Australian mining and resources expatriates returning from overseas, need to pay close attention to three key issues BEFORE leaving their host country to avoid unexpected and unwelcome financial impacts.
For mining and resources expats in the process of returning home to Australia, it’s important to fully appreciate the financial significance of your tax residency, any foreign tax obligations and numerous issues relating to your Executive Share Scheme (ESS).
Failing to understand these matters and the crucial timing of required actions, can have significant impacts on your financial position once you arrive home, including some that may not be easily resolved.
For returning expats, your financial prosperity is closely linked to tax. It is imperative that you understand how tax is applied in Australia and in foreign tax jurisdictions and the steps that can be taken to avoid paying unnecessary tax. This includes the timing of those steps, particularly with regard to ESS vesting.
Further, it is important to note that the general tax information discussed here can have considerable impacts on financial planning outcomes. Therefore, when navigating the complexities of working overseas and making the most of wealth opportunities through ESS, financial planning needs to consider tax outcomes across different jurisdictions.
To achieve this, *collaboration is required between specialist financial planners and tax advisers experienced in both Australian and international tax jurisdictions.
Tax Residency
Unfortunately, tax residency is not clear cut. However, it has potential to significantly impact your tax obligations either in Australia or depending on your circumstances in one or more foreign tax jurisdictions. It’s important to be aware, that there can be a requirement for completing foreign tax returns for different periods of time, particularly where assets (including ESS) were granted or acquired while outside of Australia.
Identifying whether you are a tax paying resident of Australia or a tax payer in a foreign tax jurisdiction, is a key definition that can impact your tax position.
It is imperative that you understand when you cease being a foreign tax resident, when you resume your Australian tax resident status, and that tax residencies are not mutually exclusive. That is, there could be foreign tax implications on Australian owned assets. Failing to obtain tax residency advice can have flow on effects to other tax, asset and ESS considerations.
Foreign tax issues
Just because you are no longer residing in a foreign jurisdiction doesn’t mean unresolved or ongoing foreign tax requirements won’t follow you home. You will need to fully understand the issues and implications of tax on your income and assets.
To do this, you’ll need advice on your foreign tax obligations including the implications of your financial transactions, assets and income that have been captured and treated under that country’s tax legislation.
ESS – Executive Share Schemes
If you’ve participated in an ESS while overseas, there are numerous matters to consider.
You will need to understand any tax implications for future vestings as well as impacts on vested shares from both an Australian tax and foreign tax perspective.
You also need to know if withholding tax has been, or will be, applied automatically to your ESS and what this means for you.
While not limited to ESS, other important questions that require answers include whether you are required to lodge a tax return overseas and what that might mean in terms of your Australian tax position and any foreign tax credits you may receive.
Next steps
The key take outs from this article are that well before you return to Australia you need to consider your financial circumstances in terms of your tax obligations in both your foreign and Australian jurisdictions. Importantly, this includes being aware of timing, particularly with regard to ESS vesting.
Assessing your financial position (including your tax and ESS circumstances) then implementing an appropriate strategy that aims to streamline your transfer of cash and assets back to Australia, while planning for and resolving tax and other matters, all takes time.
In my experience working with Australian mining and resources personnel posted to various locations around the world, the first step is to seek advice early.
Failing to do so, can (and very often does) result in being caught off guard. This can include missing important timing requirements that can result in paying significant unnecessary tax, not to mention the stress caused by the complexity inherent in these matters and limited time frames in which to deal with them.
Make sure you obtain advice regarding the Australian tax implications of legal structures (if any) set up during your period living overseas (e.g. trusts and companies, pension fund accounts), as the Australian tax treatment of these structures may be intuitive, and the effective tax outcomes may be severe.
I’m sure you agree, returning to Australia from overseas should be a triumph of personal and career experiences and financial reward that enhances your private wealth that creates a sense of being financially in control.
For more information about the financial matters, you need to consider when returning to Australia, please contact James Marshall, Financial Adviser and ESS Strategist +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in the mining and resources sectors.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This information does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: As advice and services relating to tax matters as discussed here, are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required such matters are referred to appropriately qualified professionals.
