Australia – Key Things Employers and Expatriates Should Know About 2017 Budget

Australia – Key Things Employers and Expatriates Should

This GMS Flash Alert reports on some of the important budget measures recently announced affecting individuals and their employers.

1000

Related content

flash-alert-2017-088

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. 

WHY THIS MATTERS

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. 

Levy on Visa Sponsors for Skilling Australians Fund

From March 2018, large businesses will have:

  • an up-front payment of $1,800 per year per employee on a Temporary Skill Shortage visa (the replacement for the subclass 457);  
  • A one-off levy of $5,000 for each employee sponsored for permanent residence.

Tax Rate Changes: TBRL, FBT, and Medicare Levy

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. 

KPMG NOTE

The removal of the TBRL will likely offset the increased costs for visas referenced above. 

Changes to Taxation of Australian Housing

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.

KPMG NOTE

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.

Personal Income Tax: Brackets/Rates for 2017-2018

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
$18,200

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 
180,001+ $54,232
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]

KPMG NOTE

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. 

RELATED RESOURCE

For more details, see “Federal Budget 2017 – Review” on the Web site for the KPMG International member firm in Australia.

FOOTNOTE

CONTACTS

For additional information or assistance, please contact your local GMS or People Services professional or one of the following professionals with the KPMG International member firm in Australia: 

 

Ben Travers

People Services Leader

Tel. +61 3 9288 5279

btravers1@kpmg.com.au

 

Dan Hodgson

People Services

Tel. +61 8 9278 2053

dghodgson@kpmg.com.au

 

Mike Wall

People Services

Tel. +61 2 9335 8625

mwall2@kpmg.com.au

 

 

The information contained in this newsletter was submitted by the KPMG International member firm in Australia.

© 2017 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.

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.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.