Living/Working Overseas (In Singapore?) while investing in Australia.

[MF35]

Hi All,

I may have an opportunity to work overseas (most likely Singapore). I'm married with one young child, planning to have another in the next few years, and have already started investing in Resi Property in Australia. We plan to continue to invest in Australian Property.

I've heard people talking about working overseas (in particular Singapore) in the past and recall generally that there were supposedly financial benefits. For example I think Singapore have a very low rate of income tax. I was wondering if anyone on the forum lives / has lived overseas (in particular in Singapore) or simply knows something about it, and can tell me what the financial benefits of living/working in Singapore or other particular countries are?

Thanks, MF35.

 

[alexlee]

http://www.ato.gov.au/large/content...htm&pc=001/009/039/002/001&mnu=&mfp=&st=&cy=1

This is VERY brief, and check with your own accountant, but because Singapore has a double tax treaty with Oz (see above), you might be able to claim Australian tax residency while your Singpoare salary income (probably doesn't apply if you use a contracting company, for example) is exempt from further Oz tax after you've paid the Singapore tax.

Tax losses from Australian IPs are carried forward indefinitely until you have applicable Australian income to offset it, though it's not indexed.

An interesting quirk is that as an Australian tax resident, you get franking credits refunded in full because you are in a tax loss position for Oz tax purposes.

There are a LOT of rules regarding the above, and I'm not going to take legal responsibility for it (even though I personally have done the above, for the UK and Japan), but it gives you something to think about and ask your accountant.
Alex

 

[julia]

MF 35
Australian property investor magazine covered the issues of living overseas with Australian rental properties in the September edition and the October edition discusses working overseas. If you can't get it from the Newsagents ring 1800888788

 

[ggumpshots]

http://www.ato.gov.au/large/content...htm&pc=001/009/039/002/001&mnu=&mfp=&st=&cy=1

This is VERY brief, and check with your own accountant, but because Singapore has a double tax treaty with Oz (see above), you might be able to claim Australian tax residency while your Singpoare salary income (probably doesn't apply if you use a contracting company, for example) is exempt from further Oz tax after you've paid the Singapore tax.

Tax losses from Australian IPs are carried forward indefinitely until you have applicable Australian income to offset it, though it's not indexed.

An interesting quirk is that as an Australian tax resident, you get franking credits refunded in full because you are in a tax loss position for Oz tax purposes.

There are a LOT of rules regarding the above, and I'm not going to take legal responsibility for it (even though I personally have done the above, for the UK and Japan), but it gives you something to think about and ask your accountant.
Alex

A double taxation agreement basically means you aren't taxed twice , but only once by the government where you live.
If you live and work in Singapore then you wouldn't be a resident of Australia
for Tax purpose, so the franking idea wont work.
However Alexee could be right in very unusual circumstances but most of the population wouldn't be able to implement Alexees suggestion.

 

[alexlee]

A double taxation agreement basically means you aren't taxed twice , but only once by the government where you live.
If you live and work in Singapore then you wouldn't be a resident of Australia
for Tax purpose, so the franking idea wont work.
However Alexee could be right in very unusual circumstances but most of the population wouldn't be able to implement Alexees suggestion.

I disagree. I'm talking about Australian TAX residency, which isn't dependent on your physical or legal residency. Physical residency does NOT have to equal tax residency. I can (and claimed such) to be an Australian TAX resident even though I was physically overseas for 6 years. My justification, in case the ATO asks, is that I always intended to come back to Oz.

I can claim tax residency in more than one country. Normally this would be stupid because then I'd be up for two lots of tax, EXCEPT (for example in my case) where Oz has a double tax treaty with the country I'm in (so salary isn't double-taxed), and I don't have other assets in the country I'm in (and it doesn't have world-wide taxation). I didn't buy UK property partly for that reason.

There is nothing in the tax law that prevents you from claiming tax RESIDENCY even though there might be a case for tax non-residency. All the tax residency rules in the legislation only deals with when you are DEEMED a tax resident. There is no law or case that I know of where the ATO wants you to be a tax NON-resident.

e.g. you might be deemed a tax resident if you go work overseas but intend to come back and do not cut ties to Oz (having your investments in Oz would be a major tie). i.e. the ATO WANTS you to be a tax resident as much as possible.

Why? Because theoretically the ATO can get more tax out of you if you're a resident (world wide source) EXCEPT for minorities such as Australian IP owners working overseas.
Alex

 

[alexlee]

I did this when I was working in Tokyo as well. Surprising given that Japan has a tax rate of <20%, but Japan does have a double tax treaty with Oz. So in that case I was both a tax resident of Japan AND Australia, and was subject to the tax laws of both countries. However, due to the fact that my Japanese salary isn't double-taxed (though I had to declare it on my Oz tax return), there was no extra tax to pay.

It doesn't work for everyone (e.g. if you use a contracting company because then you're not earning salary but dividend income, but I was permanent so I didn't have that option anyway) so check with your accountant.

As an example, Telstra 3 earned me around 17% AFTER tax in dividends because I got the 14% fully franked div and got the franking credits back as a refund because I had a net Australian tax loss.
Alex

 

[Patosan]

I have to agree with Alexlee about the TAX residency ... as far as I'm concerned it's a fairly grey area ... you'd get different answers if you asked different ATO staff. Basically I believe that the ATO is hardly likely to challenge someone who is claiming residency for tax porposes, the reverse would probably get more response.

I have read with interest Alexlee's posts on this topic for some time and contemplated going down that road, yet thus far we haven't ventured in that direction. So for the moment we pay tax in Japan and make a small loss on IP in Oz which is carried forward ... in our case thru a trust. It is pretty much useless asking Oz accountants about this sort of stuff, though there must be some who have expertise.

Good luck

 

[alexlee]

I have to agree with Alexlee about the TAX residency ... as far as I'm concerned it's a fairly grey area ... you'd get different answers if you asked different ATO staff. Basically I believe that the ATO is hardly likely to challenge someone who is claiming residency for tax porposes, the reverse would probably get more response.

I have read with interest Alexlee's posts on this topic for some time and contemplated going down that road, yet thus far we haven't ventured in that direction. So for the moment we pay tax in Japan and make a small loss on IP in Oz which is carried forward ... in our case thru a trust. It is pretty much useless asking Oz accountants about this sort of stuff, though there must be some who have expertise.

Claiming tax residency wouldn't change anything relating to the trust, though. Losses (assuming it's a normal discretionary trust) are quarantined anyway. If it's in your personal name and you claim tax non-residency, losses are still carried forward.

The main advantage to claiming tax residency is that you get the franking benefit, and the ATO won't challenge it (however, they are more likely to challenge it if you claim non-residency). Also, you can put your foreign income onto your Australian tax return and show that to banks as serviceability.
Alex

 

[MF35]

Thanks everyone for your posts.

Julia, I read the API September article but it seems to be more focussed on people who are not Australian Residents looking to invest in Australia. We are Australian Born and would be going to Singapore on an indefinite, but not permanent basis. Most likely 2 or 3 years, then returning to OZ.

Alexlee, the fact the losses for current IPs in OZ are carried forward is interesting and would seem significant if IPs owned hear are Negatively Geared. As is the case with us currently. If we were not getting the tax refund to assist maintain the outgoings on NG IPs this would increase the drain on our cash flow significantly in the short term and possibly prevent us buying further IPs (negatively geared at least).

Obviously I'll need to look into it further to work out the likely net result to us for our specific position. But for us to go to Singapore we'd have to stand to benefit financially, and significantly enough to justify the trouble. That is, if we could increase our net income (taking into account the lower tax rates and better employment package) and not be worse off (or at least not much worse off) in relation to our Australian IPs it would be an attractive option. I would also have a look at the benefits of shares if there is a significant tax benefit while we were O/S. Lots of research and calcs to do.

So Alexlee, were you significantly better off financially by living O/S? Has anyone (Australian Citizens/Residents) lived in Singapore and owned IPs in Australia at the same time? How did it work out?

Thanks for your help.

MF35

 

[Hornsby]

IP in OZ while working in Singapore

MF35,

I own IP in OZ while I was working as expats in Singapore for almost two years. I lost money when I transferred money back to AUD to pay my mortage cos strong currency. If you are not getting paid by AUD, then you will only pay tax in Singapore which their finance year ending in Dec. You will pay your tax in end of Dec in one go.

Heard some expats borrowing lower interest rate from Singapore bank to pay off their mortage in Syd while they are getting paid in Singapore dollars.

Go www.singaporeexpats.com to post your questions there, you will get more answers which you like to find out.

I can't remember much these days now.

 

[redsquash]

I disagree. I'm talking about Australian TAX residency, which isn't dependent on your physical or legal residency. Physical residency does NOT have to equal tax residency. I can (and claimed such) to be an Australian TAX resident even though I was physically overseas for 6 years. My justification, in case the ATO asks, is that I always intended to come back to Oz.
Alex

Australian resident tax is payable by residents.
If you are out of the country a certain number of days , then generally, and there are exceptions,you become a non resident of Australia.Unless , Alexee ,you are talking about something completely different , then Australian TAX residency, is dependent on your physical location.You are right,your legal residency for your yearly tax return is irrelevant..

with double taxation agreements in place I don't see how you can be a resident of Australia for tax purposes and live in another country for 2 years as the writer is suggesting

You are correct about intention, but its quite complicated and just having intention alone is insufficient , from my understanding.There examples on the ATO web site.

You can claim anything you like , but until you have been audited by the ATO,and passed the audit, your claim has no merit.The self assessment system does not mean because you get a refund, that your logic is correct.
Patosan its a very muddy area . I tried getting answers from the tax office but they seemed confused...............or ,at the very least,unsure. Had i rung on a different day I in all likely hood would have gotten a different answer.

 

[alexlee]

So Alexlee, were you significantly better off financially by living O/S? Has anyone (Australian Citizens/Residents) lived in Singapore and owned IPs in Australia at the same time? How did it work out?

Thanks for your help.

MF35

In my personal case, yes, I think I was financially better off by working o/s. While I 'lost out' on some cashflow because I couldn't claim tax losses (and I lost to inflation because the losses aren't indexed) I made more money o/s than I could have in Australia. I also took advantage of franking credit refunds. There were plenty of non-financial benefits as well, of course. Working overseas is a great experience in and of itself.

This is the first tax year since I came back to Sydney, and the tax office just assessed my PAYG variation with a 2% tax rate.
Alex

 

[auspony]

Interesting thread. I am an Aust citizen but currently (and since 2000) living in the US. I have not paid Aust taxes nor completed returns since leaving Aust since I was not considered a resident for Aust tax purposes. I have 2 IPs in Australia which are negatively geared but I have not been able to claim deeductions since not paying tax in Australia. Once we move back (in 2008) am I right in reading that I can bring forward those tax losses from 2000-2007 in the first tax year I pay Aust taxes?

 

[MF35]

Alexlee, Why was the income you earned on your Australian Shares not taxed in OZ? (No doubt there's an explanation I just don't understand it).

We'd have to re focus to concentrate on the actual loss before tax breaks (given that's what we'd be paying if we were in Singapore and not being able to claim tax breaks in Australia). Further IPs purchased in OZ while we were in Singapore would have to be closer to cost neutral than we could otherwise tolerate.

Thanks for the pointer to the website Hornsby I'll have a good look.

MF 35

 

[alexlee]

Alexlee, Why was the income you earned on your Australian Shares not taxed in OZ? (No doubt there's an explanation I just don't understand it).

It is taxed in Oz. Australia-sourced income - taxed in Oz and included in my Oz tax return (which I still had to do every year even though I was overseas). However, the dividend income isn't enough to cover the tax losses from the property, so the dividends are tax free (well, offset against property losses). Think of it as if you have no other income and got $5k in dividends. It's included in your assessable income but since your tax rate is zero at that level, you pay no tax. So it's taxed in Oz at zero rate.

The kicker is franking credits. Since I'm in a tax loss position (overseas income is not Aust taxable income), my marginal tax rate is zero. So I get franking credits refunded.

We'd have to re focus to concentrate on the actual loss before tax breaks (given that's what we'd be paying if we were in Singapore and not being able to claim tax breaks in Australia). Further IPs purchased in OZ while we were in Singapore would have to be closer to cost neutral than we could otherwise tolerate.

Well, one hopes that in Singapore you will be earning more than in Oz. In my case, when I first went to London I almost tripled my pay (pound was around A$2.75 back then). I save the same amount of my pay (around 40% of net) so even though I couldn't claim back the -ve gearing straight away I was still better off.
Alex

 

[alexlee]

Australian resident tax is payable by residents.
If you are out of the country a certain number of days , then generally, and there are exceptions,you become a non resident of Australia.Unless , Alexee ,you are talking about something completely different , then Australian TAX residency, is dependent on your physical location.You are right,your legal residency for your yearly tax return is irrelevant...

That's not true. The laws state that if you live in australia for more than 183 days in a year, you are DEEMED a resident. What that means is that if you reside overseas for more than 183 days of the year, you MIGHT be able to claim tax non-residency. If you live in Oz for more than 183 days in the year, there is NO chance you can claim non-residency.

There is no rule that I know of where you are DEEMED a NON-resident for tax purposes.

I think we're talking about the same thing. I seem to be reading the rules and intention of the ATO differently. I believe the ATO wants EVERYONE to be a tax resident. Your reading is that the ATO doesn't care but just puts in rules to slot people into either group. I disagree: I think the ATO wants to make everyone tax-residents if it could.

with double taxation agreements in place I don't see how you can be a resident of Australia for tax purposes and live in another country for 2 years as the writer is suggesting

My point is that the ATO has plenty of rules DEEMING you a resident. It does not appear to care if you want to claim tax residency even though you might qualify as a tax non-resident. The whole point of the double taxation agreement is that Australian tax residents don't get shafted for working overseas. If everyone who worked overseas can claim tax non-residency, why would you need a double tax treaty at all? If you're tax non-resident overseas income doesn't have to be declared on your oz return anyway. The double-tax agreements apply only to Australia tax-residents who happen to work overseas. The rule says >90 days. It doesn't have an upper limit. If anything I would view that as the ATO's way of persuading people to keep claiming tax residency.

You are correct about intention, but its quite complicated and just having intention alone is insufficient , from my understanding.There examples on the ATO web site.

You can claim anything you like , but until you have been audited by the ATO,and passed the audit, your claim has no merit.The self assessment system does not mean because you get a refund, that your logic is correct.
Patosan its a very muddy area . I tried getting answers from the tax office but they seemed confused...............or ,at the very least,unsure. Had i rung on a different day I in all likely hood would have gotten a different answer.

Again, you and I have a different opinion on the intended direction of the ATO rules. You believe there might be instances where the ATO will deem a person tax NON-resident against their will. I do not. When the ATO audits me I would re more worried if I had claimed tax non-residency, since EVERY rule they have is about deeming you tax RESIDENT.

Every case I've read involves taxpayers who want to be tax NON-residents, and the ATO saying no. All those intention rules are about the ATO wanting to make you a tax resident. I have yet to see a case where the taxpayer wanted to be a tax-resident and the ATO saying 'no, you're going to be a non tax resident'.

Find me a case where the ATO deemed a taxpayer tax non-resident against their wishes and I'll be glad to be proven wrong. Day one of tax law was all about 'this is when you might get away with claiming yourself as a non-resident, but the ATO has all these rules to yank you back'.
Alex

 

[alexlee]

Just to make sure I'm actually making sense, I think the ATO rules regarding residency are one sided. The rules start on the premise that 'a taxpayer is a tax resident unless they can prove otherwise'. If you claim tax residency, that's the end of the matter. Why would the ATO then try to turn you into a tax non-resident? If they succeed then that would open a huge can of worms: they don't WANT more rules where you can claim tax non-residency. If they could they would make everyone a tax resident.

The rules are very one-sided. Their purpose is to make as many people tax-resident as possible (where the ATO can tax them the most). So if you start off claiming tax residency, my opinion is that the ATO will do nothing.
Alex

 

[alexlee]

Interesting thread. I am an Aust citizen but currently (and since 2000) living in the US. I have not paid Aust taxes nor completed returns since leaving Aust since I was not considered a resident for Aust tax purposes. I have 2 IPs in Australia which are negatively geared but I have not been able to claim deeductions since not paying tax in Australia. Once we move back (in 2008) am I right in reading that I can bring forward those tax losses from 2000-2007 in the first tax year I pay Aust taxes?

You know, if you have Australian assets (your IPs) you're legally obliged to do Australian returns. May want to talk to your accountant. Just because you're not a tax resident doesn't mean you don't have to do returns: you do if you have Australia-based stuff.
Alex

 

[Kennethkohsg]

Dear Alex and Julia,

1. What is the exact nature on the existing double taxation agreement between the Singapore and Australian Govt?

2. How does it apply to Australians working or/and investing in Singaporeans and for Singapore working or/and investing in Australia?

3. Looking forward to learning from each one of you both in terms of the required professional tax education as well as from your own (differing)/known real life experiences (if any), please.

4. Thank you.

regards,
Kenneth KOH

 

[duplex]

hi mf35,

singapore has lots to offer in terms of career and life style. most people have (had) automatically a better disposable income due to the low taxes. over the last 12 - 18 months costs have developed quite a bit in singapore - especially rent. in case you can negotiate a package with your employer you should be aware that rent, schooling and if necessary a car is quite expensive thus should reflect accordingly. singapore is no longer a hardship country and that is why employers are not paying the megabucks anymore unless you are by any chance a private banker.
in my five years i met a couple of people that utilised ultra low interest rates, using australian banks in singapore, to buy property in australia and pay of the mortgage with S$ income. if you are interested to learn more pm me and i can give some more insight knowledge.
have fun in singapore
d.