Perhaps the main reason many Australian expatriates come abroad is to escape the high personal taxes in Australia and try and save up some capital to enhance their lives back in Australia when they return.
Not surprising when you consider that a recently as June 2004, the top marginal tax rate of 47% was levied when your income exceeded only A$62,500 per annum.
The good news is that things are changing very rapidly in Australia, and we are moving to a more tax friendly environment, albeit we may never be as low a tax on personal incomes as some of our Asian neighbours.
The below table shows the reductions that have occurred to Resident Marginal Income Tax Rates in recent times.
| Pre GST 30th June 2000 | Financial Year 30th June 2006 | From 1st July 2006 | |||
| A$0 to A$5,400 | 0% | A$0 to A$6,000 | 0% | A$0 to A$6,000 | 0% |
| A$5,401 to A$20,700 | 20% | A$6,001 to A$21,000 | 15% | A$6,001 to A$25,000 | 15% |
| A$20,701 to A$38,000 | 34% | A$21,001 to A$63,000 | 30% | A$25,001 to A$75,000 | 30% |
| A$38,001 to A$50,000 | 43% | A$63,001 to A$95,000 | 42% | A$75,001 to A$150,000 | 40% |
| A$50,001 and above | 47% | A$95,001 and above | 47% | A$150,001 and above | 45% |
In the short period of just 6 years, the top rate has been lowered slightly from 47% to 45%, but more importantly the threshold in which it applies has been lifted from A$50,000pa to A$150,000.
In addition, it is estimated by the Government that over 80% of Australian taxpayers will now be taxed at no more than 30% due to the lift in the band to A$75,000pa.
People living in Australia will warmly welcome these reductions, however there is no doubt that they are aimed largely at the huge expatriate population, which now stands at almost 1 million located all over the world, as a temptation to bring you home.
Australia is experiencing a skills shortage with record low unemployment and strong job growth, so we need people in Australia to continue the steady growth of the economy. This year some 130,000 migrants will arrive in Australia to help fill this gap, but the Government is serious about getting expatriates home as well.
The personal tax reductions have been funded by a solid Federal Budget (which has delivered surpluses for 10 years), steady economic conditions, a growing population generating more Government revenue and the fact that Australia is now free of all Government debt.
These four key elements are expected to remain into the future so it will not be surprising to see continued lowering of personal tax rates in the next few annual budgets, delivered in May each year.
For many expatriates, these reductions may be enough incentive to head home, but in all cases it is best to wait until you have saved sufficient to make your life enjoyable back in Australia.
That usually means being debt free on the family home, as there continues to be no tax relief for interest paid on your private mortgage.
So for all expatriates, we can now aggressively save whilst abroad, confident that when we decide to return to Australia that the tax rates will be a lot friendlier than the day we left.
