An Italian Australian, Turkish Australian and Greek Australian have investments in Rome, Istanbul and Athens respectively. The Italian and the Turk get taxed once in the country where their investments are located, but the Greek Australian not only pays higher taxes in Greece – on account of living abroad – but also faces a double tax whammy as the money is retaxed by the ATO.
While taxpayers from 57 countries with bilateral Double Taxation Agreements with Australia are taxed only once, Greeks see their rentals and other investments shrink a little more as two tax offices get a slice of the pie. Without such an agreement in place for Greek Australians, income is up for grabs by both the Australian and Greek governments regardless from where it originates. Taxpayers who move between these countries for short periods, who have family rentals and other investments or who receive pensions from abroad are affected by double taxation.
Greek Community of Melbourne President Bill Papastergiadis recently brought the issue to the attention of Greek National Tourism Officer Secretary General Dimitris Fragakis during the Greek Australian Dialogue Series organised by Paul Nicolaou, the Director of the Australian Chamber of Commerce & Industry Business. “It’s vital, because those of us who do invest in infrastructure in Greece are taxed in Greece and the money we bring to Australia is taxed again,” Mr Papastergiadis said, adding that the problem rests with Australia, not Greece.
The GCM President is now planning to pen more letters to both Greek and Australian government officials, including Australia’s Treasurer Josh Frydenberg and Greece’s Development and Investment Minister Adonis Georgiadis. “Greece and Australia have a shared history, there is a strong Greek presence in the country and shared values,” Mr Papastergiadis told Neos Kosmos. “Prime Minister Scott Morrison even came out in support of Greece in the eastern Mediterranean and Hagia Sophia’s conversion, and yet on another level, though Australia has bilateral tax agreements with Latvia, San Marino, Canada, there is not one with Greece.”
It’s a complex issue that has accountants ripping out their hair and Greek Australians either rushing to sell off their property in Greece to avoid taxes eating away at their money or considering fraud because getting taxed once is more than enough for most people.
Greek Australian Lawyer Bill Beys told Neos Kosmos that it is a “complex matter”, and many may be caught out. “I think an agreement would cause many problems for Greek Australians that haven’t been honest with the Australian government and especially with their pensioners in Australia,” he said.
Getting taxed only once would help discourage such dishonesty.
Tax accountant/consultant Evan Binos says that he finds the lack of an agreement “frustrating”.
“I had a phone call recently from an Australian citizen that was stranded in their holiday home in Greece as a result of the current COVID-19 crisis,” he said, and as a result he was considered a tax resident of both Australia and Greece and paid up twice. Had he been stranded in Italy, rather than Greece, he would have only been taxed as an Australian tax resident thanks to the Australia-Italy Double Tax Agreement which only taxes residents on income streams coming from their countries, Mr Binos points out.
Without such an agreement in place for Greek Australians, income is up for grabs by both the Australian and Greek governments regardless from where it originates. Taxpayers who move between these countries for short periods, who have family rentals and other investments or who receive pensions from abroad are affected by double taxation.
“Double Tax Agreements that Australia has with other countries provide ‘tie breaker’ rules in relation to tax residency,” Mr Binos told Neos Kosmos. “These rules examine the location of the taxpayer’s permanent home or if they have a permanent home in both countries, then the location of their personal and business assets.”
Greece’s Prime Minister Kyriakos Mitsotakis recently asked Greek Australians to consider living in Greece while working from Australia. “But think of it, we’re a globally connected world where we can work from anywhere – COVID-19 has proven that if you have good digital infrastructure – which we do – and have further invested in, why not?” he asked during an event hosted by The Hellenic Initiative. “Why should you consider Greece as just a place to spend your holidays? Why not live here? Why not retire in Greece? Why not work out of Greece? Why not work out of Kastellorizo?”
Mr Binos knows exactly why diasporans are reluctant, and it has less to do with broadband speeds and everything to do with the tax “anachronism” which continues to exist in a world with an increasingly mobile workforce. “Not having a Double Tax Treaty to provide certainty to the tax treatment of rental income or capital gains made on the sale of Greek real estate acts as a significant impediment to such investment decisions,” he said. “Clarity and certainty would encourage property investment in Greece from Australians irrespective of their background.”
Trade Commissioner Katia Gkikiza said, “Greece recognises the importance of a Double Tax Agreement with Australia for the further development of economic collaboration between the two countries and is moving towards this direction.”
She told Neos Kosmos that EU member states without such agreements in place, including Greece, recently sent a letter to Treasurer Frydenberg calling for such a treaty and was pleased that the government said it would support the recovery from COVID-19 by modernising and expanding Australia’s tax treaty network to eliminate double taxation, as announced in the 2020-21 Budget.
A spokesman from Treasurer Frydenberg’s office told Neos Kosmos that the recent Budget announcement that the Government would extend its network would soon solve the problem, but we were not given a date as to when such a treaty would be created. “The Government’s initiative will reduce tax barriers, promote cross-border trade and investment and support productivity,” the spokesman said.
“As part of this initiative, the Government is currently reviewing Australia’s tax treaty negotiation program, and Greece will receive full consideration as part of this review. In the interim, Australia’s domestic law, such as the Foreign Income Tax Offset, may unilaterally apply to reduce the effects of double taxation in practice.”
Mr Binos says a treaty would have advantages for both countries.
“It would provide Australia with the ability to raise extra tax revenue on overseas assets (which are likely to increase in value over time) held by Australians, in a manner that is fair to the Australian taxpayer and efficient to the Australian taxing authorities as it would encourage disclosure of such investments and compliance with the Australian taxation laws,” he said.
“In relation to Greece, it would open up a new source of capital investment, irrespective of size of the Australian market. It would also have indirect benefits in that it would further strengthen and enhance the relationship of the two countries, but would also enhance and assist the links the Hellenic republic will have with the current and future generations of the Hellenic Australian diaspora.
Mr Papastergiadis hopes the simplification will take place sooner rather than later. “The reality is that many Greek Australians, once they are in middle age, contemplate the purchase of a property in Greece as part of their retirement plan. This is a common discussion in Australia,” he said. “A double tax agreement would make the difference as they consider whether to invest in Greece or invest elsewhere. Besides, we are all global citizens.”
He says, “Capital doesn’t understand borders.”