Every year, perhaps with 2020 being slightly different, thousands of Australians decide to depart the sunny shores of the land down under to head abroad for work opportunities, to start businesses or simply to experience another culture. Many of these Australian expats intend on returning to Australia eventually, but they could spend anywhere from 1 to 25 years abroad before returning home. With COVID-19 impacting most countries across the globe, this has meant that many of these Australian expats who were back in Australia on business or to see family have become stuck here, and are unable to return to their home, whether that be in Singapore or otherwise.
One of the key concerns of many of these Australian expats who are stuck at home is what happens to their tax residency. Many are still able to complete their work for their overseas employer and are therefore being paid, but are concerned about where the Australian Tax Office (ATO) will treat them as an Australian tax resident and seek to apply Australian tax rates. This is a very real concern for many, particularly for those Australian expats living in Singapore, and this is clearly outlined in the example below exploring the tax differences between the two countries:
If we assume that Mary is earning an annual salary of $200,000, her tax payable in Australia would be $67,097, whereas in Singapore this would be just $21,150. This is a staggering difference of $45,947 in the tax bill, which is clear to see why many Australian expats should be concerned about their tax residency.
The ATO has provided updated guidance for those Australian expats who are stranded at home for a period of three months or more. There are a wide range of factors that the ATO will consider to examine whether employment is fact connected with Australia and therefore could assume that the expat is in fact to be taxed as an Australian resident.
For a full list, you can examine these here but I have highlighted some of the key considerations below:
- If you start working for an Australian entity as part of your employment
- The overall economic impact or the results of your work are more impactful on Australia
- You work with Australian clients
- Your permanent place of work becomes Australia
- You have to be physically present in Australia to complete your work
- Your employer is in Australia
If an Australian expat meetings the following criteria, then they could continue to be treated as a non-resident of Australia for tax purposes:
- Nothing else has changed about your employment other than the fact that you happen to be currently carrying out your work in Australia
- You have no other active connections to Australia
- You are planning to leave Australia as soon as you’re able to
If you have any uncertainties about your tax residence or you would just like some clarification, be sure to reach out and seek professional advice.
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.
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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.