This GMS Flash Alert reports on some of the important budget measures recently announced affecting individuals and their employers.
On 9 May 2017, the Commonwealth Treasurer delivered the Australian Federal Budget 2017-18.1 The Budget contains several measures of concern to individuals, including expatriates, and their employers, such as the abolition of the 2-percent Temporary Budget Repair levy, the increase in the Medicare levy, and the cessation of the capital gains tax exemption on main residence sales for nonresidents and inbound temporary tax residents. Large employers need to be cognizant of a levy on visa sponsors. (All dollar figures expressed are Australian dollars.)
For coverage of last year’s Budget, see GMS Flash Alert 2016-056, 5 May 2016.
It is important to note that the changes affecting individuals in the Budget represent a mixed bag of restrictions, tax decreases as well as increases. The specific impact will depend on each taxpayer’s particular set of circumstances. In those cases where an assignee’s tax burden increases, the employer’s international assignment-related costs could rise accordingly, and where they decrease, those costs for employers could fall.
Certain employers bringing foreign employees into Australia, depending on the length of stay of the employee and visa type, could see their international assignment costs rise.
It is essential to get in front of these changes and to communicate quickly and clearly with key stakeholders, so that they can properly plan, budget, and make necessary adjustments.
From March 2018, large businesses will have:
The 2-percent Temporary Budget Repair levy (TBRL) for high income earners ends on 30 June 2017. Changes to balance sheets are required from 1 July 2017. Fringe Benefits Tax (FBT) rates have already been adjusted back to 47 percent.
The Medicare levy will increase from 2 percent to 2.5 percent from 1 July 2019. Changes to balance sheets are required from this date. Fringe Benefits Tax rates will be adjusted from 47 percent to 47.5 percent from 1 April 2020.
The removal of the TBRL will likely offset the increased costs for visas referenced above.
Nonresidents and inbound temporary tax residents will be denied access to the capital gains tax (CGT) main residence exemption from 9 May 2017. Existing properties will be grandfathered until 30 June 2019. This exemption has been one of the key considerations influencing the decision to rent out a home while on assignment.
There has also been a reduction of the threshold for withholding tax (12.5 percent) on real property sales by nonresidents from $2 million to $750,000. This will bring more Australian-outbound assignees within the scope of these provisions.
Policies on tax outcomes of personal investment decisions must be crystal clear. Is this an assignee problem? If so, from now on individuals who want to sell their property as a consequence of international assignments should be aware of the risk of not entering into the contract of sale before they leave.
The Budget made no changes to personal income tax rates and brackets – they stay as they were for 2016-2017. See the table below.
2017-2018 resident tax rates
|Taxable income ($)||Rate|
|0 – 18,200||0|
|18,201 – 37,000||19c for each dollar over
|37,001 – 87,000||$3,572
plus 32.5c for each dollar over $37,000
|87,001 – 180,000||$19,822
plus 37c for each dollar over $87,000
plus 45c for every dollar over $180,000
Note: Excludes 2.0 percent Medicare levy.
[AUD 1 = EUR 0.678 | AUD 1 = USD 0.736 | AUD 1 = GBP 0.572 | AUD 1 = JPY 83.72]
The decision to not adjust the personal income tax scale for consumer price movements – which were quite low for 2016 at 1.5 percent – and accounting for individuals’ salary (and other compensation) increases, could lead, all told, to “bracket creep,” and therefore slightly higher taxation for such individuals.
For more details, see “Federal Budget 2017 – Review” on the Web site for the KPMG International member firm in Australia.
1 For the Budget speech and related documents.
The information contained in this newsletter was submitted by the KPMG International member firm in Australia.
<p>© 2018 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.</p> <p>KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.</p>
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.