“After many great years in Singapore, it’s time for our family to go home. What are some tax planning tips which we should be aware of as we prepare to head back down under?”
Repatriation planning is all about positioning yourself for a soft landing back in Australia. Below are a few of the most important considerations.
Residency: An important part of repatriation planning is determining when you change residency. This is the time you must start to declare your worldwide income and worldwide assets to the Australian Tax Office (ATO), which could include residual income from Singapore such as gardening leave, and international investments (shares, managed funds, property). lt’s also when you start to use up any Australian tax losses which you may have generated from negatively geared property.
Finishing up in Singapore: The Singapore tax system is very efficient, especially on exit. Generally your last 1-2 months of salary will be withheld by your employer to put towards your previous year and year-to-date tax bill, so that when you eventually jump on the plane to Australia, your Singapore tax liabilities should be cleared. It’s important to plan for this, as you may be relying on your final month’s salary for repatriation expenses. Employee share scheme shares will also be taxed on exit; however, these could also be taxable in Australia.
Timing: If you have a choice on when to return, there could be benefits to maximising your (apportioned) tax free threshold in Australia by choosing to return in January rather than July. You don’t however get to choose when your tax losses are applied, and a low marginal rate could result in losses wasted on low income. Further, exiting Singapore in January could also mean your pay-out is taxed at the lower marginal tax rates, rather than if you exit later in the year when you have a full year’s income to push your average marginal tax rate up.
Transferring cash: The good news is there’s no Australian tax on capital transfers of cash into Australia.
Shares & managed funds: For those who have built up an investment portfolio while a non-resident, be it directly held shares or managed funds (International, Singapore or even Australian), generally these will take a market to market valuation on the day you return to Australia; and you will be subjected to income tax on the dividends and capital gains on the growth from that point onwards.
Repatriation provides an opportunity to restructure these; such as place them into an Australian discretionary trust, liquidate while a non-resident and use to pay down debt, or simply transfer to your spouse if they will be on a lower income to you in Australia. Another common structure for providing tax benefits within Singapore is the investment bond or foreign life assurance policy structure. This provides wonderful concessions, such as tax deferral in Australia during the first 10 years of being set-up, then tax free withdrawal in Australia post 10 years, subject to certain contribution rules.
Principal Place of Residence: There could be an opportunity to conduct deductible repairs on your main residence to bring it back up to its original condition once your tenants move out, providing this is conducted within the same financial year. Further land tax is an important consideration and you should try to move in before your next land tax date.
Private Health Insurance: Don’t forget that the Medicare levy surcharge is also applicable once your family income is more than $180k in Australia, which can be avoided with an Australian based medical insurance policy.
** Select Investors Australia is an Australian private client tax practice based in Singapore, specialising in tax advisory and compliance obligations for Australian expatriates, foreign investors and intended migrants to Australia.
The information provided in this article is intended for information only and should not be relied upon as a basis for unilateral tax and financial planning action. The rules and bases of taxation are subject to change and the tax principles and rules discussed here have further complexities which need to be taken into account. Please contact us to discuss your specific circumstances on firstname.lastname@example.org