This was presented to the Migration Institute of Australia's 2016 Annual Conference and highlights the various tax issues foreign individuals should consider prior to relocating to Australia (whether short-term, long-term or permanently).

1. Migration Institute of Australia
Tax issues for Migrants:
Introduction for Migration Agents
MIA National Conference Presentation
17 November 2016, Brisbane, Queensland, Australia
James Meli - Director of Tax, Economos Group

2. PART I –
AUSTRALIAN RESIDENCE

3. Overview of Australia’s tax system
• Tax residence ≠ Immigration residence;
• Australia taxes:
– residents on worldwide income;
– non-residents on Australian income;
• However:
– temporary residents not taxed on foreign income; and
– foreign residents not taxed on certain capital gains.

4. Before leaving home country
• Many countries have ‘exit tax’, i.e. deemed
disposal of assets @ MV;
• Get advice prior to departure to determine:
– tax implications of ceasing to be resident of home
country;
– how income will be taxed on assets in home country
and elsewhere going forward, for example:
 tax returns; or
 final withholding taxes – dividends, royalties, interest.

5. Before leaving home country
• Understand impact of becoming Australian resident;
• Worldwide assets fall within Australian tax net;
• Deemed acquisition @ MV (except ‘taxable
Australian property [‘TAP’]);
• Evidentiary burden always on taxpayers – OBTAIN
VALUATIONS!
• Personal residency can impact on residency of:
– foreign companies; and
– foreign trusts.

6. Before leaving home country
• Even if foreign entities remain foreign tax-
resident, Australian resident individuals may be
taxed personally on income derived by:
– controlled foreign companies (“CFC’s”);
– certain foreign trusts

7. After arriving in Australia
• Based on assets and their location:
– are any foreign entities taxed as Australian residents?
– if not, are any foreign entities subject to accruals
taxation (e.g. CFC rules)?
• How will source country tax income/gains?
• Does Australia have Double Tax Agreement
(‘DTA’) with other country?
• If so, who has primary/secondary taxing rights?

8. After arriving in Australia
• If not, will Australia provide a foreign tax credit?
• What is the effective tax rate on foreign income?
• Should client consider selling assets?
• Former main residence:
– is client eligible for CGT main residence exemption?
– foreign property may be leased for up to 6 years;
– ‘6-year’ rule may apply to former main residence in
home country prior to arriving in Australia;

9. After arriving in Australia
• Former main residence (cont):
– potentially full CGT exemption in Australia (though
may be tax in home country!);
– alternatively, partial CGT exemption;
– cannot have more than one main residence at same
time.

10. PART II –
TEMPORARY RESIDENCE

11. Special regime for certain temporary
visa holders
• Australian residents taxed on worldwide income;
• However, temporary residents only taxed on:
– Australian source income;
– certain foreign source employment income;
• Temporary residents exempt from Australian CGT
(except in relation to TAP assets);
• Most common temporary residents – 457 visa
holders and NZ SCV holders;

12. What is a temporary resident?
• You are a temporary resident if:
– hold a temporary visa under Migration Act; and
– not a social security resident (“SSR”), that is:
o reside in Australia; and
o one of the following:
 Australian citizen;
 holder of permanent visa;
 protected special category visa holder; and
– spouse is not a resident under SSR.
• Exception – tax resident and any condition failed
on or after 6 April 2006.

13. What happens when temporary
residence ends?
• If individual returns to home country or relocates
elsewhere – nothing;
• If individual applies for permanent residency:
– worldwide assets come within Australian tax net @
MV on that date;
– evidentiary burden on taxpayers – OBTAIN
VALUATIONS!
• See diagram on next page

14. What happens when temporary
residence ends?
Arrival in Australia
Deemed acquisition @market value
Ordinary resident
Temporary
resident
Cessation of temporary
residence
Temporary residence
delays bringing (non-
TAP) CGT assets into
the Australian tax net.

15. PART III –
ISSUES FOR SHORT-TERM
ASSIGNMENTS

16. Short-term assignments
• Unlikely to become Australian tax residents
(although watch 183-day rule);
• Non-residents taxed on Australian source income;
• Employment in Australia has Australian source;
• Foreign-residents taxed from
‘Day 1’ unless DTA applies;

17. Short-term assignments - employees
• Australia has DTA’s with 45 countries, including
China, India, US, UK, NZ, Singapore and Germany;
• Specific terms differ but based on OECD Model;
• For employment income, resident of Country X
only taxed in Country X:
– individual in Australia < 183 days; and
– remuneration paid by/on behalf of non-resident
employer; and
– remuneration not deductible in determining profits of
PE.

18. Short-term assignments - employers
• Foreign companies sending employees to
Australia – PAYG requirements even if no tax
presence in Australia;
• Employee resident of non-DTA country – PAYG
withholding from ‘Day 1’;
• Employee resident of DTA country – no PAYG
withholding unless Employment Article of DTA
failed (e.g. 183-day period exceeded and liability
relates back to ‘Day 1’).

19. PART IV –
BACKPACKER TAX

20. Backpacker tax – what’s the issue?
• Australia has higher tax rates for foreign
residents:
• Backpackers self-assess as residents and many do
not earn over the threshold (note LITO).
Income Range Resident Rates Foreign-Resident Rates
$0-$18,200 Nil
32.5%$18,201-$37,000 19% over $18,200
$37,001-$80,000* $3,572 + 32.5% over $37,000
$80,001*-$180,000 $17,537 + 37% over $80,000 $26,000 + 37% over $80,000
$180,000+ $54,547 + 45% over $180,000 $63,000 + 45% over $180,000

21. Backpacker tax – history of reforms
• 2015 Budget:
– Government proposal to deem backpackers as foreign
residents (i.e. no tax-free threshold);
– ‘Savings’ of $540m over 4 years;
– Backpackers subject to 32.5% rate up to $37,000 from
1 July 2016;
• Agricultural and tourism
sectors voice opposition;

22. Backpacker tax – history of reforms
• Government announced that it will review its
position and introduce fresh measures from 1
January 2017 if re-elected;
• Government re-elected;
• Draft legislation before Parliament proposing a
19% tax rate up to $37,000;
• Lambie/Labor want 10.5%;
• Watch this space . . .

23. Questions
Disclaimer – This presentation does not constitute specific advice and cannot be relied upon as such. It
contains general information subject to myriad qualifying criteria, exceptions and/or exemptions and both
employers and employees should only proceed based on specific advice tailored to their particular
circumstances based on the relevant law at that time.