Australian Treasurer Peter Costello has claimed that proposed improvements to the taxation arrangements for temporary residents will give Australia one of the most competitive expatriate taxation regimes in the world.
The Taxation Laws Amendment (2006 Measure No. 1) Bill 2006, introduced into parliament on February 16, represents the third time that the National/Liberal government has attempted to make improvements to the expat tax regime, after two previous attempts were blocked by Labor Party opposition.
However, Costello explained that the new bill, introduced as part of the 2005/6 budget, will go further than the previously blocked legislation which would have applied a tax exemption to a temporary resident for a period of 4 years, only if the temporary resident had not been an Australian resident within the previous 10 years.
"The Government will now remove these time limits as they provide unnecessary disincentives and distortions for individuals wishing to remain working in Australia," Costello said in a statement.
The measure will now apply to holders of a temporary visa, with the exception of those who are directly or indirectly treated as residents for social security purposes.
Under the proposed legislation, holders of a temporary visa will not be taxed on foreign source income. They will continue to be taxed on all Australian source income and salary and wages generally, including income from employee shares or rights.
Further, capital gains taxation of temporary residents will be aligned with non-residents. The combination of these changes will also ensure that the capital gains tax rules for departing residents do not apply to temporary residents.
"The changes will significantly reduce administrative and compliance costs. It will also further reduce the cost to Australian businesses of employing expatriates," Costello observed, going on to note that the changes have been "welcomed" by business.
"The Government is committed to assisting businesses to access the skilled labour needed to compete internationally," the Treasurer added.
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