Australian expats who have had to come back to Australia because of the corona virus pandemic, should recognise what it may mean for their income tax position.
The latest advice from the Australian Taxation Office on this issue can be found here
The ATO’s view is that if you are an Australian expat and you are temporarily in Australia for some weeks or months because of the corona virus, then you will not become an Australian resident for tax purposes as long as you live overseas and intend to return as soon as possible.
However, the ATO guidance acknowledges that tax residency issues can become more complicated if the non-resident ends up staying in Australia for lengthy periods or does not plan to return to their overseas country of residency.
The ATO guidance also acknowledges that there will be unique situations with a range of potential tax outcomes.
Even though we are in the midst of a crisis a number of far reaching implications will arise if a person incorrectly classifies themselves for tax residency purposes.
These can range from not declaring income which has become taxable in Australia and also incorrectly calculating capital gains (or losses) if the incorrect tax residency date is chosen.
The ATO will expect people to take advice and make reasonable enquiries in situations where they are not sure of their income tax status.
CST Tax Advisors can assist Australian expats with expert advice in this area.
One of the key points coming out over the recent weeks about COVID-19 is the unintended impact it has had on the movement of global expats.
While many global expats are naturally focused on the potential health effect of the virus on themselves and their families – other more costly negative impacts are lying in wait to cause major issues.
Please read on and be careful COVID-19 does not hit you in ways you don’t expect.
Rushing to become an expat
Our evidence is that many companies and businesses are speeding up the deployment of expat executives to beat border shutdowns which are anticipated to come into effect.
While this is understandable from an employer perspective – making an employee move sooner than they plan – can negatively impact them in the areas of:-
- tax management,
- insurance planning for both life and property,
- investment and pension management,
and more generally across the spectrum of their lives.
People need ‘time to plan’ in the above areas to make sure they get it right.
Leaving your home country sooner than you intend can trigger a tax disposal of your worldwide assets for tax purposes in some countries like Australia and Canada. Thus, being sure of the market value of some assets and being clear about what assets you are ‘taking’ into the new host country is important.
If you are speeding up your departure – things will slip through the cracks.
These mistakes can be challenging to recover from.
For example, you may arrive in your new country – uninsured medically (you or your family) and then suffer a health incident – COVID-19 or non COVID-19.
Wittingly or unwittingly there can be serious problems caused by failing to plan.
A recent case of a client moving to the US is illustrative.
The client left their home country and their family home empty as they planned to rent it.
This dragged on for a couple of months and they failed to notify their insurer of their move overseas or that the house was empty.
Following a storm and some rain damage – quite normal – the insurer denied the claim for water damage on the basis that the home roof leak would have been noticed earlier in the ordinary course of events (if they were living there as per their insurance coverage) and the excess water damage was greatly exacerbated by them being absent from the home.
Simple issues like this can be avoided by planning and working through our Expatland checklist.
Beware of hurrying home
Likewise – expats scurrying home can leave a host of other issues unresolved.
Many employees have stock options or other share plans. Not considering the consequence of arriving home with these share plans means – no time to plan and tax liabilities being triggered when they might otherwise have been managed.
Coming home earlier than you plan might mean that the cost base of assets you bring into a country, like shares, happens when the share price is much lower than what you bought the shares for.
Australia, for example, would give a deemed cost to a returning Australian expat based on the market value of the shares at the date they resumed Australian tax residency.
As global stock markets have been in ‘free fall’ many expats will be return home with their international share portfolios – in loss territory.
A year or two from now these shares may be back up to what they originally cost.
However, that is a ‘capital gain’ in the eyes of the Australian Tax Office.
Selling the shares ‘at cost’ would yield a capital gain.
Apart from tax, a returning expat has to deal with cancelling leases or leaving behind financial obligations in their host country. This might be a long-term saving plan contract – which requires you to make a monthly payment – which is no longer something you want to do when you leave the country and return home.
There may be penalties if you stop making contributions to some savings plans.
Hurrying up to get home – can be just as fraught with financial risk management issues as leaving for Expatland.
Our advice is for you to think carefully through any move and to realise that the Expatland Global Network is here to help you.
Our E-Teams are full of experienced professionals who know what to do in most situations. They can very quickly provide you with the advice and guidance you need to ensure you are fully aware of the consequences of your move. Once you know understand the risks, you can make more informed decisions.
For more info on how to cope with these and other issues please contact us and we’ll be happy to connect you with an E-Team member that can assist.
Enjoy the journey and keep safe!
Expatland is a country based on the idea that people have freedom to move around the world in search of certain benefits. Studies show that one of the main reasons for relocation is to improve one’s financial position.
So what is the situation in Expandland during the unprecedented COVID-19 coronavirus outbreak? At a time when finances are at risk, and worry for family and loved ones at home are high – what choice will expats make – to stay in their host country during the crisis or to return home? How will the current situation affect expats’ life?
Capability of the host country
The actions that expats take and the decision to stay or to return varies based on how the host country deals with the crisis. The countries of Southeast Asia that experienced SARS several years ago, in general, were more prepared and acted faster; quick response, joint efforts, high social responsibility of the population gave viable results and has contributed, to date, to getting a handle on the spread of the virus.
Expats in Southeast Asia
According to expats in Hong Kong, Vietnam, Singapore, South Korea and China – the governments’ approach to coping with the pandemic gave them confidence in their own security. High consciousness of the population, which followed the simple rules of social distancing and disinfection, brought order into initial chaotic moods.
Needless to say that countries with high migrant rates were most vulnerable to the fast spread of the virus – intense human flows in and out added up to the total number of registered cases. However, this negative effect was offset by the high levels of public trust in the government: most countries of South-East Asia have trust levels higher than the world average.
Expats in Africa
Unlike the South-East Asian region, where there was no mass exodus of expats – in the African countries the situation is quite different. Many expats made decisions to flee the countries, despite the fact that governments in that region have made efforts to follow and implement WHO guidelines. The core problem there is that the number of locally transmitted cases of coronavirus is equal to almost zero, while the majority of cases were “imported” by Europeans, coming from the epidemic sites.
The above, combined with a weak healthcare system, which would not be able to survive the mass outbreak of infection, provoked manifestations of discontent towards expats by the local population.
Many expats chose to leave their host countries and return home, at least for a while, although some do not exclude the possibility that in the future the local population attitude towards foreigners will continue to have a negative effect, people will see them as a potential threat to their own health.
Expats in Europe
Expats, who live in Europe, mostly decided to stay, according to the information from the Chambers of Commerce in some countries. Some expats have indicated employment policies (in relation to sick leave) and the healthcare conditions are better in the host countries than in their home countries; many of them are married to locals and, those working in executive positions, considered that in hard times they should stay with their employees.
Looking at the positives
The aftershocks of the COVID-19 pandemic are still unclear. However, some positives in a time of uncertainty, could be that many expats locked down in their homes may come up with new ways of doing-business, reasonably adapting their work processes to the new realities and employing more capabilities of modern technologies.
Steve Wilding of Nuss Removals receiving the award from John Marcarian, Founder of Expatland Global Network and Geraldine Chapman, General Manager of Expatland Global Network.
The Expatland Member of the Year is Nuss Removals from our Sydney E-Team.
“Nuss Removals is a founding member of the Expatland Global Network,” commented John Marcarian, Founder of the Expatland Global Network.
“They have provided instrumental assistance with the global agreement between Harmony Relocation Network and our Expatland Global Network which has seen our network grow and the opportunities for our E-Team members increase,” John continued.
The global agreement with the Harmony Relocation Network gives members that hold FAIM certification the opportunity to co-lead E-Teams around the world.
A member of the Harmony Relocation Network themselves, Nuss Removals is a co-group leader of our Sydney E-Team.
Nuss Removals have been helping expats move for over 120 years. From shipping and storage to school and property search, they provide the essential initial services expats need when making their move.
They even maintain a removal truck from 1924 at their Lane Cove facility which was first used in the 1920s and is still roadworthy to this day.
“The Expatland Global Network has enabled us to connect our clients to service providers they need when arriving into Australia that we are unable to help them with,” explained Steve Wilding of Nuss Removals and Co-Group Leader of our Sydney E-Team.
“For our outgoing clients, we are able to introduce them to a team of people that can assist once they move to their new city,” Steve continued.
“It’s an additional value add for our customers who are increasingly demanding more from a relocations company.”
The Expatland Member of the Year award, voted by their peers, recognises the member that has shown outstanding contribution throughout the year.