2019 Australian Election for Aussie Expats

In a result that shocked most people paying attention, Scott Morrison and the Coalition have retained power and will lead Australia for the next political term. While this largely means ‘business as usual’ for most Australian expats and those living in Australia, it’s important to consider the key policy differences and the opportunities that could be created as a result. This week we explore how the Australian Federal Election outcome of 2019 affects Australian expats.

We have broken down the key areas of policy differences impacting personal finances and what the outcome means for Australian expats.

Superannuation

  1. Concessional Contributions Cap

The concessional contribution cap for your superannuation fund is currently A$25,000 and Labor did not announce any intention of changing this. However, from the 2019/20 financial year onwards, a recent development was that of making catch-up concessional contributions. If you have a superannuation balance of A$500,000 or less, your concessional contributions could accumulate over up to a 5 year period, allowing you to make up to a A$125,000 contribution and claim this as a personal income tax deduction.

Australian Expat Impact

For Australian expats considering capital gains tax exposure and repatriation strategies, the retention of the catch-up concessional contribution mechanism could prove to be quite a useful tool.

  1. Tax Deductibility of Contributions

Under the current guidelines, you can make a concessional contribution as an Australian expat to your eligible superannuation fund of up to A$25,000 per year (the concessional cap). By then completing the ‘Notice of Intent to Claim a Deduction’ form, you could then reduce your taxable income in Australia, such as rental from a positively geared property for example. The Labor party wanted to re-introduce the 10% rule, which stated that an individual could only make a concessional (tax deductible) contribution provided that no more than 10% of their assessable income was from wages or salary. The current Government scrapped this rule to assist people to make concessional contributions, particularly where their employer may not offer salary sacrifice options for example.

Australian Expat Impact

When considering tax exposure in Australia, this is a helpful development that Australian expats are eligible to continue to make tax-deductible superannuation contributions.

  1. Non-Concessional Contribution Cap

The current non-concessional contribution cap is A$100,000 per year, and the 3-year bring-forward provision allows for a contribution of up to A$300,000, providing the superannuation balance is no greater than A$1.4M. The Labor party announced that they would look to reduce this to A$75,000 per year, which would have also reduced the maximum contribution to just A$225,000.

Australian Expat Impact

This is excellent news, particularly for those Australian expats who are looking at their repatriation strategy and/or approaching retirement when exploring how to best repatriate your funds and structure your finances for retirement in Australia.

  1. Borrowing Inside Self-Managed Super Funds

Currently, self-managed superannuation funds (SMSFs), under strict guidelines are able to borrow funds to purchase an investment property. The Labor party announced that they would abolish this rule, and remove the ability of SMSFs to borrow to purchase an investment property, but would grandfather those that already had implemented such a strategy.

Australian Expat Impact

Given that in most cases, Australian expats are not eligible to set up a SMSF, this will have little impact, however it is important to consider if you are living in Australia and/or when you’re considering your repatriation strategy.

 

Taxation

  1. Franking Credits

The system of franking credits in Australia is particularly attractive when planning for retirement, and the Coalition announced that they would not make any changes to the current rules. This meant that those who were paying a tax rate of 0% or less than the corporate tax rate would continue to receive a cash refund via franking credits. The Labor party, however, announced that they would abolish any cash refunds of franking credits and only allow them to offset tax liabilities on other taxable income.

Australian Expat Impact

This is positive news for those looking to retire in Australia and exploring suitable investment options. It’s also important to reflect on the fact that if franking credits had been abolished, this could have had a significant impact on those who were not appropriately diversified in their investment approach.

  1. Negative Gearing

Negative gearing allows Australian investment property owners to claim both cash and non-cash deductions for the costs of the property and offset other Australian taxable income. The Coalition announced that they would not make any changes to negative gearing and the current rules would apply. The Labor party announced that they would only retain negative gearing for new properties purchased after 1 January 2020, and those with existing arrangements would retain the current rules under the grandfathering provision.

Australian Expat Impact

When considering wealth accumulation strategies, this is positive news both for those with current investment properties and those looking to accumulate, particularly if you’re looking at existing properties.

  1. Capital Gains Tax Discounts

The current capital gains tax (CGT) rules allow an individual to claim a 50% deduction on their capital gain if they’ve held the taxable asset for more than 12 months. For example, if you were residing in Australia, purchased BHP shares for $35, and then sold them 2 years later for $40, you would only need to pay CGT on $2.50 ($5 / 2) of the gain at your marginal tax rate. Superannuation funds also receive a similar treatment with a 1/3 discount applying on those assets held beyond 12 months. The Labor party announced that they would reduce this to just a 25% discount for individuals and retain the 1/3 discount for superannuation funds.

Australian Expat Impact

This is particularly positive news for those living in Australia, as well as those expats considering their repatriation strategy. Taking a medium to long-term approach with your investment strategy in Australia can provide a significant tax advantage here.

 

Family Trust Planning

  1. Taxation of Distributions

Currently, distributions from a Discretionary Family Trust in Australia are taxable at the marginal tax rate of the beneficiary (i.e. the person receiving the distribution). The Coalition have announced no changes to this current treatment. The Labor party, however, announced that all distributions would become taxable at a minimum rate of 30%, which would have had a significant impact on many.

Australian Expat Impact

The proposed changes under the Labor party would have had a detrimental impact on many considering trusts as part of their wealth accumulation and /or distribution strategy. It also would have severely limited the attraction of using a family trust to purchase an investment property given the ongoing tax treatment of the rental income.

Overall, the election outcome is certainly a positive one for both Australian expats and those residing in Australia when it comes to personal finances. It is important, however, to consider the potential changes and ensure that your financial strategy remains robust.

  

To Your Financial Success!

Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3

Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.

To learn more about how we may be able to help you, please contact us:

        +65 8282 5702
        jarrad.brown@gfcadvice.com
        https://singapore.feebasedfinancialadvice.com

To discuss how these changes affect you, click here to book a complimentary consultation: http://bit.ly/Book-Your-Consultation

 

General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.

 

*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.

 

 

 

To Your Financial Success!

Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3

Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.

To learn more about how we may be able to help you, please contact us:

        +65 8282 5702
        jarrad.brown@gfcadvice.com
        https://singapore.feebasedfinancialadvice.com

To discuss your own situation, click here to book a complimentary consultation: http://bit.ly/Book-Your-Consultation

 

General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.

 

*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.

 

 

 

 

Jarrad Brown is the trusted fee-based financial adviser in Singapore working with professional expats in the region. An Australian qualified and experienced Financial Adviser, Jarrad provides specialist advice to Australian expats as well as other nationalities.

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