Australian Federal Budget Report for 2012/13 – Changes relating to Australian Expats

Australian Federal Budget Report for 2012/13 – Changes relating to Australian Expats
Federal Budget Expat Edition

The 2012/13 Budget was framed against an intriguing background; a Government in trouble and a two speed economy, both desperately seeking traction. In the past two budgets, the Labor government made a commitment to return to surplus in 2012/13 so it is no surprise at all that the Budget projects a wafer thin surplus of $1.5 billion.

There have been some changes that will affect Australian expats who are considered non-residents for tax purposes.2012-2013 Australian Budget A summary of these changes are as follows:

  • Removal of Capital Gains Tax discount for non residents – the 50% capital gains tax (CGT) discount will no longer be available for non-residents on capitals gains accrued on taxable Australian property such as real estate and mining assets after 7:30pm on the 8th of May 2012. The CGT discount will remain available for capital gains accrued prior to this time where non-residents choose to obtain market valuations of assets as at the 8th of May 2012.
  • Changes to the tax rates for non-residents – the personal income tax rates and thresholds that apply to non-residents’ Australian income will be adjusted. From the 1st of July 2012, the first two marginal tax rate thresholds will be merged into a single threshold. The marginal rate for this threshold will align with the second marginal tax rate for residents (32.5%) and will apply to all taxable income below $80,000. A non-resident with an Australian taxable income of $80,000 is currently subject to tax of $23,630. This will increase to $26,000 ($80,000 x 32.5%) from the 1st of July 2012. From the 1st of July 2015, the same marginal rate will rise from 32.5% to 33% (again aligning it with the second marginal rate for residents at that time).
  • Managed Investment Trust withholding tax rate increase – managed investment trusts that make fund payments to an address outside Australia are required to pay withholding tax to the Tax Office. The rate of withholding tax is 30%, but this rate is reduced if the country has an exchange of information agreement with Australia, in which case the rate is currently reduced to 7.5%. This reduced rate will increase to 15% from the 1st of July 2012.

With the proposed changes it is recommended that you seek financial and/or tax advice to determine how any of the above changes may affect your personal circumstances.

Brett Evans is the Managing Director and a Financial Planner with Atlas Wealth Management which is the first financial services firm in Australia to specialise in providing financial advice to Australian expatriates. With over 20 years of experience in the finance and investments industry, Brett has worked for blue chip companies which include the Australian Stock Exchange (ASX), HSBC, Suncorp and Citi Smith Barney.

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