While the increase global executive mobility has been an ever present trend over the past decade or more the growth of the Asian economies and global pursuit for resources is seeing more and more small to medium enterprise grappling with issues of sending teams of professionals and company executives off shore. At the same time a number of legislative changes and broader trends, including the growth in popularity of self managed superannuation funds (SMSF) and the softening of the US dollar have occurred.

Consequently companies and employees must consider a wider range of implications associated with relocation and expatriate assignments in what is already unfamiliar territory. This comes in addition to the typical analysis and structuring to deal with the local regulatory environment applicable at a corporate level.

Prior to the Government’s abolition of broad income tax exemptions applying to Australian residents engaged in employment overseas (former Section 23AG), attention typically focused on the prevailing tax rates and legislation applicable to the expatriate employee in the offshore jurisdiction. As the rules currently apply, with limited exception, worldwide employment income is included in a resident individual’s Australian taxable income with an associated credit for tax paid offshore. This change necessitates reassessment of the many standard expatriate employment contracts that lurk in the bottom of HR or Finance Director’s draws.

Australian residency for income tax purposes relies upon an individual’s circumstances, yet has significant implications with respect to the employer’s obligations in both jurisdictions and the structuring of appropriate compensation packages. It is critical that the company and individual work collaboratively to achieve an appropriate outcome where dealing with remuneration and other benefits.

The growth in popularity of self managed superannuation funds (SMSF) among professionals and executives means that these too become an added complication when considering offshore movements. Broadly, maintaining complying superannuation fund status is paramount and requires the fund be an “Australian superannuation fund”. Of particular importance to outbound individuals is that complying status requires central management and control of the fund is ordinarily in Australia; and the majority of the fund’s assets are attributable to Australian resident active members. Basically, active members are contributing members. In  instances where fund assets are liquid and the individual’s move more long-term, rolling benefits into a public offer fund may be appropriate. However, as is not uncommon, where the fund holds property or other relatively illiquid assets consideration must be given as to the ability of the fund to remain complying where a member/s is absent from Australia and potentially not a resident. While the outcome depends on individual circumstance and preference it is essential this be considered early on.

Currency exposure is another consideration for expatriates. Large companies have been managing currency exposure “since time in memoriam”, and small to medium enterprises are becoming increasingly sophisticated in this respect. However, it is only of late (and in light of the softening US dollar) that expatriate individual’s are looking more and more at the appropriateness of their contracted currency and managing their exposure. At an individual level strategy will be largely dictated by the term of employment and intended time offshore, the denomination of any debt exposure or other obligations and the company’s willingness to be flexible with either the contracted currency or insulating the individual from significant exchange movement.

These considerations, together with the important family consideration such as offshore accommodation, education and in some instances security, should not perturb individual or companies from entering foreign markets. The hosting of the AICD annual conference in Beijing this May is further evidence of the growing importance of China, and Asia in general, to Australian companies. Companies that encompass expatriate resource planning as a component of their offshore market strategies will ultimately do more than simply comply with various legal obligation and go further to provide security, certainty and value for their people.


Contact

Richard Wheeler
T +61 7 3640 4061
rwheeler@moorestephens.com.au

www.moorestephens.com.au