Tax implications for individuals when moving to Australia

Australia is reopening its borders post COVID and with that come questions of migration to Australia to live. There are many tax consequences to consider but this article will address those specific to individuals who establish a tax residence in the country.

1. Firstly, an individual will need to consider their tax residency when migrating to Australia. Regardless of the visa status, an individual who intends living in Australia for at least 6 months in a permanent location will prima facie be considered a tax resident of Australia. Temporary visas provide an advantage for temporary residents, restricting their tax payable so that it is only based on Australian sourced investment and personal exertion income.

2. Australian tax residents are subject to Capital Gains Tax (CGT) on all assets, regardless of whether that asset is physically in Australia or not. It is worth noting there are some exemptions such as the taxpayers primary residence. Special rules provide a process for the taxpayer to establish a cost base for each asset resulting in it only being subject to Australian CGT whilst the individual is a resident for Australian tax purposes. In effect the rules aim to replicate a scenario as if all the assets were purchased on the day the individual became an Australian tax resident. 

3. Becoming an Australian tax resident also has many implications for overseas entities they control or that may be of a privately held nature, including the potential for double taxation of income to the Australia tax resident at both the source country and in Australia. These issues will be highlighted in the next article.

Moving to Australia to live can expose individuals to unexpected tax consequences. Careful planning can advise you in advance of these consequences and in some case significantly reduce the tax payable.

For more information contact David Baumgartner dkb@baumgartners.com.au

Further Reading:

Loans and gifts received from overseas entities

About Baumgartners:

Baumgartners, based in Melbourne, Australia, is an entrepreneurial firm of Chartered Accountants, Chartered Tax Advisers and strategic business experts who truly believe in building successful relationships. They are an energetic and passionate firm of professionals with a breadth of technical expertise. Combined with real business experience, this sets them apart from the rest.

Their practice is growing rapidly because of their genuine approach to client service, the exceptional results achieved, and emphasis on people and relationships. An integrated full-service approach to strategic planning and a broad range of services provided, from accounting and taxation through to business consulting, superannuation, growth and wealth management strategies, financial planning, asset protection and risk minimisation strategies.