As the expression goes, there are only two certainties in life, death, and taxes, and this applies whether you’re an Australian resident or an Australian expat living and working overseas.
From the many conversations that our team at Ally Wealth Management have had with Australian expats over the years, we know that there’s a lot of confusion and misinformation out there about what investments you have to pay tax on and when based on whether you’re an Australian tax resident or not.
This week, we thought we’d shed some light and clarify what Taxable Australian Property (TAP or TARP) is and what it means for Australian expats.
What Is Taxable Australian Property?
Taxable Australian Property (TAP) refers to those assets that remain taxable in Australia regardless of where you may reside. The Australian Tax Office (ATO) has defined this to include:
- A direct interest in real (physical) property located in Australia
- A mining, quarrying, or prospecting right to minerals, petroleum, or quarry materials that is situated in Australia
- A Capital Gains Tax (CGT) asset that you’ve used at any time to carry on a business through a permanent establishment in Australia
- An indirect interest in real property located in Australia – whereby you and your associates hold 10% or more of an entity (foreign or domestic) and the value of your interest is principally attributed to Australian real property.
What Is Non-Taxable Australian Property?
This refers to those assets that are not captured in the above definition of Taxable Australian Property, which can include the following:
- Equities or shares listed on the Australian Stock Exchange (ASX)
- Exchange-Traded Funds (ETFs) listed on the ASX
- Managed Funds in Australia
What Is The Difference For Me As An Australian Expat?
The key difference between the two for you as an Australian expat is how they are taxed. While a non-resident of Australia for tax purposes, Taxable Australian Property assets will remain taxable in Australia while the remainder won’t.
Should I Sell My TAP Assets Before Moving Abroad?
The fact that that some of your assets may remain taxable in Australia does not mean that they should automatically be sold before you move offshore. In fact, it may even be quite tax-efficient to have some of your assets remain in this tax environment. This is why it’s important to seek professional advice from an experienced team that has the skills and expertise to understand your situation and objectives as an Australian expat.
What Happens To My Non-TAP Assets When I Move Abroad?
When you cease being an Australian resident for tax purposes, you are ’deemed’ to have disposed of your assets, which are not considered to be Taxable Australian Property (TRP assets) at the market value at the date of your departure. It is at this point that a Capital Gains Tax (CGT) event takes place, and tax is either paid on the capital gain realised or a tax loss is created if the shares or other investments have decreased in value.
It is important to note that you do not have to carry out a deemed disposal and can elect to defer the realisation of the capital gain. It’s important to seek professional advice here to assess which is the right option for you.
How do I figure out which is the right option for me?
Naturally, given the potential impact that these decisions could have on your personal finances, it’s important that you seek professional advice from your financial (tax) adviser to ensure that you’re considering your options, and making informed decisions based on your own situation.
Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.
Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.
Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.
General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.