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Employment Taxation for Expats in Australia

Submitted: April 2014

Tax File Number (TFN)

To ensure you pay the correct amount of tax on your income, you should apply online for a TFN upon arrival; otherwise all income tax will be deducted at the highest marginal rate. The form is available from here, simply fill in the details required and print the completed form. You then have 30 days to take the form, your proof of identity and visa to the nearest Australia Post Office, which can be found from this locator. If you need to ask questions about your application, you can phone 13 28 61, if you need an interpreter then you should phone 13 14 50. You should receive your TFN within 28 days.

Working for an employer

Australia uses a Pay As You Go (PAYG) for collecting income tax from employees. Under PAYG, your employer deducts tax from each wage or salary payment. There are two different tax-rate scales, depending on whether you are considered a resident or a non-resident. Generally you will become a tax resident if you stay for longer than 183 days in a tax year. However if you can show that you usually live abroad, and do not intend to live in Australia for more than two years, you may be taxed as a non-resident. As a non-resident you will only be taxed on your Australian earnings. As a resident, you are taxed on your worldwide earnings. Depending on your level of income from Australia and abroad you will have to judge whether it is better to become a tax resident (with the allowances and lower rates of income tax) or not. If you are staying for less than 183 days, and you are being paid by an employer resident in a country which has a suitable tax treaty with Australia, you may not have to pay tax in Australia at all.

The tax year runs from 1 July to 30 June. Your employer will deduct tax from your wages or salary each time they pay you.

As a non-resident you will not receive any basic allowances, and the tax rates for 2013/14 are as follows:

Income AU$

Rate

Up to 80,000

32.5%

From 80,001 to 180,000

37%

180,001 and above

45%

As a resident you will receive basic allowances, and the tax rates are as follows:

Income AU$

Rate

Up to 18,200

0%

From 18,201 to 37,000

19%

From 37,001 to 80,000

32.5%

From 80,001 to 180,000

37%

180,001 and above

45%

There is also a Medicare levy of 1.5% of income, which is payable by residents only. Superannuation is deducted at a rate of 9% of income. If you are a non-resident who has paid Superannuation, you can reclaim it when you leave the country, though you will have to pay income tax on it. There is an online application for this here.

You may also have to submit a tax return at the end of the tax year. You can employ a tax agent to do this for you. There is advice and access to the electronic tax return filing system here.   

Working as a contractor

As a self-employed contractor (sole trader), you do not have to pay the actual tax due on your income every month. Instead you use the PAYG system to pay tax in instalments, based on an estimate for earnings for the year. You have to fill in a tax return once a year, in which you detail your income, costs and other variables to arrive at a final figure for actual income tax due. You can also apply for an Australian Business Number (ABN); though certain conditions apply; for instance you should be working in your chosen field of work. Applying for an ABN can be done here.

If you do not expect to earn much more than AU$80,000 and your business-related expenses are not high, careful consideration should be given as to whether to work as an employee or as a sole trader. Many employers prefer to employ sole traders as they are not required to pay Superannuation on their behalf.

 

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