Author Topic: Canadian moving permanently to Australia  (Read 1682 times)

jdrux

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Canadian moving permanently to Australia
« on: March 02, 2021, 11:12:28 PM »
I have just applied for Australian permanent residency. Planning to move with my Aussie wife and our child in about 2 years when my residency goes through. Do you know how that works for our Canadian investment accounts when living and working in Australia? I have been told that the government-registered accounts will freeze, as in we can't add any more to the accounts, but they can still continue to grow tax-free or tax-deferred.

Are there any tax implications in Australia for holding Canadian investment accounts? Does it make more sense to collapse these accounts and migrate them into a margin or non-registered account so we can continue to contribute with Australian income after the move?

Thanks for your advice.

conwy

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Re: Canadian moving permanently to Australia
« Reply #1 on: January 05, 2022, 07:35:04 AM »
Thought I'd leave a reply, as no one else has. I've never worked/lived in Canada, so don't know any specifics. That said, as an Australian who has worked in the UK, I can perhaps share my thoughts (not formal advice of course!)

I would guess the following two considerations would apply:

1. Tax residency in Australia

2. Tax treaties / Double tax agreement

Once you have Australian residency, have moved to Australia, have your home, work, family, etc. in Australia, then you would be considered an Australian tax resident for Australian tax purposes. Presumably on the Canadian side you would also be considered an Australian tax resident for Canadian tax purposes. (But you might want to check the specifics with a Canadian tax accountant.)

Assuming that's the case, then you will need to pay tax in Australia to the ATO on all foreign earnings including your foreign investment distributions and any Australian investments. However you can claim a Foreign income tax offset on any foreign income which has already been taxed at the source. So if the Canadian Revenue Agency has already taken taxes out of your Canadian pension account, then you can claim that as an offset in your ATO tax return. You will still be taxed by Australian tax rules, but only after subtracting the offset amount, to compensate for the Canadian tax you already paid. This is thanks to the income tax treaty which Australia has with a number of countries, including (I believe) Canada.

Regarding your Canadian pension funds -

My understanding is that in Australia, after retirement ("preservation age"), you don't normally have to pay capital gains tax on superannuation (which is the Australian equivalent of a government pension/retirement fund). To avoid paying CGT on your Canadian pension withdrawals you might need to move them to an Australian super fund.

It seems like it should be possible to transfer all of your foreign pension funds to an Australian Self Managed Super Fund (SMSF) in one lump sum, and from there, have it treated/taxed the same as regular super. (Tax treatment of transfers from foreign super funds). I'm not sure if it's supported for Canadian funds. I guess you'd need to ask an Australian tax accountant about that.

If you prefer to keep your pensions in Canada and withdraw from them from Australia, I'm not sure whether you would be taxed on capital gains at that time, or whether it would be considered as super and you would not be charged capital gains tax. Also a question to ask an Australian tax accountant.

Hope it helps a bit!
« Last Edit: January 05, 2022, 07:43:51 AM by conwy »

lizi

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Re: Canadian moving permanently to Australia
« Reply #2 on: February 11, 2022, 07:44:20 PM »
Hi jdrux - not sure if you are still in the process of moving to Australia but thought I'd chime in. I've just come back to the forum after a lengthy break and I'm getting caught up on a bunch of things. Your question jumped out at me because we are in the same situation - moved back to Australia last year with my Canadian husband (who is now a PR). Prior to that we had lived in the UK so had a bit of experience with the whole "living overseas and juggle CAN tax UK tax etc".

To partially answer your questions, TFSAs absolutely shut off once you stop being a Canadian tax resident. Money still accumulates but you can't make new deposits and you don't accumulate new room. So top them up completely before you stop being a tax resident (advice I wish I could have given myself in 2018!).
RRSPs are a slightly different story. I haven't investigated too much but it appears if you have room you can still contribute - but you lose the benefit of claiming that back on your Canadian income. So again best to top up as much as possible while you have taxable Canadian income, and I guess it's fine to also top it up after that to get the benefit of tax free growth.

I am yet to figure out the tax implications of having Canadian investment accounts, so maybe we can figure this out together!

Where in Aus will you be living?