Tax changes benefit wealthy expats The Australian Financial Review, Friday 8 September 2006
Experts expect more affluent people to be attracted to Australia, writes Fiona Buffini
Recent tax changes have made Australia a tax haven for wealthy overseas executives in the country on
temporary visas, according to tax advisers.
Foreign executives and other temporary workers have been paying Australian tax on rent or earnings from any properties, assets or shares they own overseas since July.
And if changes before parliament become law, temporary residents also won't have to pay tax on capital gains on certain Australia assets such as shares in listed companies.
“This is a paradigm shift with huge tax implications for the mass of individuals who are in Australia on temporary visas,” Horwath Sydney tax director Les Szekely said.
He said the changes were quite generous and “in some ways makes Australia a tax haven” for skilled expatriates, particularly given temporary visas can often be extended indefinitely.
“You only pay tax on your Australian-sourced income and only capital gains on real estate. You can sell shares in an Australian company tax free and pay no tax on interest if it's in an offshore account,” he said.
While countries such as the UK had long had different tax rules for ordinary, temporary and non-residents, Australia has only distinguished between residents & non-residents.
But from July 1, a hybrid category means taxpayers who are here on a temporary work visa can live in Australia without ever paying tax on foreign income and capital gains, including overseas assets bought and sold while they lived here.
In addition, once a pending bill becomes law, they will even be able to sell all Australian assets except interests in land free of capital gains tax.
“Australia has now become much more attractive as a tax haven for high wealth individuals and we may see it becoming more of a magnet, especially for wealthy Asians,” Mr Szekely said.
KPMG partner Christine Deveney, who advises employers recruiting overseas workers, said the changes would generate significant saving for companies.
“Its quite a substantial change,” she said. “This is probably the biggest concession offered to temporary residents.
“In the past, if they had any level of investment income they would be looking at coming to Australia and paying tax at 48.5 per cent on that income, where at home they would be paying tax at a much lower rate.”
About 70,000 temporary work visas will be issued this financial year, almost double two years ago, as foreign businesses bring in experts to meet the skills shortage.
Being taxed on global income at relatively high rates was a big disincentive for foreigners to accept executive jobs in Australia.