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Overview of Tax Issues for Expats in Australia

Submitted: April 2014

The Australian tax year runs from the 1 July to the 31 June of the following year.

Tax Residence

When coming from abroad to Australia for employment, it is important to understand the difference, in terms of tax, between being resident and non-resident. There is no single test for this in Australia, but there are some general guidelines. Any person physically present in Australia for more than 183 days in any tax year is considered resident for the whole of that tax year, unless they can show that their usual place of abode is outside Australia, and that they do not intend to take up residence in Australia. Generally an expat visiting or working in Australia for up to two years, with no intention of remaining beyond that time, will be treated as a non-resident. A period in excess of three years (with some holidays abroad) is virtually certain to result in treatment as a tax resident. What this means is that if you have a job or contract in Australia which is clearly going to last for longer than two years, you will probably be treated as tax resident from the moment of arrival.

As a resident, you will have to pay Australia tax on any income and gains which arise in Australia and abroad for the whole of the relevant tax year, irrespective of the date of arrival. As a non-resident you are only taxed on income and gains arising in Australia.

Whatever your residence status, it is important to be aware if a tax treaty exists between your country of origin, or other country that is a source of overseas income, as these may affect the tax you pay on any money you receive from abroad. For more details, see: Taxation - Tax Treaty Considerations for Expats in Australia.

Taxes

The main taxes on individuals in Australia are employment taxes in the form of income tax and capital gains tax. Superannuation is deducted at a rate of 9% of income; this can be reclaimed (less income tax payable) when you leave the country. In addition there is a Medicare levy of 1.5% of income which is only payable by residents. To ensure you pay the correct amount of tax on your income, you should apply online for a Tax File Number (TFN) upon arrival; otherwise income tax will be deducted at the highest marginal rate (currently 45%). Your actual overall tax rate depends on how much you earn. Non-residents pay a higher rate of tax than non-residents. For more details, see: Taxation - Employment Taxation for Expats in Australia.

If you are working in Australia for a Australian resident employer, they will deduct income tax and other deductions directly from your gross income via the Pay As You Go (PAYG) system. You may still be required to fill in a tax return at the end of the year.

If you come to Australia to set up in business, you have the choice of being a self-employed sole trader, or starting your own company. Which one will suit you best will depend on your circumstances. If you plan to start a business in Australia but not be self-employed, you must register a company with the Australian Securities and Investments Commission (ASIC). The company will be liable for corporate tax on its worldwide income and gains. Income and capital gains are calculated differently but taxed at the same rate. For more details, see: Taxation - Business Taxation for Expats Australia.

Investment Tax

Investment tax mainly applies mainly to interest on savings, bonds and dividends. Interest from Australian banks and building societies is paid without any tax deducted at source, as long as you have provided your TFN. Dividends from Australian companies are paid either franked or unfranked, depending how much tax has been paid by the company. For more on the difference between the two, and how this might affect an expat, see: Taxation - Business Taxation for Expats Australia. For more details on investment tax generally, see: Taxation - Investment Taxation for Expats in Australia. The tax treatment of investment income from a country outside Australia can depend on whether there is a tax treaty between the two countries. For more details, see: Taxation - Tax Treaty Considerations for Expats in Australia.

 

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