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

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

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

Taxation Basics

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

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

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

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

Employment Taxation

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

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

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

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

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

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

Other Taxation Matters

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

Capital Gains Tax

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

Goods and Services Tax (GST)

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

Investment Income

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

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

Running a Company

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

Tax Differences between Australia and Singapore

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

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

Our Managing Director, Boon Tan, was recently featured in the Orient magazine (a publication produced by the British Chamber of Commerce in Singapore) discussing the key tax concessions available to Expats in Singapore.

Read the full article.

With the presentation of the 2019 Budget by Treasurer Heng, now is the time to start planning for the preparation of your personal tax return. With that in mind, this article outlines points for expats to consider when it comes time for preparation of your Singaporean income tax return.

The good news is that your Singapore tax return is not going to be hard to do. For many, the process takes 5 minutes and is done online.

Your return is due for lodgement each year by 15th of April. As there is no withholding tax, you will be required to make a payment of your tax liability upon receipt of your Notice of Assessment from Inland Revenue Authority of Singapore (“IRAS”). Alternatively, IRAS does provided for you to pay your tax liability in monthly instalments (interest free) via direct debits from your Singaporean bank account.

Why is tax so simple in Singapore?

The key to the simplicity is the nature of the Singaporean tax system which is a territorial based system.

Singapore only levies tax on income sourced here.

The term “sourced” means income that is generated in Singapore – e.g., employment income, interest paid by a local bank. Foreign income, such as rental income from your principal residence or investment property in your home country, is not taxed in Singapore – even if you bring the funds to Singapore.

Other income generated from interest, dividends, and capital gains on the disposal of assets anywhere in the world is all exempt from tax in Singapore. Besides, there are limited deductions that one can claim as an individual.

Notwithstanding this, here are some of the key concessions that you may be eligible to claim.

Not Ordinary Resident (“NOR”) Scheme and your tax residency

A key concession for expats to consider claiming as an employee based in Singapore is the NOR Scheme.

The NOR Scheme was introduced as an incentive to global firms to use Singapore as a regional base, and to bring talented individuals to the country. Under the NOR Scheme, you can pro-rata your taxable income based on the number of days you have worked outside of Singapore during the year – meaning that your effective tax rate can be reduced to a rate as low as 10%.

You can apply the NOR Scheme to reduce your tax rate by exempting part of your income, which in turn, will reduce the marginal tax bracket you fall into. Note that this is a concession under Singaporean taxation and does not mean that the untaxed income in Singapore is therefore taxable in the country you worked.

To qualify for the NOR Scheme, you must meet all the following criteria:

1. Your taxable income in Singapore must be at least $160,000;
2. Travelled for work for at least 90 days during the year;
3. You are a tax resident of Singapore in the year you are claiming the concession; and
4. Must not have been a tax resident of Singapore for the three years prior to the year in which you are applying the NOR Scheme.

You can claim NOR for the first five years that you are a tax resident of Singapore. If you do not qualify for the Scheme for one year during this period because you did not travel at least 90 days, you will lose one year of eligibility.

To apply for the NOR Scheme, you must lodge a claim each year at the time you file your tax return. Your claim must list the number of days and where you have worked outside of Singapore and must be certified by your employer as being correct.

In years that you qualify but fail to make a claim for the NOR Scheme when you lodge your return, you cannot go back and amend the return to claim the concession.

In the 2019 Budget, it was announced that the NOR Scheme would be stopped as of 31 December 2019. Therefore, the last claims to enter the NOR Scheme will be due with the lodgement of the YA2020 income tax return. Individuals who are already in the midst of their 5-year NOR eligibility period can continue to make the claim post the end of this year.

Tax reliefs

Singapore’s tax system provides tax residents with tax reliefs which reduce your taxable income. You can claim and apply as many reliefs that you are eligible for each year.

Five common tax reliefs that can be applied when preparing your tax return include:

1. Spouse relief
   If you are supporting a spouse who is not working and/or earning less than $4,000 from worldwide sources, you can claim a relief of $2,000.
2. Child relief
   You are entitled to claim relief for supporting a child equal to $4,000 per child regardless of where they live. Each child must be aged less than 16, or if over the age of 16 they must be in fulltime education (not necessarily here in Singapore) and cannot have an annual income of more than $4,000 from worldwide sources. The system recognises stepchildren and adopted children as qualifying for this relief.
3. Life insurance premiums
   You can apply a tax relief of up to $5,000 for the payment of life insurance premiums if your insurance provider has a branch or presence in Singapore. You may, therefore, be able to claim this relief for premiums paid in your home country.
4. Foreign maid levy relief
   If you are a woman working in Singapore and employ a maid which requires you to pay the foreign maid levy, you will be able to claim a relief equal to twice the levy amount paid for one domestic helper.
5. Professional course relief
   Up to $5,500 relief is granted if you enrol into a course, seminar or conference that leads to an approved academic, professional or vocation qualification. The relief is calculated based on the amount spent on fees, tuition, aptitude tests and registration fees incurred.

Donations

If you have made donations during the year to a local cause, you are able to claim a deduction of 2.5 times the amount you donated. To be able to make a claim, donations must be made in cash to the Government or any institution of public character which allows for their donations to be claimed at the 2.5 times rate.

Claiming everything you are entitled to

While the Singaporean tax system is a lot simpler than others around the world, you should speak with a qualified advisor ahead of lodging your personal return and ensure that you claim all the concessions you are entitled to.

About the author

Boon Tan is an experienced Accountant and has been working in the international tax advisory sector for over ten years. Born in Australia with Singaporean roots, Boon relocated to Singapore at the end of 2015.

As an expat living in Singapore, he has first-hand knowledge and experience of what expat families go through to establish themselves in a new city. He regularly draws on his in-depth understanding of the local Singaporean tax system and a network of in-country specialists in expat hot-spots around the world including USA, UK, Asia Pacific, and Australia to provide bespoke tax advice to clients.

Our Managing Director, Boon Tan, together with our Principal in Sydney, Mathew Marcarian, were recently featured in the STEP Journal* (a publication produced by STEP for its members) discussing the local taxation laws that apply to Trust beneficiaries relocating to Australia.

STEP is an organisation that focuses on improving the public understanding of the issues families face in relation to inheritance and succession planning.

Read the full article.

* Matthew Marcarian and Boon Tan, ‘The road to Oz’, STEP Journal (Vol27 Iss1), pp.41-43

Overview Of Tax Residence Rules

The Singapore Tax Act classifies taxpayers as either residents or non-residents. This is important because residents and nonresidents are taxed in a different manner.

Note that the concept of “domicile” is not relevant for Singapore income tax liability. “Residence” is the relevant test and this is defined under Section 2 of the Singapore Tax Act.

The definition includes a “qualitative test” as an individual who “resides” in Singapore in the year preceding the year of assessment is regarded as a tax resident in Singapore.

This turns on a number of factors. The term ‘reside’ is not statutorily defined and therefore it is to be given its ordinary meaning when interpreting Singapore law.