If you’re considering relocating from Singapore to Australia, perhaps due to the rising cost of living or changes in expat benefits, it is important to understand the tax implications involved in such a move. This is especially true if you have children attending international schools, which can reduce the tax advantages of living in Singapore. Proper planning will help you manage your tax obligations effectively as you transition to life in Australia.
Singapore Exit Tax
Before you leave Singapore, you must settle all outstanding tax payments, including GIRO instalments and the year-to-date tax bill. Employers typically withhold any monies due to cover these taxes. If you hold share options or awards that have not yet vested or been exercised, these may be deemed to have generated gains at the time of your tax clearance, even if restrictions on selling apply.
Australian Tax Residency and the 183-Day Rule
The Australian Taxation Office (ATO) considers the date you begin residing in Australia as the start of your Australian tax residency. This means you may become a part-year resident, and your worldwide income will be taxed from this date. Your tax-free threshold will also be adjusted accordingly.
Bonuses for Work Performed Outside Australia
If you receive a bonus after becoming an Australian tax resident, but the bonus relates to work performed overseas, it should be reported as foreign income.
Income Tax Losses
If you have carried forward tax losses, you cannot choose how much to use against your income. For example, if you have a $20,000 loss from previous years and you become a resident in June with $8,000 income that year, you must apply $8,000 of the loss, even if this income falls within your tax-free threshold. This leaves $12,000 of losses to carry forward.
Moving Into a Rental Property
If you move into one of your rental properties, any repairs must be made and paid for within the same financial year that you last received rental income. For instance, repainting is a common expense, but only the cost of painting the interior is deductible. Painting exterior walls is considered capital expenditure and not deductible.
Transferring Cash from Your Bank Account
Transferring money from Singapore to Australia does not trigger tax liabilities. However, if the transfer amount exceeds AUD 10,000, you must notify AUSTRAC (Australian Transaction Reports and Analysis Centre).
Shares Purchased While Living Overseas
When you become an Australian tax resident, the market value of your shares on that date becomes your cost base for Australian tax purposes. To qualify for the discounted capital gains tax (CGT), you must hold these shares for at least one year from that date.
Offshore Life Insurance Bonds
Your offshore life insurance bond’s policy year does not reset when your residency changes. The 10-year period starts from the original policy start date, provided the 125% rule has not been breached. Withdrawals from the 11th year onwards are generally tax-free in Australia, subject to the bond being eligible.
Private Health Insurance
To avoid paying the Medicare Levy Surcharge (MLS) when your income exceeds certain thresholds, you must maintain private health insurance with an Australian-registered insurer.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances. You are advised to seek independent tax advice from suitably qualified professionals before making any decision as to the tax implications of any investment.