What Does the New Australian Government mean for Australian Expats – There were no policy announcements throughout the election campaign that related to or were targeted at expat Australians.
But we thought it worthwhile to look at the policies and commitments that might impact Australian expats and the legislative program regarding any bipartisan bills that might be ready for the consideration of Parliament.
Proposals That Were to Affect Australian Expats
Over the past couple of years the Australian Government has proposed a number of changes that were due to impact Australian expats. Some of these included:
- Social Security – There are some Social Security issues that could impact expats in receipt of aged pension (or part pensions), with the proposal to Freeze the current deeming rates for two years.
This will effective slow the impact inflation has on the deeming of financial assets regarding the income test. It seems sensible given that aged pensioners will be hit hard with increased inflationary pressures.
- Commonwealth Seniors Healthcare Card (CSHC) – is regarded very highly by many self-funded retirees in Australia and is subject to the income test only.
The deeming rate freeze will help self-funded retirees to access the CSHC. If you are planning to retire back in Australia, you might want to consider the value of the CSHC and how you might arrange your assets and income streams to qualify.
This is an area you will require the assistance of a competent advisor.
- Superannuation – In the Superannuation area there were a number of proposals made which we break down below:
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- Downsizer Provisions – The provision allows for people to contribute to Super when they sell their principal place of residence. It is proposed to extend the scheme to all those 55 years of age and older. The contribution limit is $300,000 and the contribution does not impact upon other limits.
- SMSF Residency Requirements – the government proposed to relax residency requirements for SMSF and small APRA-regulated funds by extending the central control and management (CM&C) test safe harbour from two to five years.
- Active Members Test – Under the current active member test, an SMSF must either have no active members overseas or have active members that are Australian tax residents and who hold at least 50 per cent of either the total market value of the fund’s assets or the sum of the amounts that would be payable to active members if they decided to leave the fund. This measure will allow SMSF and SAF members to continue to contribute to their superannuation fund whilst temporarily overseas for a period of up to 5 years.
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For an expat returning to Australia within the 6-year principal place of residence exemption period who meets the rest of the rules the downsizer provisions may be a terrific opportunity.
Assuming they are over the age of 60 (current age limit), owns a principle place of residence (PPR) and is returning to Australia within the 6-year limit, they could sell the PPR, pay the pro rata CGT and contribute $660,000 into their Super Account (assuming they have an existing balance under $1.4 Million in Super) in addition to some tax-deductible contributions.
The contributions are the $300,000 downsizer plus $330,000 after tax contributions brought forward. A word of warning always utilise the services of an advisor when making large Superannuation contributions, as this area is dense with rules and limits, and the consequences of error can be disastrous.
- Changes to the Tax Residency Rules – Many of our clients have also asked if it is likely that the new Government will proceed with the proposed changes to the residency rules.
We are still waiting for the draft legislation, but the provisions had support from both sides of the house. We hope when we see the legislation that some of the more onerous provisions are modified, such as the 45-day rule.
If you are not familiar with these proposals and would like to talk to one of our specialist advisers about how it may affect you feel free to contact us.