COVID-19 Financial Support for Individuals and Businesses – August 2021 Update

While the Federal Government’s Jobkeeper and Cash Flow Boost have wrapped up, the ongoing pandemic and resulting lockdowns continue. This means that businesses and individuals right across the country, particularly in the capital cities, continue to face income loss. As of August 11th 2021, additional economic assistance packages have been announced as a direct result of the most recent lockdowns and restrictions.

FEDERAL GOVERNMENT

At present the government has not reinstated the JobKeeper initiative. Instead, they have provided a payment directly for individuals who have lost work hours.

             COVID-19 Disaster Payment

On 3rd June 2021, the Federal Government announced a COVID-19 disaster payment. This is now a tax-free, non-assessable, non-exempt income payment for the individual recipient. At the time this payment was made in response to the Victorian lockdown in May/June, however it was also made available to future Commonwealth declared hotspots.

This payment is aimed at individuals who have lost paid work hours due to the restrictions imposed by lockdowns. The support provided is based on the number of working hours lost:

  • Over 20 hours = $750 a week payment
  • 8-20 hours = $450 a week payment
  • JobSeeker, Austudy, Age pension recipients who have lost at least a full day’s work in a week may also be eligible for a payment of $200 a week.

NEW SOUTH WALES

NSW has a number of measures available to provide economic support due to the current wave of lockdowns.

The NSW 2021 COVID-19 Business Grant and NSW 2021 JobSaver payments are available for NSW businesses (including non-profit organisations and sole traders) with a turnover between $75,000 and $50 million in the 2020 financial year, and have had under $10 million in wages.

             NSW COVID-19 Business Grant

Eligible businesses can apply for grants of between $7,500 and $15,000. The amount of the grant depends on the extent to which the business turnover declined during the first 3 weeks of the Greater Sydney lockdown (26 June to 17 July 2021) compared to:

  • The same period in 2019; or
  • The same period in 2020; or
  • The 2 week period immediately before the Greater Sydney lockdown.

The amount of the grant will depend on the decline in turnover:

  • 30% or more decline = $7,500 grant
  • 50% or more decline = $10,500 grant
  • 70% or more decline = $15,000 grant

These grants are likely going to be declared to be tax-free grants. Applications can be made until 13 September 2021.

             NSW 2021 JobSaver

The JobSaver cashflow boost is a cashflow boost for eligible businesses available from week 4 of the current NSW lockdown. It is to help businesses maintain their employee headcount. This payment is made in fortnightly amounts based on 40% of their NSW payroll payments, with a minimum of $1,500 a week and a maximum of $100,000 a week.

To receive the payment, the business must maintain their staff levels through the lockdown. Non-employing businesses (sole traders) may receive a payment of $1,000 a week.

             Micro Business Grants

For smaller businesses, with turnovers between $30,000 and $75,000 (in the 2020 financial year), who have experienced a decline of at least 30% of their income, but are not able to apply for the previous two grants, the Micro Business Grant is available.

Applications for this grant close on 18 October 2021.

             NSW Payroll Tax Concessions

Businesses with under $10 million in payroll for the 2021/2022 financial year, who have experienced a 30% decline in turnover will have their annual payroll tax liability reduced by 25%. 

Businesses will also have the option to defer their 2020/2021 annual payment as well as the July and August monthly payments until 7 October 2021. 

             NSW Land Tax Concessions

Up to 100% relief may be available to residential or commercial landlords who have provided rent reductions to eligible tenants. Note that the property owner cannot apply for this concession as well as the Residential Tenancy Support Payment.

             Residential Tenancy Support Payment

Residential landlords with eligible properties may be eligible for grant up to $3,000 if they provide rent reductions to their tenants. They will be eligible for either this grant, or up to 100% land tax concession.

             Short Term Eviction Moratorium and Other Tenant Safe Guards

An eviction moratorium is in place until 11 September 2021. Where a residential tenant has lost at least 25% of their income due to COVID-19 (along with other eligibility criteria), the landlord will not be able to evict the tenant prior to mediation.

             Targeted Industry Support

Other targeted industry support applies to some of the most hard hit industries (such as tourism and entertainment industries).

VICTORIA

The Victorian government has issued a range of grants to assist businesses impacted by the shutdowns.

             Business Costs Assistance Program Round Three (BCAP3)

Eligible businesses who received the Round Two payments (BCAP2) for business costs assistance were automatically paid this additional grant.

Businesses who missed the Business Costs Assistance Program Round Two may be able to apply for the “BCAP2 July Extension” grant instead.

             Small Business COVID Hardship Fund

Businesses who were not eligible for support under existing programs but experienced a turnover reduction by at least 70% (and have a payroll of under $10 million) may be able to access pay grants of up to $5,000. A second round of funding under this grant was announced on 6 August 2021. This grant enables Small Businesses to access grants of up to $8,000.

             A New Business Continuity Fund

This is an additional grant announced on 28th July 2021, that will be automatically applied to any business that was eligible for the BCAP2 or BCAP2 July Extension, where their business was impacted by capacity limits in the CBD.

             Specific Industry Funds

Licensed Hospitality Venues, Alpine Businesses, and Events organisers, have specific grants available for their Industry, due to recognition of the particular hardships that these industries have faced during lockdowns. These grants are between $5,000 and $25,000 for eligible businesses located in areas impacted by the lockdowns.

             Commercial Tenancy Relief for Victorian Businesses

This relief involves the reintroduction of the Commercial Tenancy Relief Scheme. Support is also being provided to landlords who provide rent relief. This relief is generally available where the business has a turnover below $50 million and their revenue has reduced by at least 30% due to coronavirus.

QUEENSLAND

Queensland also has a range of grants available, primarily for small to medium businesses. To be eligible, the business must have a turnover of at least $75,000, an annual payroll of under $10 million and a reduction in turnover of at least 30%.

             2021 COVID-19 Business Support Grants

Eligible small businesses within areas that were locked down may apply for a $5,000 business support grant. Larger businesses in hospitality and tourism have now been added to this grant, subject to meeting relevant criteria.

             Queensland Tourism and Hospitality Package

A range of measures specific to the tourism and hospitality industry includes:

  • Deferral of payroll tax liabilities
  • Waiving, refunding, or deferring certain fees and licensing costs
  • A cleaning rebate to aid eligible businesses and nonprofit entities impacted as potential exposure sites

OTHER

State assistance has also been offered in South Australia, Western Australia, and the Northern Territory.

With lockdowns continuing to be announced, particularly in the Eastern States, it is likely that further extensions, top ups or additional grants will continue to be announced.

Understanding the Differences Between Australian Citizenship, Visa Residency and Tax Residency

It can understandably be confusing to determine the difference between being an Australian tax resident for tax purposes compared to visa residency.

If you’re an Australian citizen who was born and continues living in Australia, then it’s pretty straightforward. You are an Australian for both citizenship and tax purposes.

But what about when things aren’t so clear? Can you be an Australian citizen but not an Australian tax resident? Can you be an Australian tax resident without being an Australian citizen? And what about Visa status? How does this change things?

Citizenship and visa residency are pretty clear cut. You are either a citizen or you aren’t. You either have an Australian residency visa, or you don’t. Tax residency, whilst linked to some degree to having visa residency or citizenship, is not as straightforward.

Australian Citizenship

You are an Australian citizen when Australia is legally your home country. This could be because you were born in Australia, or because you were born to Australian parents, or because you applied for citizenship. As an Australian citizen, Australia is considered to be your default country for all purposes, including taxation. This is why an Australian citizen may, in certain situations, continue to be treated as a tax resident, despite living in another country.

However, what about for those citizens from another country, living in Australia?

Australian Visa Residence 

People who are citizens of other countries are only permitted to stay in Australia per the terms of their Visa. There are many different types of visas, ranging from short-term holiday visas, through to permanent residency visas.

The type of visa you hold will play a part in your circumstances when determining tax residency. For instance, individuals on short-term visas are less likely to be considered Australian tax residents, while individuals on long-term or permanent residency visas are more likely to be considered Australian tax residents.

Australian Tax Residency

Despite what your citizenship and visa status is, tax residency is a matter of fact and intention. There is no application form to be completed nor automatic rule to become a tax resident.

When considering whether you are an Australian tax resident the primary factor is whether you, the individual, is living in Australia (see the “resides test” below). Conversely, you may be a foreign resident for tax purposes if you live outside of Australia. Living in Australia is distinguished between having a holiday in Australia, or staying in Australia for an extended period, whether temporary or permanent.

To help distinguish “permanency”, an individual must typically be living in Australia for at least six months to be considered a tax resident. Conversely, Australian citizens who are living overseas are typically still considered to be Australian tax residents if they are living overseas for less than 2 years. Indeed an Australian citizen may be living overseas for up to 5 years and continue to be considered an Australian tax resident if there are sufficient ties remaining in Australia to demonstrate that the nature of their overseas stay is “temporary”.

In order to determine tax residency specific residency tests are considered.

Tests for Australian Residency

To determine whether an individual is a tax resident there are a number of tests that can be applied. Passing any one of these tests will determine residency status.

             Resides Test

The first test for residency is the ‘resides test’. If you are physically present in Australia, intending to live here on a permanent basis, and have all the usual attachments in Australia that one would expect of someone living here, then you are a tax resident.

Factors considered include whether your family lives in Australia with you, where your business and employment ties are, where you hold most of your assets and what your social and living arrangements are. If you pass this test then there is no need to consider further tests. 

It is possible to be found to be a resident of more than one country. In cases where you are found to be a dual resident, you may need to consider tie breaker rules in any relevant Double Tax Agreement. 

If you don’t pass the resides test then you may still be a tax resident if you satisfy one of the three statutory tests instead.

             Domicile Test

The domicile test states that you will be found to be an Australian tax resident unless you have a permanent home elsewhere. An Australian citizen will have Australia as their domicile by origin. This means that even if an Australian citizen is living or travelling overseas their default home will be Australia. 

In such situations residency only changes when there is an intention to permanently set up a new domicile overseas. (For this reason people holidaying overseas or living overseas on a short-term basis can continue to be Australian tax residents even if they don’t step foot in Australia for years). Individuals who were domiciled in Australia but who do not cut their connection with Australia, will continue to be Australian residents.

             183-Day Test

The ‘183 day test’ is the day count test. This test is typically to capture foreign residents coming to Australia, rather than applying to Australians moving overseas. Individuals who come to Australia from overseas for at least 183 days may find themselves being Australian tax residents. Note that being in Australia for 183 days of the year does not automatically make such an individual a tax resident. Non residents who come to Australia for more than 183 days but do not have any intention of taking up residence in Australia may, depending on their intent and actions, be considered visitors or holiday makers, and therefore not qualify as tax residents.

             The Commonwealth Superannuation Test

Australian Government employees in CSS or PSS schemes, who work in Australian posts overseas, will be considered Australian residents regardless of other factors. 

Examples of Tax Residency and Foreign Tax Residency

To understand the difference it might help to look at a few examples of different scenarios.

             An Australian Citizen who is a Tax Resident

Tom is an Australian citizen who was born in Australia. He has lived in Australia his whole life, and intends to continue living here. During the year he goes on a 6 month holiday, travelling around Europe. At the end of his 6 months he decides to take advantage of another opportunity and stays in Africa for 3 months. After this time, he returns home to Australia. 

Tom’s tax residency never changes. Despite travelling overseas for 9 months of the year, he continues to be an Australian resident for tax purposes. This is because Australia is always his home, and his time overseas is not in the nature of a permanent move.

             An Australian Citizen who is not a Tax Resident

Jill is an Australian citizen who was born in Australia. She has lived in Australia for her whole life. However, in 2019 Jill accepts an opportunity to take a job in England. The position is a permanent position and requires Jill to move to England on a permanent basis. After acquiring the necessary visa to work and live in England, she sells her home and uses the proceeds to make the move to England, where she buys a new home and settles down. Jill brings her son to England with her, and closes down her Australian bank accounts. She does not expect to return to Australia, other than for occasional holidays.

On the day that Jill departs Australia she becomes a foreign resident for tax purposes. The fact that she is an Australian citizen does not change this. This is because it is clear from her actions and intentions, closing off ties to Australia, and establishing a new home in England,  that she is moving to England on a permanent basis. 

             A Tax Resident Living in Australia on a Permanent Residency Visa

Bob is from the United States of America. While in Australia on a working holiday visa, where he travels around the country, his final stop is at a small country town that feels like home to him. He makes friends and is even offered a permanent job there. Bob’s visa is almost up, so he goes back to the United States as planned, then takes the necessary steps to return to Australia and apply for a permanent residency visa. Bob effectively cuts his ties with the US and intends to make this small country town his new home and moves into a room with one of his new mates.

On Bob’s initial time in Australia under his working holiday visa, he will be considered a non-resident, or a temporary resident, depending on his visa. Even though he started thinking about making a permanent move at this stage, he had yet to take any steps to show this intention. However, on his return, which was made with all the actions necessary to show that this was a permanent move to Australia, he then becomes an Australian tax resident. 

             A Foreign Tax Resident with an Australian Permanent Residency Visa

Jane is a British citizen who has been living in Australia on a permanent residency visa for the past ten years. She just received news that her parents were in a bad accident and both need permanent care. Jane decides to pack up and move back home to care for her parents. She sells off her assets, closes her Australian bank account, and returns home to live with her parents. She also finds a part time job overseas.

Even though Jane has a permanent residency visa in Australia, she is no longer living here on a permanent basis. This means she is now a foreign resident for tax purposes.

Permanent and Temporary Residents

Even if an individual is deemed to be a tax resident, the ATO further distinguishes between temporary residency and permanent residency. Temporary residency typically occurs when an individual is genuinely residing in Australia on a “permanent” basis, however, are only in Australia on a temporary Visa, as opposed to living in Australia on a permanent residency Visa or obtaining Australian citizenship.

Temporary residents are only taxed on their Australian-sourced income.

Tax Residency is based on your Permanent Residence

As you can see from the above examples, tax residency is based on where an individual is permanently residing. If you are in Australia on a holiday, or only for a short time (less than 6 months), then you would not be considered an Australian resident for tax purposes.

However, holding a permanent residency visa, does not necessarily mean you are a tax resident. If you actually live in another country on a permanent basis, having your social and economic ties in another country, then you will be a foreign resident for tax purposes. 

It is important to note that there must be a permanent home elsewhere. If an Australian resident decided to travel the world for several years, although they may think they have departed Australia permanently, as they do not have a permanent home elsewhere, this would not constitute a decision to permanently reside in another country. Australia would continue to be their home, even though they are absent from Australia for a prolonged period of time. 

Since determining tax residency can be quite complex, it is important to speak to a tax specialist to understand your situation.

Tax obligations of expats living in Australia on a “Distinguished Talent Visa”

There are many pathways that you can take when coming to live in Australia on a permanent basis. The “Distinguished Talent Visa”, subclass 858, is one of them. This Visa allows you to stay in Australia on a permanent basis, and permits you to work and study in Australia.

As an individual living in Australia on a “Distinguished Talent Visa”, you need to be aware of your tax obligations. Below we outline the most common questions clients on the “Distinguished Talent Visa” want to know.

Is a person living in Australia on the Distinguished Talent Visa an Australian tax resident?

An individual living in Australia on a Distinguished Talent Visa is most likely an Australian tax resident. 

This visa allows you to live in Australia on a permanent basis. If you choose to live in Australia on a permanent basis and take actions to make this move, then you would be considered to be an Australian tax resident. 

However, if you simply use the visa to stay in Australia on a short term basis while continuing to live in your usual country of residence, then you would remain a foreign resident for tax purposes. 

This means that the Visa itself is not evidence of tax residency, however it is a pathway that could allow you to become an Australian permanent resident, and accordingly, an Australian tax resident. You would still need to actually move to Australia and begin residing here.

If your intentions and living situation changes whilst in Australia, your tax residency status can also change. 

What are the tax implications of moving to Australia on a Distinguished Talent Visa?

Assuming you are coming to Australia on a permanent basis, then moving to Australia on a Distinguished Talent Visa will mean you become a temporary Australian tax resident. This will mean that in Australia you may: 

  • be taxed on your worldwide income, including income that comes from your former home country
  • need to obtain market valuations on any overseas assets you own in order to establish their cost base for capital gains purposes
  • Be required to consider any double taxation issues with the country that you are departing from
  • As a temporary resident you will not be subject to capital gains tax on property you hold overseas.

Since the Distinguished Talent Visa alone is not sufficient to confirm that you are becoming an Australian resident, it is important that you get your residency assessed and obtain adequate tax advice for your specific circumstances. 

Should I sell my assets prior to moving to Australia?

Whether or not you sell your property and investments prior to moving to Australia is a personal decision that you should make based on your investment and financial needs and goals. You should always take financial advice from a qualified financial advisor.

From a tax perspective, you will only need to declare capital gains from the sale of your overseas assets if you become a resident and are not also a Temporary Resident before you sell them. 

In this situation your assets are valued and taken to have been acquired at the time that you become a resident and are not still a Temporary Resident.

Assets that are subject to capital gains tax will be eligible for a 50% discount on the amount that is assessed, once they have been held for at least 12 months.

Getting adequate advice on the tax consequences of choosing when to sell your assets is something that should be done as soon as possible, so that you are able to make more informed decisions.

What happens with the taxes I am required to pay in my home country?

After moving to Australia on a permanent basis it is possible that you will still be required to pay income tax in your former country of residence. 

If there is a Double Tax Agreement (DTA) between Australia and your former country of residence, then the DTA will contain provisions that minimise the potential of being taxed twice on the same income. 

DTAs can minimise the amount of foreign tax that is paid on investment income such as interest. They also include tie breakers for situations where you are deemed to be a resident of both countries. 

Paying Tax in Australia

Whether you are a permanent resident, a temporary resident, or a non resident of Australia, you will be required to lodge an Australian tax return on an annual basis while earning income in Australia. 

Non residents are only required to include income that is sourced from Australia. 

Permanent residents are required to include income from worldwide sources.

Under the Australian tax system your employer withholds some tax from your pay, known as PAYGW (pay as you go withholding). The PAYGW is remitted to the ATO who then offset this against your assessed tax liability for the year. Any excess PAYGW is refunded at this time, or a notice of payment is issued where you owe additional tax. 

Australians moving to the USA: Key Differences in the Australian and US tax system

Like any overseas move, moving from Australia to the United States will mean that you will encounter a brand new taxation system. 

If you’re used to the Australian tax system, the US system may seem a lot more complicated. For a brief overview of the differences see this comparison table:

AustraliaUnited States
Tax Year1 July to 30 June1 January to 31 December
Tax AuthorityAustralian Taxation Office: ATOInternal Revenue Services: IRS
Income Tax (residents)As an Australian you are taxed at a tiered individual income tax rate that ranges from 0% to 45%.Federal Income Tax is charged at tiered individual rates between 10% and 37%. Unlike Australia there is no initial tax free threshold.

Most States also impose a personal income tax which varies between states. Typically the state tax rates are under 10%. 
Income Tax (non-residents)Australia typically only taxes non-residents on income that is sourced in Australia. The tax free threshold doesn’t apply, and the first $120,000 of Australian income is taxed at the rate of 32.5%. (Up to a maximum of 45% for every dollar over $180,000). There may be some limitations and exclusions depending on the relevant double tax agreement. The US typically only taxes non-residents on income that is sourced in the US. Passive income (for example dividends, rent, royalties) is taxed at a flat 30% (unless a specific tax treaty specifies a lower rate). Effectively connected income (income earned through a business or personal services) is taxed at the same graduated rates as for a US person. 
Social Security Tax RateNot applicableThe US charges additional social security taxes, which is payable by both the individual and their employer. There is a cap on the maximum wage that is subject to this tax each year. 
Medicare Australians are taxed for a medicare levy on all of their income, unless they are under low income rate thresholds. The medicare levy rate is currently 2% of taxable income. High income earners are also charged a medicare levy surcharge, unless they have appropriate private health care coverage. The rate of medicare levy surcharge is between 1 and 1.5% depending on the individual’s taxable income level.  In Australia many medical services and public hospital services are provided free for all Australians under the medicare system. This is what the medicare levy and medicare levy surcharge tax levies pays for.The US also charges a medicare tax on all individual income. The rate is currently 1.45%. Employers are required to withhold an extra 0.9% medicare tax when an individual’s wage exceeds $200,000 in a year.   Unlike Australia, the US does not provide universal health care for its citizens. In the US each individual is responsible for funding their own health care. This means that instead of the medicare taxes going towards a general public funding pool for universal healthcare, they go towards your Medicare Hospital Insurance for when you are a senior. Medicaid is available to help support low income earners. 
Health InsuranceIt is optional for an individual to pay for private health insurance, which covers private health care as well as services that aren’t covered by medicare. High income earners will be exempt from the additional medicare levy surcharge if they take out private health insurance with adequate hospital coverage.In the US an individual is responsible for health insurance (most employers do provide health insurance coverage) in order to get their health care services covered, or partially covered, by their insurance provider. Medicaid is available to assist low income earners to access free or reduced cost health care. 
Sales TaxGST is a federal tax charged at 10% on most goods and services. Basic essentials are exempt. Sales taxes apply on most goods and services, and these are levied by the various state governments. These taxes range from 0 to 13.5%. 
Tax Return Due DatesThe financial year ends on 30 June. Individual tax returns are due for lodgement by the 31 of October (however extensions typically apply until May in the following calendar year where an individual uses a tax agent to lodge their return and they have no outstanding obligations). The financial year aligns with the calendar year in the US, meaning the tax year ends 31 December. Tax lodgements are due by 15 April the following year. Self-employed and small business owners are required to make quarterly reports to pay estimated taxes that are reconciled with the annual filing. 
Income from your Australian Superannuation FundTaxation on superannuation income streams and lump sums is taxed differently depending on whether you have reached the preservation age, and the type of super income stream that is paid. Distributions from an Australian superfund are typically exempt from US tax provided the benefits are appropriately claimed and reported. 
RetirementOnce you reach preservation age (60), your retirement benefit from your superannuation fund is tax free.

Aged pensions form part of your taxable income, however if you have no other income then your pension won’t exceed the tax free threshold. 
Your income stream from any 401(k) plan, social security or pension are taxed depending on your income sources and overall level of income.

As you can see, there are a number of key differences in the way taxes are levied and collected in the US. Much of this is due to the additional authority of the states to impose both income and sales taxes for their own jurisdictions. This means that the exact amount of taxes you will be faced with will, ultimately, depend exactly where in the states you are moving to.

Tax Considerations Every Australian Expat Should Understand Before Moving To The USA From Australia

If you’re an Australian who is moving to the United States, there are many tax issues to be aware of. Here’s a basic overview of what you need to know before considering the move. 

You can also download our guide: Moving to USA, here.

Tax Residency

When moving to another country, the first consideration should be your tax residency. From an Australian perspective, you will be taxed very differently depending on whether:

 i) you remain an Australian tax resident, 

ii) you remain an Australian tax resident, but also become tax resident of the United States, or 

iii) you become a non-resident of Australia and become tax resident of the United States.

As an Australian tax resident you are taxed on your worldwide income, whereas a non-resident is only taxed on Australian sourced income.

For Australian tax purposes, there are a number of tests that determine whether you are treated as a tax resident. Just simply moving to the US does not automatically mean you become a non-resident of Australia. Usually an Australian citizen, or permanent resident, will remain an Australian tax resident unless they move overseas on a permanent basis. While there is no one specific factor that will determine what makes a move permanent, factors that will be considered include the length of time living overseas (minimum 2 years), purchasing or leasing a home overseas, selling Australian assets, and where your personal family ties and business ties lie.

The US, on the other hand, has its own set of rules to determine whether an individual is considered a tax resident in the US. Foreign nationals that are Greencard holders, and those that have been in the USA for over 183 days are generally regarded as ‘resident aliens’ and taxed like US citizens on their worldwide income. Non-resident aliens in the US are only taxed on their US-sourced income.

It is possible that you could be considered a tax resident of Australia under Australia’s rules, and a tax resident of the US under the US rules. In this case, the Double Taxation Agreement (DTA) between Australia and the US will need to be referred to. This tax treaty exists to help avoid double taxation in both countries.

As the rules and tax treaties in both Australia and the US can be quite complex, it is important to talk to a tax advisor who is experienced in cross border residency issues in order to understand your tax residency status, and to be aware of when your residency status may change.

Living In The US Temporarily – Taxation As An Australian Resident For Tax Purposes

If you remain an Australian tax resident after moving to the United States, then you will continue to be required to lodge an Australian tax return each year. As an Australian tax resident, you are required to declare income from worldwide sources in your Australian tax return. 

The Australia – US DTA will need to be referred to,  to see which country has the taxing rights over certain income categories. The DTA also explains circumstances when foreign income tax offsets are available to offset Australian tax. 

US Tax Return

You will also need to lodge a US tax return as a US non-resident, for any US sourced income. The US has the right to tax non-residents on US sourced income. However, thanks to the Australia – US DTA, Australia will generally treat any US income tax paid as foreign tax credits against the Australian tax liability. This means you will only need to pay Australian tax on any difference between the amount of US tax paid and the amount of Australian tax assessed. If the US tax is higher, then you will not be refunded the excess above the Australian assessment.

Living In The US Permanently – Becoming A Non-Resident Of Australia

If you are moving to the US on a permanent basis you will become a non-resident of Australia for tax purposes. You will need to still lodge Australian tax returns on any income generated from sources in Australia.

Capital Gains Tax Payable When You First Move To The US

One of the first taxation issues to understand when moving to the US is that Australia will treat you as having disposed of your capital assets (excluding Australian real property) at the market value prevalent on the date of your departure, unless you elect to defer the deemed disposal (explained further below). A deemed capital gain or loss will need to be calculated and included in your tax return, as if you had actually sold those assets. Once those assets are sold at a later date whilst you are in the US, there will be no further tax payable in Australia (tax will be payable in the US). 

However, you do have the option not to include the deemed capital gain if you instead choose to report it as a capital gain when you eventually sell the assets. However, the DTA will need to be referred to, to see whether the gain would be taxable only in the US.

In summary, your options are:

Option 1- Declare a “deemed” capital gain in your Australian tax return for your foreign investments when you leave the country. As long as you don’t return to Australia you will have no more Australian tax to consider when you eventually sell those foreign assets.

Option 2- Choose not to declare a deemed capital gain, but wait until you actually sell the foreign investment. If you are still living in the US (or another country that has a similar clause that gives them taxation rights over Australia in this situation), then you won’t need to declare the capital gain in an Australian tax return. If you are living in a country that doesn’t have this clause when you sell the foreign investment, then you would have to declare the capital gain in an Australian tax return at that time.

Australian Sourced Income

As a non-resident for Australian tax purposes you would only be required to lodge an Australian tax return to declare any Australian sourced income that was not already fully taxed under the Double Taxation Agreement. For instance, interest income for non-residents is subject to special withholding rates that are considered to be the full and final tax. This means that the tax withheld is the tax paid for this income. You can’t claim deductions against this income to reduce the tax you have to pay on it, and you can’t claim the tax as a credit against other income being reported in an Australian tax return. As long as your bank has been notified that you are a non-resident they should withhold the correct amount of tax.

Fully franked dividends from Australian sourced companies are also considered to be the full and final tax for the Australian sourced income.

Other Australian sourced income is required to be included in your Australian tax return to be assessed for tax at non-resident rates.

Australian Superannuation

While contributions that you make to your Australia superannuation fund may be deductible against your Australian income, they will generally not be deductible against your US income.

Australian superannuation funds are not subject to the same tax deferral rules in the US. Further advice will need to be sought on whether Australian superannuation fund earnings will be taxable in the US.

Talk To Your Tax Advisor Before Making The Move

Moving overseas can create a large number of potentially complex taxation issues to consider. This article contains a brief introduction to some of the tax issues that may be encountered when considering a move to the US and does not consider your personal situation or circumstance. It is important to speak to a qualified and experienced tax advisor, both in Australia and in the USA, about how the various laws and tax treaties apply to your specific situation.

Please note that the general information provided is accurate at the time of publication, however tax laws do change frequently. To ensure you have reliable information it is therefore important that you seek specialist advice at the time of your potential or intended move, to ensure you have up to date, and personally relevant advice on hand.

Planning ahead ensures you have the information necessary to make informed choices, and prevents you from being surprised with unexpected tax costs.

CST Tax Advisors in Sydney can provide you with advice regarding your Australian tax when it comes to moving, or considering a move overseas. Our US office will be able to assist you with tax advice regarding your US tax.

Federal Budget Changes

This Federal Budget has been shadowed by the economic uncertainty and unusual difficulties faced under the coronavirus. This means there has been a general expectation that there would be significant announcements made in the effort to stem the negative impact that COVID-19 restrictions have had on the economy.

With the income tax changes covered in the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 passing both houses of Parliament on 9 October 2020, both employers and employees could be seeing the benefit of budget announcement in a matter of weeks.

Here’s an overview of the key Government announcements.

Personal Income Tax

The planned reduction in personal income tax rates is being brought forward to 1 July 2020. That means you’ll be seeing the benefits not just in your 2021 tax return, but in adjustments to your salary package as soon as the PAYGW rates are updated.

While the tax free threshold and the top marginal tax tier remain unchanged, the 19%, 32.5%, and 37% tax tiers now cover higher levels of income. 

*Previous Tax Rate for 2021New Tax Rate for 2021
NIL Tax 0-$18,2000-$18,200
19% Tax $18,201-$37,000$18,201-$45,000
32.5% Tax $37,001-$90,000$45,0001-$120,000
37% Tax $90,001-$180,000$120,001-$180,000
45% Tax $180,001 +$180,001+

*Medicare levy of 2% also applies unless exempt.

Low Income Tax Offset (LITO) and Low and Medium Income Tax Offset (LMITO)

The LMITO offset of a maximum of $1,080 for taxpayers will continue to apply in the 2021 income tax year. Individuals with a taxable income of between $48,000 and $90,000 will be able to access this offset in full.  

The maximum low Income Tax Offset is increased to $700 for individuals earning under $37,500. A pro-rata amount of the low income tax offset will be available to individuals who earn under $66,667. (The LMITO is also available to low income tax earners in addition to the LITO).

Instant Asset Write-Offs

Unlike previous allowances for instant asset write-offs, this allowance is uncapped. That means eligible businesses can claim the full cost of new assets purchased, regardless of how much those purchases were. 

From 7:30pm 6 October 2020 until 30 June 2022 the instant asset write off provisions have also been extended to businesses with a turnover of up to $5 billion. 

This will essentially mean that 99% of businesses will be able to fully write off the cost of purchasing and installing assets that are acquired and first used between 7 October 2020 and 30 June 2022. 

Small businesses (under $10 million turnover) with a balance in a simplified depreciation pool, will be able to expense the full remaining balance of that pool in the 2021 and 2022 years.

Loss Carry-Back

For businesses with a turnover of up to $5 billion who have made a tax loss this year, but paid taxes in previous years, the government is creating an opportunity to go back and offset current losses against previous profits. This will allow those businesses to generate a refund from those previously paid taxes.

The limitations imposed on this measure include: 

  • Limiting the amount carried back to be no more than the earlier taxed profits.
  • The requirement that the carry-back does not cause a company to have a franking account deficit. 

The tax refund generated by carry-back losses will be available to eligible businesses on lodgement of their 2021 and 2022 tax returns. As this measure is optional, businesses can choose to simply carry forward their current year tax losses as normal.

Small Business Tax Concessions Extended to Larger Businesses

The small business tax concessions have been extended to businesses who have an aggregate annual turnover of between $10 million and $50 million.

Access to small business tax concessions include:

  • From 1 July 2020, eligibility to immediately deduct certain start-up and prepaid expenses. 
  • From 1 April 2021, exemption from the 47% FBT on car parking and multiple work-related portable electronic devices (phones, laptops) being provided to employees. 
  • From 1 July 2021, access to simplified trading stock, PAYGI remittance based on GDP adjusted notional tax, and monthly settlement of excise duty. 
  • A two year amendment period for assessments from 1 July 2021. 
  • Potential for a simplified accounting method for GST purposes.

JobMaker Incentive

The JobMaker incentive is a government grant paid to employees who hire young job seekers.

The payments are made at $200 a week for eligible employees between 16 and 29 years old, or $100 a week for eligible employees between 30 and 35 years. 

The limits and eligibility criteria include: 

  • The job must be a newly created job between 7 October 2020 and 6 October 2021. It must not displace an existing employee. 
  • The credit is claimed quarterly in arrears and is capped at $10,400 for each new position created. 
  • The credit claimed cannot exceed the payroll increase for the reporting period. 
  • Eligible employees must be paid for a minimum of 20 hours per week on average over the reporting period
  • The new employee must have been on JobSeeker, Youth Allowance, or Parenting Payments for at least one out of the past 3 months before being hired. 
  • The new employee cannot be an existing or former employee of the business and the employer cannot also be receiving a wage subsidy under another program for the employee. 
  • Employers claiming JobKeeper payments are not eligible.
  • New employers created after 30 September 2020 will not be able to claim for the first employee they hire.

R&D Incentives

Small companies with turnovers below $20 million will have access to an 18.5% R&D tax offset.

Corporate Residency Test

Where a company was incorporated offshore it now has a chance to be considered an Australian tax resident. To become an Australian tax resident the company must have “significant economic connection to Australia”. This effectively means that the company must undertake their core commercial activities in Australia and have its central management and control in Australia. 

Keeping up with technology

While not strictly a tax measure, the Government has also indicated that they will be looking into making permanent changes to the Corporations Act 2001 in order to keep up with the times. This would mean companies could achieve a quorum through virtual attendance at meetings and provide certainty on issues such as electronically executing documents.

FBT Changes

A new FBT exemption will be introduced for employers to retrain and reskill employees who are being made redundant. This is so that the employer can help reskill an employee for a brand new position without triggering an FBT liability in covering costs that don’t have a sufficient connection to their existing role. This does not cover the cost of Commonwealth supported university placements or repayments of Commonwealth student loans. 

The Government is also looking at measures to reduce the compliance burden on FBT returns being finalised from 1 April 2021.

CGT on “Granny Flats”

Where an elderly or disabled person transfers their home, or the proceeds from the sale of their home to an adult child or trusted person, so that the trusted person can provide ongoing housing and care for them, then a CGT exemption will be applied to the arrangement. 

Commercial rental arrangements are not covered by this exemption. It only applies where the arrangement is entered into on the basis of family relationships or other close personal ties.

Taxing Times

With many concessions, rate changes, incentives, and ease of administrative burden efforts under way, taxpayers could be seeing a large overhaul that may leave a permanent mark on the tax system.

Please keep in mind that the announcements are subject to change as the Government finalises legislation. 

JobKeeper Update

The government has announced an extension to JobKeeper beyond the initial 28 September conclusion. This extension means it is available to all eligible businesses (including the self-employed) until March 28 2021.

However, JobKeeper is not simply carrying on in its current form. Businesses who have been claiming JobKeeper subsidy may not continue to be eligible. New businesses who were not previously eligible may become eligible in the September quarter and be able to apply for the extended JobKeeper period.

Keep in mind that due to the ongoing pandemic, changes may continue to be made up to, and even beyond the time, that the new JobKeeper payments kick in.

Here’s an overview of the changes that have been announced:

Qualification Criteria

To receive JobKeeper payments after 28 September the business will have to show that their actual turnover has experienced a significant decline for the September 2020 quarter. This differs to the original requirement of simply having to have a reasonable expectation of decline.

This means that a qualifying business must actually have a turnover that, in their September 2020 quarter, is at least 30% less than the turnover they had in their September 2019 quarter.

Businesses with an aggregate annual turnover of more than $1 billion must actually have a turnover for their September 2020 quarter that is at least 50% less than their September 2019 quarter.

To continue to claim the JobKeeper payments for the March 2021 quarter, the business will have to confirm the ongoing impact of loss of income in the December 2020 quarter. This means they must actually have the lower income in the December 2020 quarter when compared to their December 2019 quarter, in order to continue to claim JobKeeper in the March 2021 quarter.

Businesses who were not previously claiming JobKeeper, but who are eligible in the September 2020 quarter based on their actual turnover, and meet all the other original qualifying tests, may apply as new recipients.

As occurred with the original JobKeeper payments, the Commissioner will have the discretion to set alternative tests, where comparing the actual turnover to the equivalent period in the prior year, is not appropriate.

Eligible Employees

Employees that will be included in the extended JobKeeper subsidy must meet the following criteria:

  • Currently employed by the employer (including being stood down or re-hired).
  • Were a full-time, part-time, of fixed-term employee at 1 July 2020 OR
  • Were a long-term casual who was employed for over 12 months on a regular basis, and is not employed as a permanent employee elsewhere. 
  • Over 18 years of age on 1 July 2020 (or an independent 16 or 17 year old who was not studying full-time). 
  • Australian resident (as defined in the Social Security Act 1991) or
  • New Zealand citizen living in Australia under the Special Category Subclass 444 visa (which is the Visa that automatically applies to New Zealand citizens who come into Australia).
  • Were not being paid parental leave or Dad and Partner pay under the Paid Parental Leave Act 2010.
  • Were not being paid under a worker’s compensation payment due to a total incapacity to work.

An individual who has multiple jobs can only claim JobKeeper from one employer. They cannot elect to claim JobKeeper in a position where they have been a regular casual for more than 12 months, if they are eligible for JobKeeper with another employer for whom they are permanently employed.

Self-employed individuals will be eligible to continue to receive JobKeeper as long as they meet the original requirements and the relevant turnover test, and are not permanently employed by another employer.

Payment Amount

December Quarter:

Under the extended JobKeeper payments, the fortnightly payment will be reduced from $1,500 to $1,200. This is for any employee who was employed for at least 20 hours or more a week.

For employees who worked less than 20 hours a week, payments will be reduced to $750. Business participants who worked less than 20 hours a week will also be paid at these lower rates.

March Quarter:

For the March 2021 quarter the JobKeeper payments drop to $1,000 a fortnight for all eligible employees who worked for at least 20 hours a week.

Employees who worked less than 20 hours a week will be paid out at $650 a fortnight.

The working hours used to determine whether an employee worked more or less than 20 hours a week are the 4 weeks prior to 1 March 2020. However, this test period may not always be relevant since the extension now includes permanent employees who were employed as of 1 July 2020, and casuals who meet the 12 month employment criteria by 1 July 2020.

A business may apply for the Commissioner’s discretion for alternative tests where an employee or business participant’s usual working hours were different in the qualifying period than they would normally have been (for example if they were on voluntary leave during the bushfires, or not employed in the previous quarter).

Further Information About JobKeeper

Like the original JobKeeper program, JobKeeper is a wage subsidy that is paid to eligible employers in order to help cover the cost of wages that they are paying to their employees.

The JobKeeper income received counts as taxable income to the business, just as the wage payments made count as a tax deductible expense to the business. Any JobKeeper payments made to the business via claims based on an eligible business participant are also included as taxable income for the business. There is no GST on this income and it does not count as turnover for GST purposes.

The Treasury’s fact sheet on the JobKeeper extension can be found here

Key tax differences between a Permanent Resident and Temporary Resident

The rules around tax residency are largely different to the rules around social security, visa residency, as well as citizenship.

Australian Tax Resident

In Australia, for tax purposes, an individual is an Australian resident if they satisfy one of the residency tests. 

However, those people from outside of Australia may not realise that establishing that you are an Australian tax resident is not the end of the story. An Australian tax resident may be a permanent resident or a temporary resident, with different tax implications.

Temporary Australian Tax Resident

A temporary Australian tax resident is an Australian resident who:

  • Holds a temporary visa under the Migration Act 1958
  • Is not an Australian resident according to the Social Security Act 1991
  • Does not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991

The Social Security Act 1991 defines an ‘Australian resident’ as a person who resides in Australia and is an Australian citizen, holder of a permanent visa or a protected special category visa holder.

As you can see this is different to the tax definition of Australian tax resident.

Temporary residents may be considered an Australian tax resident due to a “permanence” in their intention and action of residing in Australia, however, they may not be legally allowed to permanently reside in Australia based on their Visa, which means they will likely return to their home country.

(NZ citizens are a special case, where they can remain in Australia without applying for permanent residency, but are still considered Temporary Residents based on the “Special Category Visas” issued to them upon entry to Australia.)

The Difference Between a Temporary Resident and a Permanent Resident for Tax Purposes

All Australian residents are taxed on their Australian and worldwide income, including any capital gains on foreign property held.

Foreign residents are taxed only on their Australian sourced income.

Permanent Australian residents are treated the same as an Australian resident, and taxed on both Australian and worldwide income.

Temporary residents are taxed on their Australian-sourced income only. They are taxed at resident marginal tax rates, however, they do not pay tax in Australia on their foreign-sourced income.

Foreign residents and temporary residents are subject to capital gains tax (CGT) if a CGT event happens to a CGT asset that is taxable Australian property. They are not subject to CGT in Australia on their foreign owned taxable property for CGT purposes. This ensures, for example, that they can reside in Australia on a temporary basis without having to worry about the CGT consequences of a home they maintain back in the country in which they permanently live and are likely to eventually return to.

Taxable Australian Property

‘Taxable Australian property’ are capital assets that include real property situated in Australia, mining rights in Australia, assets of a business located in Australia, and indirect interest in Australian real property through an entity that you hold 10% or more controlling interest in (where such interest is primarily associated with ownership of the Australian real property).

This also includes options over any of the above.

Individuals are taxed on any taxable Australian property, regardless of their residency status.

Overview of Different Tax Treatment


Non-ResidentTemporary ResidentPermanent Resident
Taxed on overseas incomeNONOYES  
Taxed on Australian sourced IncomeYESYESYES   
CGT on taxable Australian propertyYESYESYES
CGT on foreign taxable propertyNONOYES
Entitled to claim CGT main residence exemption on Australian main residence       
NO
              
YES

YES           

Note that a temporary resident’s visa status may change, and they may find that they become a permanent resident, or Australian resident. If a temporary resident becomes a permanent resident, then they are deemed to have acquired any assets (other than taxable Australian property) at their market value on the date that they ceased being a temporary resident and became a permanent resident. Once an individual has become a permanent resident, simply departing Australia, even for more than six months, may not be enough to change their status to a non-resident.

Technology and Pandemic Create Tax Issues for Foreign Employees and Foreign Companies

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.

OECD Guidance on Potential Tax Consequences of COVID-19 Work and Travel Restrictions Keeping Australians Overseas

For many businesses, investors, and travellers, international travel is a regular, or important part of life. When 2020 started there were only very vague whispers that something was lurking over in China. Otherwise, travel, and travel plans, went on as usual. However, things very quickly escalated as COVID-19 began to spread around the world, with country after country swiftly and suddenly imposing international travel bans and local movement restrictions.

With an estimated 1 million Australians living and travelling overseas, many have found themselves trapped in inaccessible areas or unable to find a flight back home. Equally, many Australian expats have found themselves back in Australia unable to leave Australia temporarily.

From a tax perspective this does lead to the question of what tax consequences arise in these situations.

OECD Guidance

The OECD has released some guidance on what this could mean from a tax perspective. The following notes are based on the 3 April 2020 version of this advice.

Unintentional Creation of a “Permanent establishment” for Businesses Through Employees Stranded Overseas

It is considered unlikely that individuals who have been dislocated overseas and are working from a residence overseas during this crisis, will be seen as creating a permanent business establishment overseas. This is an exceptional situation where employees may temporarily be working in a different location for a long time.

In general, an isolated individual who is required to work from an overseas home is only working there on intermittent business activities and not creating a place of business that is used on a continuous basis to carry out the tasks of an enterprise. The situation is out of the control of the business, where the normal place of work is inaccessible.

However, it is also important to consider the domestic laws in the country where an employee is working during this time. Domestic laws may have different requirements in place, may not be adequately covered by a double tax treaty, or may not have legislated exemptions specific to the COVID-19 travel restrictions. It is therefore important to obtain advice specific to the country in which an employee is working during the COVID-19 travel restrictions.

It is also important to note that if an employee was habitually concluding contracts overseas on behalf of the business back in their home country, before COVID-19 travel restrictions were imposed, that they may be treated differently for tax purposes.

Could the Residence Status of a Company be Impacted when the Effective Place of Management has been Displaced Overseas During COVID-19 Travel Restrictions?

Some businesses may have found that their chief executive officers or other senior executives are stuck in a country other than the company’s country of residence, for the duration of the COVID-19 restrictions. This leaves those businesses concerned that there is effectively a relocation of management to an overseas location, which could in turn impact the company’s tax residency status.

Again the advice noted is that it is unlikely that situations created by COVID-19 restrictions will cause an unintended change in an entity’s status for tax residency. This is because the change in location of management is both an extraordinary and temporary situation due to an emergency situation.

Tax treaties typically contain tie breaker rules that should ensure this remains the case. In particular it is noted that the key to determining the location of management is the place where management usually occurs. This means a forced change of location of management during COVID-19 travel restrictions is unusual and exceptional, as well as temporary, in that the intention will be to resume usual operations once the travel restrictions are lifted.

Cross Border Workers

When a government is subsidising the wages of an employee who usually works in one location but is being paid while simply residing in another, from which country would this income be attributable?

The OECD Commentary indicates that this should be the place where the employee would otherwise have been working to earn their usual wages. This is because taxing rights are typically given to the place where employment duties are performed. Since the government payment is in relation to their normal employment duties, normal taxing rights apply to the source country. The country of residence would therefore be required to tax this income under the usual double taxation relief between the two countries.

Change of Residence Concerns

The OECD indicates that it is unlikely that the COVID-19 situation will affect the normal treaty residence position.

Australia, the UK, and Ireland, for example, have all issued guidance making it clear that where it is merely the exceptional circumstances of COVID-19 travel restrictions that are keeping non-residents within the country, this will not cause a change in tax residence.

However, it should be noted that such guidance has been qualified. For example, it is the ATO’s view that if a temporary change due to COVID-19 becomes permanent, then all the usual income tax issues will need to be confronted.

Business as Usual 

In general it appears that the OECD is suggesting that COVID-19 travel restrictions will not, by and large, result in changes to the usual measures and tax treatments that are in place.

This is because the COVID-19 restrictions are government mandated restrictions that are out of the control of the businesses and individuals who are impacted by them. They are exceptional circumstances imposed to deal with an emergency situation, rather than business as usual, and they will therefore only be temporary measures, even if they last for a lengthy period.

It should, however, be noted that all of these indications are general in nature and largely based on the model double taxation conventions as well as typical responses around the world to the COVID-19 travel restrictions and the way different countries are dealing with the issues that have arisen from this.

Specific tax advice should be sought from the local jurisdiction in which you are residing whilst under COVID-19 travel bans, as well as your Australian international tax specialists, to ensure that your specific situation, and the applicable double tax agreement and extraordinary circumstances are properly understood.