Australia: Related Information
Living and Working in Australia - The Expatriate Perspective
This page was last updated on 17 Jan 2019.
Immigration and Residence
The stringent criteria for entrance imposed on those hoping to expatriate or immigrate to Australia can sometimes give the impression that the Australian government is closed to the idea of new immigration. However, this impression is slightly misleading. Although the government is very clear about the types of people it is prepared to admit to the country (preferably young and skilled), there are a number of different visas available for varying periods of time, and experience in your chosen field also counts for a lot.
For most Australian visas, as well as fulfilling the criteria laid down for that particular type of permit, you will have to pass a 'points test'. These are preliminary assessments of your likelihood to succeed in and be of benefit to, Australian society. Age, professional experience, and English language skills are all assessed, and a number of points awarded according to the results. At the moment, the minimum number of points required to be accepted for a visa is 65, though this figure varies according to how keen the government is to encourage new immigration at any given time.
The different visa categories are:
1. Business Visa
This class of visa allows successful business people to develop new business opportunities in Australia, and is available on a permanent basis, subject to a four year probationary period (see below). Within this category, there are several subsections, all with different requirements. These are:
- Business Owner: To apply for this visa, the individual must be able to prove that for at least 2 of the last 4 years, he or she had net assets in a business amounting to A$200,000 and was actively involved in the management of the company for the same period. The business in question must have had annual turnover of at least A$500,000 for 2 of the last 4 years.
- Senior Executive. In order to qualify for this type of visa, the individual must demonstrate employment for 2 of the last 4 years in the top three levels of management by a major private sector business. They must also pass a business skills points test and their business and personal assets must amount to A$500,000, although this can be in combination with assets owned by their spouse.
- State- or Territory-Sponsored Business Owner. (As Business Owner Visa, except with required pre-immigration business assets of AU$300,000)
- State- or Territory-Sponsored Senior Executive. (As Senior Executive Visa, except that business and personal assets need only to amount to AU$250,000.
- Investment Linked. An individual must first apply for an Investor (Provisional) visa. If they are successful, they will be granted a visa for a period of 4 years. They must demonstrate a successful business or investing career, 3 or more years of experience managing a business or portfolio, and for at least one of the five fiscal years preceding the application, direct involvement either in the management of a business in which there was more than a 10% ownership interest, or in the management of a portfolio in which there was the equivalent of AU$1,500,000 (for non-state sponsored visa applications) invested. For the 2 years prior to application, net worth must have been more than AU$2,250,000. There is also the need to pass a Business Skills points test. Applicants for Investor Visas must maintain their designated investment for a 4 year term. Failure to do so may result in visa cancellation. (N.B. The thresholds differ for state and territory sponsored investment visas)
- Established Business in Australia. In order to qualify for this type of visa, there must have been at least a 10% ownership interest in an Australian business enterprise for at least 2 years, there must be minimum net personal and business assets of AU$250,000, and there must have been involvement in the active and continuous management of the business, and there must have been physical presence in the country for a total of at least one year in the two years before the application for permanent residence under this category is made. There is also a Business Skills points test. (Again, state or territory sponsorship affects the various thresholds here.)
Full descriptions of the visa types and requirements can be found here.
There is two stage visa processing for business skills migrants. Almost all business migrants are granted a provisional visa for four years. After establishing a business with the requisite level of business activity or maintaining the requisite level of investment in Australia, provisional visa holders are eligible to apply for permanent residence.
2. Temporary Business Visa
These types of visa traditionally allowed business visitors temporary entry to Australia, and could be arranged for both short stays (from 3 months) and long stays (up to 4 years), although obviously the formalities surrounding the application were greater for the latter category. They were available to:
- Executives, managers and specialists employed by a company operating in Australia
- Personnel from foreign companies which are seeking to establish a branch there or participate in joint ventures. Also, employees fulfilling a contract awarded to a foreign company.
- Independent executives seeking to join an existing business, or establish their own in Australia.
- Personnel sponsored by an Australian business
The subclass 457 independent executive further application onshore (457IE FAO) visa was developed in recognition that an emerging number of independent executive visa holders in Australia were facing the expiry of their visa, but were legitimately in business and required more time to be eligible to apply for permanent residence under established business in Australia (EBA), regional established business in Australia (REBA) or state/territory sponsored business owner (residence) categories.
The 457IE FAO is a two-year multiple entry visa that allows subclass 457 visa holders to remain in Australia and continue their business activities as an owner and principal.
3. Independent Visa
This group actually accounts for the largest contingent of skilled workers immigrating to Australia each year. Applicants are selected on the basis of education, skills, and professional experience, and the points test is applied to determine an individual's suitability.
4. Temporary Study Visa
This type of visa enables overseas students to study in Australia. The right to work while studying is not now automatically afforded, and all initial Student visas are granted with the condition 8101 (no work). Permission to work can only be applied for after studies in Australia have started. Ease of application processing depends on whether the application is made from a 'gazetted country' (one whose citizens have a good history of compliance with student visa regulations) or a non-gazetted country. In addition, student visa will only be granted to those seeking to undertake a registered course or part of a registered course on a full-time basis. A registered course is an education or training course offered by an Australian education provider who is registered with the Australian Government to offer courses to overseas students.
5. Retirement Visa
On 1 July 2005, the Retirement visa (subclass 410) - Temporary) closed to new visa applicants. The visa class remained open to existing subclass 410 Retirement visa holders (and their spouses), who were able to continue to apply to rollover their subclass 410 Retirement visa.
Retirement visa holders who successfully rollover their Retirement visa on or after 1 December 2005 were to be granted four year stays in Australia (doubling the previous rollover period of two years).
6. General, or Skilled Australian Sponsored Visa
This type of visa is most appropriate for those who are immigrating for family, humanitarian, or other reasons. The person sponsoring the application must be either a parent, brother or sister, non-dependent child, niece or nephew, and they must be a permanent resident or Australian citizen. As for other visa types, applicants in this category must also pass a points test examining their skills, age, experience, and English language ability. There are a range of options including temporary and permanent visa categories, and special arrangements need to be made for New Zealanders applying under this category whilst already staying in Australia.
Definition of Tax Residence
A person is considered to be tax resident in Australia if:
- They are domiciled in Australia, and do not have a place of abode elsewhere.
- They are not domiciled in Australia, but have been there either continuously or intermittently for 183 days over the previous fiscal year.
- They are resident and go abroad, but the term of employment is less than 2 years, and the individual intends to return to Australia.
- They have a permanent home, habitual abode, or close personal and economic ties in Australia.
The Taxation Laws Amendment (2006 Measure No. 1) Bill 2006 was introduced into parliament on 16 February of that year. From 1 July 2006, individuals defined as ‘temporary residents’ have enjoyed exemption on tax on income that is earned outside Australia.
To fall under the definition of temporary resident, an individual must hold a temporary visa (including one for work or study). They must also not be an Australian resident according to the definition given in the Social Security Act 1991, nor must they have a spouse who is an Australian citizen or holds a permanent visa.
The measures apply to holders of a temporary visa, with the exception of those who are directly or indirectly treated as residents for social security purposes. Holders of a temporary visa are not taxed on foreign source income in certain circumstances. They continue to be taxed on all Australian source income and salary and wages generally, including income from employee shares or rights.
Furthermore, capital gains tax (CGT) for temporary residents would be aligned with that of non-residents. The capital gains tax rules for departing residents do not apply to temporary residents.
Australia has, however, traditionally had no specific system of taxation or allowances for visiting expatriates, and if they are resident, they must pay the standard progressive income tax on world-wide income and gains. Although taxes are levied at federal, state, and local levels, unless the expatriate individual has purchased property in Australia (in which case local land tax would be payable), the most relevant tax is probably federal income tax.
Australia has double tax treaties with virtually all of its major trading partners. Most of these follow the OECD model treaty, and in all of Australia's full treaties, there is usually a 'tie-breaker' clause to deal with those who might otherwise be treated as residents of both Australia and the treaty country.
The government began to suggest that the country needed to improve the taxation position of visiting business executives in 2002, and indeed to reduce tax generally if it was to stay internationally competitive. In 2001-2, the total income tax payable by an individual who earnt $180,000 was $71,980. For 2018-19, the figure is $54,232; this represents a reduction of almost 25% on the total tax payable.
Currently, non-residents living and working in Australia for more than six months are likely to be taxed on any income derived from offshore, as well as income earned in Australia during their visit.
From 21 September 1999, a 50% capital gains tax discount was introduced for temporary resident individuals. However, this was rescinded on 8 May 2012 and has not been reinstated.
While individual residents are liable for tax on their worldwide income, non-residents are generally only taxable on Australian sourced income and taxable Australian assets. However, the definition of 'Australian sourced' income is quite far-reaching, and includes:
- Income earned by a branch or permanent establishment (usually a physical presence for more than 6 months in the fiscal year is taken as a permanent establishment) located in Australia and owned or part owned by the non-resident.
- Income earned from a contract accepted by an Australian agent authorised to accept contracts on behalf of non-residents.
- Income earned from contracts signed in Australia, or to be performed there.
- Income from contracts in which the implied or express law is Australian, or in which the currency of payment is Australian dollars.
- Income from contracts whereby one or both of the parties resides in Australia.
- Rental income from Australian property paid to a non-resident.
However, a non-resident employee will not pay tax in Australia if his employer is resident in another country, with which Australia has a double tax treaty, and the employee is in the country for less than 183 days in the financial year.
In Australia, capital gains are taxed as income. The exception to this rule is the profitable sale of shares in a resident public company, where the shareholding is less than 10%, and the shares have been held for not less than 5 years. There is no wealth tax, inheritance tax or gift tax levied in Australia, except where a capital gain may arise from a lifetime gift.
Bringing Investments into Australia
Interests in many different types of offshore vehicles and many types of foreign investment are liable to CGT and income tax in Australia. Hence professional advice should be taken on such interests before bringing them into the country, as it may be possible to bring forward or postpone distributions, or redistribute trust assets among family members. (Although be aware that after a certain point, the unearned assets of minors are taxed at the maximum marginal rate for individuals...)
There is also a danger that an offshore entity brought into Australia, if controlled by an individual (or his family group) who then becomes resident, will be considered to be Australian, and therefore subject to tax on its world-wide income. Therefore, the ownership structure of offshore (and all foreign) assets should be carefully checked out in advance.
Tax Breaks for Expatriates
In terms of tax breaks for expatriates who have become tax resident in Australia, the short answer is that effectively there aren't any! For the moment, resident expatriates are taxed as Australian citizens, on their world-wide income, and there are fairly stringent anti-avoidance provisions in place to prevent the sheltering of assets in offshore trusts or companies.
There are no specific allowances or systems pertaining to non-resident expatriates, other than the fact that they will not usually pay income tax on foreign earnings or income, but they are not permitted to take advantage of some of the exemptions and rebates open to Australian residents. Although taxes are levied on both a federal and local level, the only time a non-resident foreign national is likely to become liable for local taxes is if he or she owns Australian real property, in which case land tax will be payable.
All personal and household goods are assessed for duty and sales tax when brought into Australia, but if the intended period of expatriation is less than 12 months, an exemption should be granted on household goods. This exemption can sometimes be extended, depending on the circumstances.
There are no exchange controls in Australia, although there are certain restrictions on the investments that can be made by non-residents, for example in urban developed residential real estate, and also in certain key industries.
So, is Australia an Attractive Location for Expatriates?
Judging by the number of people who want to move there - yes! Although the immigration process can be fraught and expensive, the government is interested in bringing in those with skills that benefit the Australian economy. The stringent measures are designed to protect the very factors of Australian life that make many people want to move there –the fine weather, easily available land, low pollution levels and general high standard of living.
However, strictly from a taxation point of view, the world's smallest continent is not the ideal location for expatriate executives, at least not those who are obliged to become resident for a long period of time.