Should a Kiwi expat in Australia get an Australian citizenship? In tax perspective

Recently there is a debate about the Kiwis living in Australia permanently not able to get an Australian citizenship. Are there any benefits of getting it? Is the citizenship going to affect your tax obligations?

When a Kiwi enters Australia, a special category visa subclass 444 (SCV) will be issued. This visa grants the right to live and work in Australia permanently. It will expire at the time you depart Australia and a new one will be issued when you re-enter again. This visa is “unprotected” which means you are unable to apply certain types of social payments. Visit the website below for the list of social payments available to an unprotected SCV holder.

An unprotected SCV holder is a temporary tax resident in Australian tax law, despite the visa grants the right to live and work in Australia permanently. This rule is largely unknown in Australia. A temporary tax resident has a huge tax advantage as most of the overseas income is exempt from tax in Australia while you still have access to the tax-free threshold and a lower tax rate just like a normal tax resident. The temporary tax resident status will be terminated permanently on the date you receive your Australian PR or citizenship, or if your spouse has obtained an Australian PR or citizenship.

(Extra note: If you were a SCV holder commenced residing in Australia on or before 26/2/2001 or commenced residing in Australia within 3 months from 26/2/2001 (Obtained a determination from Centrelink), your SCV is “protected”, which means you are not qualified as a temporary resident but you have access to all social payments just like an Australian PR or citizen).

A New Zealand citizen living in Australia, as a holder of an unprotected SCV, is treated as a permanent resident for the purpose of buying a residential property in Australia. This means you:

  • Have access to the First Home Owner Grant;
  • No need to have an approval from the Foreign Investment Review Board;
  • No foreigner’s stamp duty surcharge and application fees
  • Easier to apply a mortgage in Australia

Once you or your spouse have an Australian PR or citizenship, you are no longer a temporary resident. You may have access to the social payments in Australia (given you have satisfied all other specific requirements / income tests) but no tax exemption for overseas income anymore. Before applying for an Australian PR or citizenship, you should ask yourself the following questions:

  • Do you have any investments or planning to invest outside Australia?
  • Are you a medium or high-income earner in Australia (say above AU$60,000 annually)?
  • Any family / social reasons?

Generally speaking, if you have investments outside Australia or earning a higher income in Australia, it may be better for you to keep the unprotected SCV & temporary residency. However, a more detail examination is necessary before drawing a conclusion.

If you have included your overseas income in your Australian tax return by mistake while you are a temporary tax resident, you may need to lodge an amendment / objection ASAP. Contact us immediately if you need help on this.

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