Returning Aussies face a tax hit

The pandemic has seen droves of Australian expats return home, with many more likely to follow in the months and years ahead. But they could be greeted with a hefty tax bill on their foreign investments.

Tax expert Peter Bembrick, from HLB Mann Judd, warns of unique tax implications depending on the time spent overseas, and the jurisdiction. These cover income tax, shareholdings, employee share schemes, cash in offshore banks accounts, and pension funds.

“Property is another key consideration,” he says. “Some countries charge non-residents a higher rate of transaction tax or tax capital gains on profits from property investments and, in Australia, if you’ve retained property while abroad, you may be better to move back into it first before selling.

“This applies particularly to the former family home, as nonresidents selling property are now excluded from the capital gains tax main residence exemption and the related ‘six-year absence’ rule.”

Returning Aussies are also at threat of being double-taxed.

“[Returning citizens] may be able to claim a credit for the foreign tax paid upon their return, but only if they have the proper records and structures in place,” says Bembrick.

For taxation purposes, shares and managed funds are usually assessed as if they were sold at market value on the date you move.

“The good news is there would be no further Australian CGT implications if these assets are actually sold while a non-resident. However, if they are still owned when Australian tax residency is resumed, they - along with any new investments - will be deemed to be re-acquired at that time for their current market value, so any future capital gains or losses on sale would relate only to the movement in value during the second period of Australian tax residency.”