south african tax

Tax considerations when emigrating to Australia: Image: Adobe stock

Tax considerations when emigrating to Australia

As a South African tax resident, SARS taxes your global assets, but as a non-resident, only South African-sourced assets are taxed.

south african tax

Tax considerations when emigrating to Australia: Image: Adobe stock

Sable International’s SA Tax Director, William Louw, answers some frequently asked questions about the tax implications of leaving South Africa and how assets, income, and pensions may be taxed when you emigrate to Australia.

What should you know before leaving South Africa?

When people leave South Africa, they often don’t understand what taxing rights change with SARS and what information they should get before leaving the country. 

  • A taxpayer is somebody who has to pay taxes in a jurisdiction because they earn income there. 
  • A tax resident pays tax on their worldwide income in that jurisdiction. 

What will happen when you move out of South Africa is that you change from being a tax resident of South Africa to potentially just being a taxpayer. When in Australia, you might become an Australian taxpayer, and then later a tax resident.

What you need to understand is that each tax office has its requirements of what a tax resident is, and tax emigration from South Africa could happen even if you’re not yet considered a tax resident of Australia. There could, theoretically, be a period where you are not a tax resident anywhere, and this will have implications for your financial planning. 

So, before you move, you should find out what taxing rights will change and from which date from the South African perspective. And also how you will be taxed once you enter the Australian tax system, both when tax resident and also for the period before you become a full tax resident.

How far in advance do you need to start planning? 

That depends largely on your asset base and if you are planning on restructuring that asset base before leaving. Suppose you have significant assets, which can trigger a lot of Capital Gains. In that case, you probably want to start a few years beforehand, because in South Africa a portion of your Capital Gain is added to other taxable income, which means if you plan your exit, you can try and dilute those tax events. 

For people who don’t have many assets, I would still recommend at least six months. The actual move, and probably the three or four months after moving, is a very stressful time for anybody, and you don’t want to be discussing things that relate to tax during that period. 

How will your assets be taxed when you emigrate? 

The first thing you need to be aware of is that your tax bill will change significantly when you change your tax status.

While you’re a South African tax resident, SARS is taxing your worldwide assets, but as a non-resident, SARS will only tax you on your South African-sourced assets

To determine whether an asset is South African sourced, ask whether the asset will always remain in South Africa or if that will shift as you move out of the country. For example, South African property can never leave South Africa.

Next, you need to work out whether an asset will trigger a Capital Gain. For instance, retirement annuities, bank accounts, and personal assets won’t. 

With most other assets, they will trigger that Capital Gain Tax when you leave South Africa (as if you sold them). This tax, often called “exit tax”, is due the day before you leave SA, which can have a huge cash impact and a penalty tax if you don’t plan for it correctly.

However, if you plan and sell that asset while you’re still in SA, you can deal with the Capital Gains inside your tax returns, which means you can pay your taxes when they’re due when you file your return. 

For the assets you decide not to sell before you leave, it’s also important to look at how Australia will tax those assets when you sell them in the future. They might tax you over the full life period of the asset, not just a period that you became an Australian tax resident. And if you end up keeping those assets, and passing them down the family line, what additional taxes might be triggered for your children or grandchildren?

There is a lot of future planning that sometimes has to happen well before it’s required.

What occurs if I leave South Africa but continue earning income there?

Once again, you have to look at the underlying asset generating that income. That asset has to be directly linked to South Africa or in South Africa. As a simple example, let’s say you have a South African property and you rent it out when you leave SA. Because a South African property can’t leave South Africa, the rent that it generates will always be subject to tax in South Africa. And then you look at how it will be taxed in Australia afterward. If it is taxed in Australia, the tax that’s been paid in South Africa can be used as a tax credit in Australia. 

From the timing side, you want to make sure that if you become an Australian tax resident, you do your tax return in South Africa before you do the Australian one so that you know what tax credits are going into Australia. You also have to bear in mind that the tax years are different between jurisdictions. 

The other one that people aren’t aware of is employment income. People don’t understand how that is sourced. Now, the asset that generates employment is you, yourself. That means where you are physically is the source of your employment income, not where you get paid from, and that’s what many people get confused about in South Africa and abroad. If you are in Australia earning employment income, it should only be taxable in Australia, unless you meet certain requirements for tax in South Africa.

People don’t understand that. They get confused about something in South Africa called the “expat tax” with the R1.25 million exemption. That, however, is an exemption allowed to a South African tax resident who’s working abroad. If you’ve broken your tax ties from South Africa, you’re not a South African tax resident, foreign source income isn’t reportable, and therefore not taxable in South Africa. And that can be tricky to understand and work out. 

What about South African pensions? 

There is what’s called a Double Taxation Agreement (DTA) between South Africa and Australia, which says that if you’re a tax resident in one of the two jurisdictions, certain income streams are taxed in specific ways, and they override the normal rules. 

What happens is that when you move from South Africa to Australia, if you earn a pension or provident living annuity, you need to confirm that Australia will tax it, that it’s exempt from taxes in South Africa, and you need to tell SARS that and fight with them about it. 

Getting a tax directive from SARS to get the taxing right for pay as you earn (PAYE) on the pension and provident funds can be quite tricky, so you need to plan, otherwise, you might pay tax in two jurisdictions. 

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On the other hand, something like a living annuity from a retirement annuity in South Africa will first be subject to taxes in South Africa, and then you look at how it’s going to be taxed from Australia. 

A living annuity, once it’s triggered, has to be depleted over its lifetime, which means it could take 15 years before you can close it down. Up to that point, you have to do South African tax returns. 

Emigration vs tax emigration

Three different jurisdictions within the government might come up in a conversation about leaving South Africa:

  • Home Affairs controls your passport and physical movements in and out of the country. 
  • SARS controls what’s reported around the tax that comes into South Africa,
  • the Reserve Bank controls capital cash flows in and out of the country, as well as what banking rights you’ve got. 

While the three talk to each other a little bit, they aren’t the same. If you change your tax residency from South Africa to Australia with SARS (“tax emigration”), you don’t have to break the other two ties (e.g. lose your citizenship). 

Financial emigration vs tax emigration

Financial emigration doesn’t exist in South Africa anymore. That was an old application with the Reserve Bank to get your retirement annuities paid out of South Africa. What’s happened is that from March 2021, financial emigration stopped, and since then SARS will only allow you to encash your retirement annuities in full three years after your official tax emigration date. So basically, to get your retirement annuities paid out, you have to prove that you’ve been a non-tax resident in SA for at least three years.  

It’s important to remember that when it comes to tax, every situation is unique. It’s worth speaking to an expert to find out the best way forward for your specific situation. 

Sable International’s South African tax team works hand-in-hand with wealth advisers and the forex department to offer you specialist, personalized, end-to-end advice. Speak to the team at or by calling +27 (0) 21 657 1517

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