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“When I lived in Australia, I was always thinking about how my investments would be taxed and how to best structure them. Now that I live in Singapore, what should I be aware of?”
Australian tax planning is such an important part of a good financial plan when you are an Australian tax resident. If you get this wrong, you could be giving back as much as 48.5% of your investment returns to the tax man. However, when you are an expat living in Singapore, personal investments and capital gains are largely tax free. This is a game changer to your financial and retirement plan for assets you are accumulating during your time as an expat, however below are some tips and tricks which you should be aware of when it comes to the (lack of) taxation of your investments.
Deemed sale on exit of Australia
As an Australian resident for tax purposes, you are taxed on your worldwide income and worldwide assets, however as a non-resident, you are only taxed on your Australian sourced assets. This includes shares and managed funds which you acquired during your time as a resident. You do however, have the ability to “deem sold” these assets for tax purposes when you leave, which results in enjoying the capital gains tax free growth when you are in Singapore. Note: this is a one-time election which you must make in the year when you exit Australian tax residency. The ATO generally don’t like you amending your return to pick this up if you missed it.
Australian shares held or acquired during your time offshore
Australian shares are famous for paying franked dividends, which many rely on to help boost the return. However, as an expat non-resident of Australia, when living in Singapore (Under the Double Tax Agreement between Singapore and Australia), these are taxed at 30% – the rate of franking which the company paid assuming the shares are fully franked. So, the net effect is you keep the cash, lose the franking credit, and don’t have to put this in your tax return. Those shares which are not fully franked, suffer a 15% withholding tax charge. Note: those shares acquired whilst a Singapore tax resident OR deemed sold on exit of Australia, are capital gains tax free during your expat assignment.
Acquiring shares and managed funds within Singapore and bringing these back to Australia
Both Australian shares and managed funds, as well as international shares and managed funds, will be taxable again in Australia when you change residency back to Australia, from their market value on change of residence. Any dividends and distributions are taxable on a cash (paid) basis in the future at your Australian marginal tax rate. Placing funds into a foreign life assurance account, or a life bond structure, whilst a non-resident will provide tax deferral in Australia for the first 10 years of the account operation, and then tax-free access post this, subject to contribution rules. Further shares and managed funds can be contributed to an Australian discretionary family trust just before changing to Australian residence. This allows for distribution of income and gains among beneficiaries (i.e your family) to take advantage of their marginal tax rates.
Contact Tristan for a consultation
It’s important to note that the above is only general advice and everyone’s situation is different. If you would like to have an obligation free discussion about your situation, contact me at firstname.lastname@example.org or +65 9108 6398. I look forward to catching up and talking tax!
** The levels and bases of taxation, and relief from taxation, can change at any time. The value of any tax relief depends on individual circumstances.