Latest Update: 5th December 2019 – Unfortunately today the Federal Government passed the Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures) Bill 2019 into law without amendment, resulting in the scrapping of the main residence exemption for non-resident Australian expats.
To read more about this disappointing turn of events click here: Death of the Main Residence Exemption for Australian expats
Original article below:
Which is the best tax strategy for expats: property or shares?
Until recently, the property market in Australia was a safe and sometimes lucrative investment option. Lately though, according to some property pundits, the tide seems to be turning.
For expats, there has been even less to cheer about when it comes to property investment. Recent changes to Australian tax laws mean that non-resident expats may no longer be exempt from capital gains tax for a property that is their main residence.
Public policy in Australia has generally been that Australians, regardless of their residency status, should not have to pay tax on any capital gains made on the sale of their family home (subject to certain criteria being met). Not so anymore.
Shares, therefore, may be a wiser investment for some expats. Let’s take a look at some specific tax advantages of a share portfolio:
- You can start small, with a modest investment and you can choose when, how much and how often you invest.
- The transaction fees are low compared to buying and selling property. You can forget about marketing costs, legal costs, stamp duty, conveyancing and so on.
- You can seek investment advice from licensed investment advisors and diversify your portfolio across different industries – technology, energy, mining, health services – thus minimising risk. A professionally managed investment portfolio can be a smart option particularly if you live outside of Australia.
- Buying and selling shares is easy and quick both in Australia and overseas thanks to online brokers. Need cash quickly? Liquidation of share assets can be done securely in a matter of days.
- The administrative costs of managing a share portfolio are low. In addition, there are no maintenance costs associated with share investment.
- And the big reason? Unlike gains on property, that are taxed fully for capital gains tax, expats who are non-residents for Australian tax purposes do not generally have to pay capital gains tax on gains on their Australian share portfolio (that they acquired whilst they were a non-resident).
- Likewise, fully franked dividends (dividends paid from profits that have previously been taxed by the company paying the dividends) are deemed by the ATO as being tax paid on receipt and not subject to further Australian tax income. Conditions apply, so you should check with our Expat Tax Services team to clarify your tax position.
If you want to book a tax consultation with us click the link to our Book an Appointment page to obtain advice on the tax implications for Australian expat shareholders. Make sure your investment profits don’t disappear!