Exceptionally talented individuals with the capacity to raise Australia’s standing in their field may be eligible for a Global Talent Visa. This Visa is a permanent residency Visa that offers a migration pathway to individuals who can bring exceptional skills into Australia.
Because the Global Talent Visa is not a temporary visa, the temporary resident tax concessions are not available and you will be taxed just like any other Australian citizen moving home to Australia.
As international tax specialists in Australia we are often asked by individuals moving to Australia on a Global Talent Visas, what the Australian tax implications of making this move are in relation to the assets back in their home country.
The tax implications of making this move will depend on the type of assets you have back home.
Below is an overview of what you can expect.
Moving To Australia With No Assets Other Than A Bank Account
When you move to Australia with no assets except the cash in your bank account, the tax consequences of holding onto your foreign assets are limited to foreign exchange (forex) issues. Since foreign currency is considered a taxable asset, Australia will tax realised exchange gains and will allow a deduction for realised exchange losses.
This means that money sitting in a bank account with fluctuating values will have no tax consequence. However, if you spend or transfer that money, including bringing it into Australia at a later date, then you trigger a forex realisation event.
If the value of your qualifying forex accounts is less than AUD $250,000 then you can make an election (known as the Limited Balance exemption) which effectively allows an exemption so that you can disregard any forex gains or losses that might arise on the accounts. This is a simplicity measure for taxpayers who are considered to have low balances of foreign currency. The objective is to lower tax compliance costs. People moving to Australia should take advice on the effect of these rules on their foreign savings.
Moving To Australia With A Main Residence In Your Home Country
While an Australian resident is eligible for an exemption from capital gains tax on their main residence, it is unlikely that this exemption will apply to you. This is because you were not an Australian resident while you were living in your property, in your home country.
Once you are living in Australia the overseas property becomes a property that is not your main residence. This applies whether you rent the property out or not.
If you rent your former residence out it becomes an investment property. The rental income is taxable and the expenses associated with generating that rental income are tax deductible. This includes interest on any mortgage taken out to purchase or renovate the property, any local rates, repairs, and other costs. Travel costs incurred to inspect or repair the property are specifically precluded as an eligible deduction. If you pay income tax on the rental income overseas, then you will be able to apply that as a foreign tax credit in your Australian tax return. This way the Australian tax paid on this rental income is limited to any difference between the Australian tax assessed and the tax paid overseas.
If you don’t rent out your former residence (or otherwise earn income relating to the property), then there is no income to declare, and no ability to claim deductions relating to the cost of owning this property.
When you sell the property you will be subject to CGT. The CGT will be calculated on the difference between the value the property sells for and the value of the property at the time you moved to Australia.
Moving To Australia With Investments
If you hold assets in your country of origin, then you will be required to report any assessable income earned from those assets, as well as any capital gains or losses generated on the disposal of those assets.
Certain types of income, such as interest, royalties, and dividends, are typically covered by Double Tax Agreements (DTAs) in a way which limits the amount of tax that the country of origin can impose. This means it is important to advise your bank and investment managers when you become an Australian resident so that they can ensure the correct foreign tax rate is applied at the source.
Regardless of the tax rules in the country of origin, as an Australian tax resident you will be required to report income from all sources in your Australian tax return.
General Tax Information You Should Be Aware Of When Moving To Australia On A Global Talent Visa
It is important to keep in mind that moving to Australia on a permanent basis will mean you become an Australian tax resident.
For tax purposes this means you will need to declare your worldwide income in your Australian tax return, regardless of where the income is earned and whether the income is brought to Australia or stays in an overseas bank account.
All foreign investment income, including interest, dividends and foreign stock plans, are assessable in Australia, whether or not they are assessable in another country.
The foreign income must be reported in the relevant Australian tax year in which it was earned. This may be different to the tax year relating to foreign country in which the investment income was earned.
In general you will be able to offset the tax payable in Australia with any taxes already paid in the country of origin.
Also be aware that Australia has complicated rules if you have interests in overseas companies or trusts, even if you did not set up the relevant companies or trusts or even if they are just ‘family companies’ or ‘family trusts’.
Capital Gains Tax
Australia has a Capital Gains Tax regime. This means you may be required to pay capital gains tax on any assets that you retain in your country of origins.
CGT is assessed at the same rate as your marginal tax rate, however there is a 50% Discount on the value that is assessed on assets that have been owned for at least 12 months after becoming an Australian resident.
CGT discount example:
You purchase a property in 2020 for $500,000.
In 2024 you sell the property for $1,000,000.
This gives you a net capital gain of $500,000.
Instead of paying tax on the full $500,000 gain, tax is only applicable on 50% of the total gain, which means you only pay tax on $250,000.
Deemed Acquisition
At the time that you move to Australia, any assets that you retain overseas are considered to have been acquired for their market value on the day you arrive. This valuation will become their cost base for capital gains tax purposes in Australia.
You are also deemed to have acquired these assets on the date that you become an Australian resident. This ensures that any fluctuations in value between the original date of acquisition and your move to Australia, are ignored for CGT calculations. It also means that you need to continue to own your assets for at least 12 months from the date you move to Australia in order to access the 50% capital gains tax discount.
Summary
As an Australian tax resident you will be required to lodge an annual income tax return in which you must report:
- Income from your worldwide source
- Capital gains or losses on all assets held, regardless of the country in which they are held
- Any foreign tax paid, which may be applied as a credit to reduce the amount of Australian tax assessed on foreign earnings
When you move to Australia your assets will be deemed to be acquired at the market value on the date you become an Australian resident.
As everyone’s situation is unique, and tax laws are frequently updated, it is important to obtain up to date advice for your specific situation. This will ensure that specific factors that may impact your situation differently are also included in the advice, as well as ensuring you are getting the most up to date information.
eBook: Key Items A Global Talent Visa Holder Should Know When Moving To Australia
If you are moving to Australia on a Global Talent Visa you are likely to become an Australian tax resident.
This eBook covers the 5 common tax concerns that those moving to Australia on a Global Talent Visa have including:
- When do I become a tax resident?
- Keeping foreign assets when moving to Australia.
- Foreign assets including foreign currencies, trusts, companies or retirement funds and pension loans.
- Selling your foreign main residence after moving.
- Using your foreign bank accounts.