The essential Australian Tax Guide for new expats

Australian Tax for inbound expats into Australia

Relocating to a new country is an exciting time for all, especially moving to an incredible place like Australia! As a new expat to Australia, there is plenty to consider – like where to live and how to understand the accent. One area this article wants you to consider is your finances and taxes in Australia.

Understanding your home country’s taxes is not ordinarily a simple affair. When we throw a whole new tax system and the integration between the two – we have a recipe for confusion. We are here to assist! We have aggregated a list of Australian tax matters we see frequently.

We stress the importance of being proactive with your financial and tax affairs. There are potentially thousands of dollars that can be saved with strategic tax planning. Do not hesitate to contact us for any matter.

Tax Residency Status

You will need to consider your Australian tax residency status as the first step. Your Australian tax residency dictates how you pay taxes. You should also consider your tax residency in the foreign jurisdiction you were involved with – as there may still be connections there.

The Australian Tax Residency statuses and how they pay tax are:

  •  Tax Resident
    • Must pay tax in Australia on your worldwide income
    • Access to the tax-free threshold (no tax on the first $18k of income)
  • Non-resident for Tax Purposes
    • You only declare income derived in Australia (i.e., Australian sourced income, interest on Australian bank accounts, capital gains on sales of Australian stocks, etc)
    • No access to the tax-free threshold, taxed on the first dollar at 32.5% (more thereafter)
  • Temporary resident
    • You must be on a certain temporary visa
    • You only declare income derived in Australia or income you earn from employment or services performed overseas while you are a temporary resident of Australia
    • Access to the tax-free threshold
    • Ability to withdraw your superannuation in Australia
  • Working Holiday Maker
    • Applicable if you are on a Working Holiday Visa (subclass 417) or a Work and Holiday visa (subclass 462)

We recommend you use our Research Residency Tool where you can determine your tax residency. We have written a blog on the importance of tax residency here.

    Australian Income Tax Rates

    Your tax rates are based on the above residency determination. If you are deemed to be an Australian tax resident, you are obligated to file an Australian tax return and report all worldwide income. If you are a non-resident, you need to report only income derived in Australia. You can view the individual tax rates published by the ATO.

    Capital Gains Tax

    Capital Gains Tax (CGT) in Australia is a tax you pay on profits from selling assets, such as property, cryptocurrencies and shares. These could be assets that you have purchased or inherited. To learn more on capital gains, read our detailed blog here.

    Assets when commencing Australian Tax Residency

    Assets (not including taxable Australian property previously held) when commencing your Australian tax residency will be deemed to have been acquired as at the market value on that day for CGT purposes. For example, if you purchased a Bitcoin in your home country at $45k AUD, and when you arrived to Australia the price of one Bitcoin was $90k AUD. The cost base for that Bitcoin will be $90k. If you ended up selling that a month later and the price of Bitcoin reduced to $70k – that CGT event in Australia will result in a capital loss of $20k, even though your effective gain is $45k AUD.

    Cash Transfers

    You are allowed to transfer money back home, there are no tax consequences of that. We see a lot of people worrying about transfers and taxes. If you earned that income legally as a non-resident in Australia – the ATO cannot tax you on that.

    Wise is an extremely popular company to transfer with – you can connect to them through our affiliate link. We don’t recommend banks as they charge flat fees (approx. $30) and have unfavourable exchange rates.

    Superannuation/Retirement/Pension Accounts

    You may have contributed to a pension plan in your home jurisdiction. There are several complexities and tax strategies that can be put into place to ensure you are not over-taxed when bringing that money to Australia.

    There is a lot to bear in mind with these accounts. Specialist advice is highly recommended.

    Income sourced from outside Australia

    If you are earning income from outside of Australia (e.g., you still are earning income from a previous role, a foreign investment property, etc), you may need to declare that depending on your residency status.

    Use of an overseas company

    If you were running your employment or a business in a foreign jurisdiction through a company/LLC and you arrived in Australia there are some things to consider if you are still dictating operations from Australia.

    Foreign Jurisdiction Tax

    Ensure you continue to monitor if you own any assets or if you earn income from your home jurisdiction. It’s recommended to inform the local tax authorities about your departure as it may involve settling tax obligations.

    Should you also require assistance with the tax in your foreign jurisdiction, we may be able to connect you with an expat tax specialist. We work with many firms worldwide.

    Be proactive!

    Before you move your life to Australia, it’s critical you seek tax and financial advice. We recommend doing this several month in advance. Appropriate planning provides you with adequate time to dispose of any assets you have acquired abroad and gives you the chance to have any assets valued if you intend to retain them. We always recommended thorough and professional tax planning advice. Do not hesitate to contact us for any matter, we offer a free initial consultation because we are so confident in our ability to assist.