1. Before you left Australia…
…did you declare to the ATO the realised gains on your shares or have you elected to maintain the cost base and defer this gain until they’re sold? Shares held by a non-resident Australian are free of capital gains tax and GST but watch the timing of purchase and sale.
2. Double Taxation Agreements
Does your country of residence have a DTA with Australia? The ATO will look to tax worldwide earnings of Australians. It’s important to make sure you don’t pay the same tax twice!
3. Buying an investment property in Australia while you are away
One of the more punitive investments from tax as non-residents. Tax rates for non- residents start at 32.5% + Medicare Levy from the first $ earned in Australia.
4. Main Residence Tax Exemption (Australia)
For properties acquired before May 9th 2017 and sold before June 30th 2019, the property remains exempt from tax (family home). Disposal after June 30th 2019 no longer receive the exemption and the sale becomes taxable. Property acquired after 7:00pm May 9th 2017, and later sold, is a taxable event at non-resident tax rates.
5. IHT – Inheritance Tax
This tax applies to UK domiciles on worldwide assets on death. Domicile is generally described as being something beyond residency, and if you were born in the UK, your domicile automatically becomes your country of birth, England, Scotland etc. Even after a change of domicile to Australia, a move to a third country e.g. New Zealand, is likely to reset the UK domicile, and worldwide assets become taxable in the UK upon death. Care is required if you are an Australian, but your spouse is from the UK.
6. UK Pension Transfers
A very complex area starting with accessing the UK pension, transferring to Australia, and then trying to contribute to Australian Super. Multi-jurisdictional tax rules and differing legislation apply for Pensions/Super. There is no easy way to transfer funds and specialist advice in each country is required. In all likelihood, a Self-Managed Super Fund may be required in Australia with a specific Trust Deed approved by HMRC. Getting this wrong could mean significant taxes and penalties!
7. Foreign Trusts & Foreign Investments
Distributions from foreign trust paid to Australian residents are punitively taxed by the ATO. You must consider which entity should own your investments (you personally, your spouse a company, etc.) when you have assets in different jurisdictions.
8. Do you have an SMSF in Australia?
Central management and control and the Active Member Test are applied to determine if the Fund is resident.
If the ATO classifies the Fund non-resident, significant penalties can apply.
9. Offshore Insurance Bonds
These are commonly used offshore to hold various assets, however, beware of large hidden fees and a lack of transparency on the underlying assets of the Bond.
10. Estate Planning
Do you have assets in more than one country?
Do you have a Will for each of those jurisdictions? In the event of death, how is your Estate taxed and are the assets able to be distributed to the beneficiaries in accordance with your wishes?
Courtesy of the Elston Group