Trading Offshore brokerage in Singapore for Australian expat

Hello forum readers and contributors.

Help me please. Somebody.

I am a self funded retiree Australian citizen staying abroad, who currently has a combination of a personally managed share portfolio of Australian shares and two managed funds.

I have discovered the consequences of being deemed a non-resident for tax purposes by the Australian government.

In regards to shares held with an Australian broker I am subject firstly to a one-off Capital Gains Tax on the date I am deemed a non-resident (whenever the hell that it), which is before the shares are even sold.
The second issue relates to losing Franking Credits to offset the company tax on the dividends.

These are massive implications for me as dividends are what I rely on for income as well as franking credits to offset tax liability. The Capital Gains tax being charged would wipe out my year's income and more. Severely punitive.

I have been on an expat forum trying to find out other expats who may have been in the same position as me. I have received some confusing replies, but a couple of expats mentioned the ability to:

* Open an international brokerage account in Singapore that can be made from overseas. The account opened could only be a nominee account.

* Shares held in my name here could be transferred from my brokers in Australia to the broker in Singapore where it would be custodied by them.

I would then be subject to Singapore laws regarding Capital Gains Tax (zero) and paid dividends into the Singapore brokerage account. I would benefit from Singapore's low tax environment. Downside are some of the holding fees that brokers charge there and high transaction costs.

Of course my offshore income would still be used in conjunction with my Australian investment income, by the Australian Tax Office to determine the tax threshold category I would be in. But I do not want to sell my investment property as well and be stuck with more dilemmas where to invest. I want diversification and already heavily invested in shares/funds.

It all sounds like a part solution, but I am new to this. I am having troubles trying to find out which Singapore brokers can do this.

I would also need to liquidate my managed funds and transfer the money to the brokerage account in Singapore to reinvest in hopefully a managed funds products that suits my needs. That's another nightmare.

I cannot see anyway around my dilemma.
I am living off around $34,000 net at the moment from all my investments (shares, funds, P2P investment and an investment property). And that is being quite frugal and no holidays anywhere.

If I am deemed a non-resident and subject to the foreign resident rate of income taxes, lost franking credits, no tax-free threshold, my income will get absolutely whacked down to around $20,000. Impossible to live off. And pre-sale CGT is the hammer blow.

I need a solution urgently. I have almost racked up the 183 days absence which I know is just one part of the domicile test, but if I am deemed a non-resident I will be punished severely with the Capital Gains upfront tax and non-resident taxes.

There must be people out there who know how this all works. Just hoping to get the right advice. I'm truly struggling with the stress. On my last legs truly. I just can't seem to get things right.

And with COVID the very expensive costs and restrictions to get back to Australia, especially right now is compounding the issue. Quarantine would do my head in again.

 

That is only half the story as there is an option not to be taxed
INCOME TAX ASSESSMENT ACT 1997 - SECT 104.165 Exception for individuals

But then you would be taxed on future capital gains while a non-resident.

 

Thanks for adding to that. It's Appreciated.

Of the two choices it seems paying CGT upfront at the resident rate then is probably a better option (in my case) to have the funds to pay the tax, or capital loss to offset (which I have a portion to pay for it). Otherwise non-resident rate CGT is brutal. And long term hold maybe 10 years. Could be really bad if I've remained overseas.

Unfortunately a portion won't be at 50% CGT discount as not held for 12 months yet (unless I was still deemed a resident past June this year) so may not be able to take advantage of that.

Okay. Hopefully some suggestions on other issues.

Regards.

 

If you never sell tho there will never be cgt, resident rates or not?

also arent franked dividends not taxed in australia for non residents? So in effect you pay the franking credits as tax.

 

You can elect not to sell when deemed a non-resident but then if later sold you are subject to non-resident CGT. Sold upfront at least it's resident rate CGT that includes any CGT discounts.

Not sure what I would do with my shares if I hold them. And whether I will need the capital in the future. If never sold I'd elect to hold them and defer CGT. But that's a risk I don't feel is worth it for me.

Yeah, Franked dividends have been pre-taxed at 30% so when paid you don't get taxed, but also don't receive the franking credit to refund the tax, which really added up to a nice tax offset as a resident.
The unfranked shares are taxed shares.
I have several shares paying unfranked divs. So they'll be a tax issue now and nothing to offset that.