2015 Federal Budget: Foreigners Attacked (including Aussies living and working overseas)
The attack on foreigners, especially hard-working Aussies expanding their knowledge and experience overseas continues unabated.
Prior to this Budget, as well as a whole lot of ‘great’ opportunities and often higher income (and lower living costs) of Aussies enjoying work opportunities overseas, there were a few downsides:
Superannuation contributions may not be made either due to circumstances or because tax deductions are not available, which will not bode well for funding retirement back in Australia;
Stunningly stupid complexity when it comes to Australian investment assets you might continue to hold whilst overseas, including most recently the reduced access to the 50% CGT discount.
This Budget sneaks in a few issues, that might just blind-side a few, and you might not realise until it is too late!:
Student Loans (HECS / HELP): bureaucracy will reign supreme when the Government seeks to recover student loan debts from 1 July 2017. At the moment, if you have a historical HECS/HELP debt (etc) and head overseas to live and work for a number of years as a ‘non-resident’ and don’t need to lodge Australian income tax returns, you can avoid indefinitely, repaying your debt. This utopia ends from the 2018 tax year, where you will need to ‘register’ (under convoluted transitional arrangements) so that you are exposed to the compulsory repayments if your foreign income equivalent (work that out…!) exceeds the threshold requiring repayments to commence, on a sliding scale. But the rules ‘sort of’ start 18 months before this as heading overseas for 6 months or more (which does not necessarily mean you would be ‘non-resident’!) from 1 January 2016 you will have to ‘register’ with the ATO, to volunteer your expected potential future exposure. This just seems to set wide-eyed young people travelling for failure;
Superannuation contributions: confusion and complexity wins over (1) eligibility to make superannuation contributions as a non-resident and (2) claiming personal superannuation contributions as tax deductions;
Even ‘temporary residents’ aren’t missed, backpackers look out!: from 1 July 2016 will generally be treated as non-residents for the period they work in Australia. That means no tax-free threshold, and tax at 32.5% from their first $1 of income. That will reduce the backpackers available to pick our fruit, and have a bigger impact than the banana inflation spike of a few years ago.
So if you leave Australia, partly to escape the complexity of the Australian tax system and the bureaucracy hero Australian Taxation Office, you might just find yourself in convoluted complexity that knows no bounds.