Taxation in Australia
The Australian financial/tax year runs from 1 July to 30 June for individuals and business.
Individuals must apply for a Tax File Number to be registered with the Australian Taxation Office and lodge annual tax returns. In most cases, tax from wages/salaries is withheld throughout the year and is known as ‘Pay as You Go’ (PAYG). Tax is charged on the income received from salary, wages, investments, shares etc.
The amount of income tax payable is based on how much you earn and your residence status. Australian residents are taxed on income sourced from both Australia and overseas, and are entitled to a tax-free threshold of AUD 18,200. Income tax rates are progressive, with the highest current margin at 45% for salaries over AUD 180,001. In most cases, residents are also required to pay a health care levy (the Medicare Levy), which is currently 2% of taxable income.
Non-residents are subject to tax only on Australian sourced taxable income, though the tax rates are higher. There are a series of tests to determine ‘Residence for Tax Purposes’ status, with the primary consideration being the ‘183 day test’.
Between 1 July 2014 and 30 June 2017, a Temporary Budget Repair Levy of 2% is payable on both resident and non-resident incomes over AUD 180,000 (exfin.com/australian-tax-rates).
Capital Gains Tax (CGT)
CGT applies to all capital gains made on the disposal of any asset, with the exception of the family home. Net gains are treated as taxable income and are subject to CGT. Net capital losses in a tax year may be carried forward and offset against future capital gains.
This death duty was abolished in 1979, and CGT is not payable on the capital gain (or loss) of assets in an estate if they are simply passed on to beneficiaries. If, however, the asset is sold by the Executor and the proceeds are then distributed on, the sale of the asset is subject to CGT.
Goods and Services Tax (GST)
Australia has a GST of 10% which is charged on most goods and services consumed in Australia with the exception of basic foodstuff, education, medical services and government charges.
Businesses are liable for paying a number of taxes including Payroll Tax, Fringe Benefits Tax and Corporate Tax (which is charged at a flat 49% rate).
Double Tax Agreement
Australia has an extensive network of double tax agreements.