Recent Australian government announcements present new opportunities for businesses and investors who want to expand their presence into Australia, as well as skilled individuals who can provide talent and innovation to Australia's key sectors. Here we outline the Visa opportunities and tax considerations.
- The Australian government is focussed on attracting business and talent to Australia creating opportunities for Hong Kong passport holders in Australia with options for a five year visa and permanent residency.
- Pathways for businesses and individuals to work in Australia assist with Visa requirements and alternative solutions dependent on circumstances and purpose are available.
- Overview of tax implications for businesses and individuals who expand or relocate in Australia.
Announcements regarding opportunities for Hong Kong passport holders in Australia
In July 2020, the Australian government announced new visa arrangements for Hong Kong passport holders to enable highly talented individuals to relocate or expand their expertise into Australia.
Hong Kong students who choose to undertake study in Australia will be eligible to apply for a 5 year Temporary Graduate visa in Australia on completion of their studies (provided the other visa criteria are met).
Skilled Hong Kong passport holders who are sponsored by an employer for a temporary skilled visa to Australia will now be eligible for a 5 year stay. The Australian government has also announced that Hong Kong passport holders will be eligible for permanent residency at the completion of their 5 year stay in Australia, provided they pass character, security and health checks. Those who choose to study, live and work in regional Australia will be eligible to transition to permanent residency after 3 years.
New Taskforce to attract international businesses to Australia.
On 4 September 2020, the Australian government announced a whole-of-government Global Business and Talent Attraction Taskforce designed to bring international businesses and talent to Australia.
The Taskforce will be focussed on emerging industries in Australia, and will initially focus on the key sectors of advanced manufacturing, financial services and FinTech, and health.
As part of this new taskforce, eligible individuals and businesses will be offered streamlined pathways to permanent residency in Australia.
Existing pathways for businesses to consider
All non-Australian passport holders must hold a valid visa in order to enter Australia. To be able to work in Australia, that visa must contain appropriate work rights entitlements. Businesses who wish to send workers to Australia need to ensure their workers obtain the appropriate visa for their circumstances. Penalties apply to both a visa holder and their employer if a visa holder is found to be working in breach of their visa conditions.
The standard visa programs have a number of requirements that need to be met, including providing market salary for the position, advertising for the position, and the applicant meeting certain skill and qualification requirements and demonstrating English language proficiency.
If a business' circumstances do not fit within the standard visa programs, there are a number of alternate solutions available.
The Global Talent Employer Sponsored program is designed to attract highly skilled migrants into niche occupations to help innovate established Australian business and contribute to Australia's developing start-up economy.
Labour Agreements are available to Australian established businesses who need to fill skill shortages where the standard visa programs are not suitable.
Designated Area Migration Agreements (DAMAs) are specific agreements covering regional areas of Australia, to enable businesses from those regions to access skilled and semi-skilled overseas workers.
Current pathways for individuals to consider
Australia's skilled migration program comprises three main categories: independent skilled visas, employer sponsored visas and business innovation and investment visas.
- Independent skilled visas are available to highly skilled applicants with an occupation on one of Australia's skilled occupation lists. This is a competitive program that requires an invitation to apply.
- Employer sponsored visas are available to skilled applicants who are sponsored by their employer to work in Australia on a temporary or permanent basis.
- Business Innovation and investment visas are available to successful business owners and investors who wish to invest or do business in Australia. The four main pathways through this program are a) business talent; b) Business Innovation Visa (subclass 188a); Investor visa (188b); Significant Investor Visa (188c).
Tax considerations for visa holders and overseas businesses
As well as understanding the various visa pathways, individuals hoping to relocate to Australia need to understand what that will mean for them from an Australian tax perspective. The first step will be determining whether they will become an Australian tax resident and, if they do, whether they will satisfy the requirements to be a 'temporary tax resident'. The Australian tax authorities devote significant audit resources to testing claims of residency and non-residency by individual taxpayers to ensure the correct amount of tax is being declared. This includes liaising with Australian customs officials and visa authorities. Given the penalties that can be imposed for non-compliance, it is critical that individuals obtain appropriate tax advice to confirm their residency status at the time of relocating to Australia and the consequences of their tax status having regard to their personal circumstances. Some of the key questions an individual visa holder will need to consider include:
Will I become an Australian tax resident?
A resident is subject to Australian tax on their worldwide income – that is, income which has a source in Australia and income which has a source overseas. This includes gains from the sale of overseas assets. A non-resident is subject to Australian tax only on Australian-sourced income. There is a statutory test for determining whether someone is a resident, which looks at the ordinary meaning of 'reside', whether the person's 'domicile' is in Australia, and the time they spend in Australia during an income year. It is a highly fact-specific exercise and no two circumstances will be the same.
Will I become an Australian 'temporary resident'?
There is a special category of tax resident called a 'temporary resident'. A temporary resident is taxed similarly to a non-resident, although any employment income they derive whilst they are a temporary resident will be taxable in Australia (regardless of whether they work in Australia or overseas). An individual will be a temporary resident if:
- They hold a temporary visa granted under the Migration Act 1958;
- They are not an Australian resident within the meaning of the Social Security Act 1991 (i.e a person who resides in Australia and is either an Australian citizen, the holder of a permanent visa or a special category visa holder who is a protected SCV holder); and
- Do not have a spouse that is an Australian resident within the meaning of the Social Security Act 1991.
- It follows that an individual's visa pathway into Australia will have a direct effect on whether they can qualify as a 'temporary resident' for Australian tax purposes.
What does it mean if I am a temporary resident?
An individual who qualifies as a 'temporary resident' should not be subject to Australian tax on their foreign-sourced income (other than employment-type income). It follows that if someone has significant sources of overseas income – such as interest on overseas investments, rental income from overseas property – qualifying as a 'temporary resident' can have a material bearing on their Australian tax exposure. It also means that the individual will not be subject to Australia's anti-deferral rules, which can apply to tax the individual on an annual accruals basis where they hold a controlling interest in a foreign company and the company does not distribute income or gains to the individual during the tax year.
What does it mean if I am a tax resident?
If an individual is an Australian tax resident, including an individual who obtains permanent residency on expiration of their visa, they will be taxable on their worldwide income. This means that income derived from overseas investments and assets, which may have been non-taxable so long as they qualified as a temporary resident, would become taxable. Furthermore, certain tax rules which may have been 'switched off' during a period of temporary residency, such as anti-deferral accruals rules, can now apply, and any assets that the individual holds (other than those which qualify as taxable Australian property) will be brought into the capital gains tax net. Individuals who have relocated to Australia and have a controlling interest in a foreign company should also be aware that their relocation could result in that company becoming an Australian tax resident, notwithstanding that it has been incorporated overseas. A company will be an Australian tax resident where it is incorporated in Australia or, if it is not incorporated in Australia, it carries on business in Australia and has either its central management and control in Australia, or its voting power controlled by shareholders in Australia. The Australian Taxation Office takes the view that if a company carries on business and it satisfies the central management and control test, it will be deemed to carry on business in Australia notwithstanding that its trading or investment activities are not carried out in Australia. Where a company is a tax resident, it will be subject to tax on income and gains from Australian and foreign sources, and will have associated tax filing obligations. As discussed above, the visa pathway program is also designed to encourage international businesses to expand their operations into Australia. This will inevitably create a number of Australian tax compliance obligations – for example, if a business relocates employees to Australia it will need to register for Australian employment taxes, and will need to withhold tax from salary payments and make employer social security contributions (called superannuation guarantee). The business itself may also have tax filing obligations depending on what structure it chooses to adopt to expand into Australia and whether its activities in Australia results in the creation of a 'permanent establishment' (taxable presence).