Advancing technology is rapidly bringing possibilities to the workforce that once seemed to be nothing but science fiction. AI (artificial intelligence), virtual reality, data communications, augmented reality, and more sophisticated automations are already making their mark to various degrees.

In addition, the COVID19 pandemic has seen hundreds of thousands of Australians return from abroad. Many of those returning may be able to continue working for their foreign employers.

What does this all mean?

With the rise of the internet and global e-connectivity many organisations in finance, information technology, telecommunications and professional services had been realising that their employees did not have to be physically present in the workplace to perform their job function.

Even before the pandemic that trend had well and truly commenced. The enormous outsourcing industry has been a testament to that. The necessity of lockdowns should accelerate that trend.

Working for foreign employers from Australia

An increasing number of Australians will be able to take advantage of continuing permanent employment opportunities, not with domestic employers but with overseas employers.

When you are a tax resident in one country, but your sole source of income is from another country, you may find that not only do you face double the tax administration, but if the correct advice is not taken you may face higher effective rates of taxation.

As more of these scenarios emerge, there will be a need to obtain tax advice from advisors who are experienced with addressing these issues.

Managing companies ‘remotely’

If you are a director of a company and have returned to Australia due to the pandemic, unavoidable issues will arise if you are required to manage the affairs of a foreign company from Australia.

Corporate tax laws stem from over one hundred years of legal history and they are not about to change any time soon to accommodate modern times. Australia’s laws around corporate residency are well understood and the reality is that if you are a controlling director of a foreign company and you have returned to Australia, you should seek tax advice in relation to how Australia’s tax laws apply to foreign companies.

The consequence of not seeking detailed advice is that the foreign company in question might be a resident of Australia and its profits might be subject to Australian corporate tax depending on the situation.

If you are a controlling shareholder of a foreign company, you might also find that Australia’s tax laws will attribute some or all of the company’s profits to you even if a dividend is not paid to you. This outcome can arise depending on the facts, because of Australia’s Controlled Foreign Company rules.

Changing the way you interact with your accountant

If you are working for a foreign employer from Australia, there will be a need for income tax advice to ensure that you properly plan for tax outcomes and are not caught out with unexpected tax bills.

Keeping in touch with your accountant more regularly to plan your position will be increasingly important if you find yourself in this situation.

As an Australian moving to Singapore there are a number of differences that you should be aware of in relation to taxation.

Having an idea of what to expect will help you to organise your move and understand your tax position so that you are more financially prepared.

You can download our guide: Moving to Singapore, here.

Taxation Basics

The most fundamental difference between Australia and Singapore is that in Singapore there is no CGT in Singapore and they do not generally tax investment income. Singapore also has a much lower rate of tax in their highest tax tier, which is one of the appeals for Australians considering a move to Singapore on a permanent basis.

Other key differences between Australia and Singapore’s taxation system include: 

• Financial year
• Terminology used
• What constitutes allowable deductions
• Which income is taxed
• How tax is paid. 

For instance, while you are taxed on your worldwide income as an Australian resident, Singapore only taxes residents on income that is actually sourced in Singapore. Read on to see some of the basic differences in taxation from an employment perspective.

Employment Taxation

As an Australian employee you would be familiar with the PAYGW system.

Pay As You Go Withholding ensures that your estimated tax is paid directly to the ATO through the year. Then, at the end of the year, you lodge your tax return and are either required to pay any additional tax owed, or are refunded any excess tax that the ATO received through the year.

Singapore is the opposite. All of your wages will be paid to you in full as an individual. Then you are required to pay your income taxes in full at the end of the tax year. This means you need to be careful to track and keep aside money to pay your tax bill. In your second year as a resident of Singapore you can pay your tax for the first year using a monthly instalment system.

You will also be used to working in a system where you can claim work related deductions to help bring your tax obligations down. In Australia any work expenses that your employer does not cover can be paid for yourself, then claimed as a deduction that reduces your taxable income. Singapore does not allow employees to claim tax deductions. This means you will want to be extra sure that your employer is covering your work related costs.

Another system you will be familiar with as an Australian worker is Superannuation. Your Australian employer is required to make superannuation contributions to your superannuation fund in order to fund your eventual retirement. The accrued superannuation balance is only able to release your superannuation to you in limited situations, such as retirement.

Singapore also has a retirement fund, the Central Provident Fund (CPF). However, this fund does not just serve as a retirement cash payout. Instead, it is intended to help save for housing and healthcare in retirement. Unfortunately for Australian expats, the CPF is not typically available. This means you may need to continue to build an Australian superannuation fund to plan for your own retirement.

Other Taxation Matters

Employment income is not the only source of income. While Australians are taxed on a range of income types, the Singapore tax regime is not the same.

Capital Gains Tax

Australians are required to pay tax on the sale of most capital assets, and in some situations they are even taxed on the deemed realisation of assets. Certain concessions, such as the 50% discount where the asset has been held for more than 12 months, can be applied. Singapore does not have a capital gains tax regime at all.

Goods and Services Tax (GST)

GST is a tax that applies in both Australia and Singapore on the sale of goods and services. GST is 7% in Singapore, whereas it is 10% in Australia. However, this doesn’t necessarily mean you end up paying less GST in Singapore overall. While Australia has a large range of supplies that are exempt from GST, including essential goods and services, Singapore only has a limited number of exempt supplies.

Investment Income

In Australia you are taxed on investment income at your own individual marginal tax rate. However you are also typically able to claim tax credits for any tax that the company has paid on income that is distributed to you.

In Singapore a company pays taxes on its own chargeable income. This is the final tax paid, and investment income that is passed on to shareholders is not taxed in their hands. (If the investor is a non-resident, they would only be liable for non-resident taxes in accordance with their country of residence).

Running a Company

If you plan to run a company in Singapore there are a wide range of requirements that you need to understand in terms of setting up and running the company. Not the least of these is that, from a taxation perspective, the first three years of operation are tax free for the first $100,000 of chargeable income. After this the company tax rate is only 17%. In Australia the company tax rate is currently 30%.

Tax Differences between Australia and Singapore

While there are some commonalities in the foundation from which the Australian and Singapore systems have grown, there are a lot of differences. These differences range from terminology to timing, what income is taxed, at what point it is taxed, and the tax rate.

As outlined above, there is an appeal in being taxed under the Singapore regime. For instance, the tax rates are lower, there is no CGT, and investment income is not typically tax in the hands of the individual it is distributed to. If you are considering making this move, ensure that you fully understand your personal situation and have a good understanding of whether you would be a Singapore tax resident. It is always important to speak to a professional advisor for a more detailed assessment of your specific situation.