This is a question that I am often asked by clients. It is not often that you will have the luxury of choosing when to head back to Australia as other influences will take precedence including the availability and starting date of any Australian based employment, children’s school starts and the availability of somewhere to live.
Some people do have the good fortune to plan an arrival date and even take extended holidays prior to their permanent relocation to Australia, so if you are in that position, here are some of the main issues affecting the timing of your return from an Australian taxation perspective.
Full year means bigger value for tax credits
If you have made the most of your time abroad and acquired Australian rental property, it is likely that you may have accumulated tax losses (or credits as we refer to them). You can use these to reduce your Australian salary tax and since we have a marginal tax scheme in Australia, where the higher your income the higher the tax rate, it is usually better to have a full years income to use your credits against so that the tax saving is at the higher rate rather than the lower.
This can be a significant difference and would encourage a return in the earlier part of the tax year, usually July to September, as the most tax effective.
Having a Super Return
If you return to Australia late in the financial year, say May or June, then one way to preserve your tax credits is to make an additional contribution into an approved Australian Superannuation scheme to offset your income for the month or two that you have been back during that financial year.
This will allow the credits to be available to carry forward to the next financial year for maximum effect. This would require some additional thought as it could impact on your family cash flow but could be a substantial saving.
A Good Day on the Stock Market
On relocation to Australia, all offshore assets (property or shares) and any Australian shares become taxable but importantly this only applies to the excess above the market value on that day of relocation.
As such, it is always better to return to Australia during a more optimistic time where asset values are higher.
Sadly if prices are down this could be detrimental, so if it is possible to postpone your arrival until things improve this should be done. Realistically this is not easy to expect but is certainly worthy of consideration.
If you are intending to move into a property in Australia that you own and have had rented, then you can claim costs of bringing the property “back to standard” after the rental period. This may include painting, garden maintenance and general upkeep of the property but not significant items like carpets or kitchen upgrades.
The end of rental maintenance should be carried out within a reasonable period of when the tenancy ends, but can be done once you have moved in, and will allow a full deduction against your tax which will make it very cost effective.