Hundreds of thousands of residents depart Australia every year for 12 months or more. The hub of Asia-Pacific’s commerce, Singapore is one of the world’s most popular expat destinations, in particular for Australians.
If you already earn a living in Singapore, or simply have business interests there, then you understand why. But, as the year comes to a close and the end of Singapore’s financial year looms, you may have questions about the best way to repatriate funds earned in Singapore back into your pocket in Australia.
Singapore is a haven for Australian expats almost by design. A high standard of living. A stable GDP and a commitment to technological enterprise and R&D. Singapore boasts a remarkable story of development over a reasonably short time from a labour intensive economy to an economic powerhouse, firmly leading the way in innovation and knowledge-based services.
Expat labour has been integral to this success story. A small island with no surplus of natural resources, Singapore relies on foreign skilled and unskilled labour, making up as much as a quarter of its population, to remain one of the 10 richest countries in the world in terms of GDP per capita.
Australians form a key part of this workforce. A streamlined banking system, low incidence of crime, and a healthy exchange rate make it a stable place to earn a living. Add to this a relatively low maximum individual tax rate of 22%, then it is little wonder that many skilled professionals flock to live and work on the island metropolis.
Combine these financial and lifestyle factors in Singapore with the fact that you are not taxed in both Australia and Singapore for your income, and continued exemptions from CGT should you sell your Australian property while living on the island, then it’s reasonable to expect the Australian expat presence there to grow, not diminish.
Large companies and global institutions hire scores of accountants and tax advisors to manage the tricky issue of profit repatriation. True, your concerns may not be as multifaceted. You may simply work in Singapore, manage a local business, or do business in Singapore through your Australian company. The challenges of bringing back most of your profits into Australia still exist.
Depending on how you set up your finances, you need to consider the cash flow of how and when you will take a tax hit when repatriating money – how much will you pay overseas, then in Australia under the corporate tax rate, then again in your personal tax? In addition, the benefits of earning money under the Singaporean tax rate and the compensation provided by the ATO to prevent double taxation need to be measured against the costs of fees incurred when transferring money back to your Australian business from overseas earnings.
These vexing questions of just how and when you will be hit with taxes, fees and charges when you shift your money from Singapore to Australia come down to, in the end, your business and financial structures. These structures will guide the different forms of profit you earn overseas, and different tax costs apply to different forms of profit. Loans repayments, interest, service charges, and dividends attract different tax hits in Australia and Singapore.
Each person or company will need to evaluate which is the best business and profit structure for them, and from that you can come up with a sharp, effective profit repatriation strategy.
For example, if you choose to set up an overseas company in Singapore, how will you inject capital into it to get it going? Perhaps a loan, or an investment that comes back to you in the form of shares or equity? This decision, often made before you even start working in Singapore, will impact your profit repatriation strategy.
You could recoup the money from your overseas company by charging interest on a loan you’ve lent from Australia. You could ask your overseas business to pay this out of their profits. Or, if you invested in the Singaporean business, you could declare a dividend on your overseas shares. Or you could simply charge your overseas company for a service and pocket the money in Australia. Interest, dividends, service charges – which is the smartest profit repatriation strategy?
It could very well be a combination of all three. This is why profit repatriation requires planning unique to your situation. You need to understand both your financial and business structure in terms of Singaporean and Australian tax and the best way to make changes to your cash flow and finances in order to get the maximum amount of profit back. At Calibre Business Advisory, we have invested a significant amount of time and effort into understanding exactly this. With a presence in Singapore and offices in Australia, we regularly work with Australian expats to help set themselves up in a financially smart manner on the island.
Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants below to discover new options for your business in Australia and beyond.
Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.
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