Tax in Australia

14 January 2013
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Overview of Tax

Financial Year

The Australian financial year is from 1 July to 30 June.

Tax Returns

By 31 October each year, all Australian taxpayers must complete a tax return - "the TaxPack". This is a self-assessment system, whereby each taxpayer declares their income and allowances to arrive at their own tax liability.

Tax File Number (TFN)

Every Australian resident with earnings from employment or investment needs a Tax File Number (TFN). You should apply for your TFN soon after arrival - either at a Tax office, a Centrelink office or online. Your TFN will be allocated and sent to you within 10-28 days, but if you get work in the meantime, just tell your employer you have applied, so you don't get taxed on a higher rate.

Australian Business Number (ABN)

If you run a business, you will normally be required to register for an Australian Business Number. You will also have to register for the Goods and Services Tax (GST) if your turnover exceeds $75,000 per annum.

Important - Please Read
In Australia, anyone providing financial product advice must be licensed through ASIC (www.asic.gov.au). Aussiemove.com is not a financial advisor and we do not give financial product advice - we do provide general factual information only, obtained from official government sources, such as the ATO (www.ato.gov.au) and statistics from what we believe to be reputable sources. You should consider obtaining independent advice before making any financial decisions.

Our advertisers/sponsors may be Australian or overseas companies that provide services to migrants either before they depart their home country or when they are resident in Australia - the licensing they require will depend on where they are located and where their clients are resident. If you would like to find out about their services, please use the links to contact them directly in order to discuss your own requirements with them.

Income Tax

Employment

Employers are required to deduct income tax directly from their employees' salaries each pay period (each month or fortnight). See Income Tax Rates.

Self-Employment

Those in business for themselves are required to complete a quarterly Business Activity Statement (BAS) to account for their business tax, GST, superannuation fund payments etc. The system is known as "Pay As You Go" (PAYG).

Investment Income

Individuals with investment income (such as rental income or dividends from shares) greater than $2000, will normally have to complete a quarterly Instalment Activity Statement, and pay the tax due. This also comes under the "Pay As You Go" (PAYG) scheme. You can change to one annual payment if your PAYG tax is less than $8000.

Income Tax Rates

Australia has a tiered income tax system, where the more money you earn, the higher tax rate you pay on the extra income (as in the UK). Current (2012-2013) rates are:

Taxable Income
Tax Rate
Tax Amount Due
$0 - $18,200
0%
$0
$18,201 - $37,000
19%
19¢ for each $1 over $18,200
$37,001 - $80,000
32.5%
$3,572 plus 32.5¢ for each $1 over $37,000
$80,001 - $180,000
37%
$17,547 plus 37¢ for each $1 over $80,000
$180,001 and over
45%
$54,547 plus 45¢ for each $1 over $180,000

Example
On a gross taxable salary of $100,000 you would pay tax of:
$17,547 plus 37% of $20,000 (the portion over $80,000) which equals $24,947

Plus 1.5% of the lot ($100,000), for Medicare levy = $1,500

Giving a total tax bill of $24,947 + $1,500 = $26,447 (effective tax rate=26.45%)

Leaving take-home pay of $73,553

Or in weekly terms, $1,923 per week gross leaves you with $1,414 in your pocket.

Other points to note

  • For those arriving in Australia part-way through the tax year, the tax-free amount is reduced from $18,000 according to the number of months of residency in the tax year.
  • Add the Medicare Levy Surcharge (extra 1%) if applicable. The surcharge kicks in for families earning $168,000 or more, but see the ATO for more details.
  • Any allowances due to the taxpayer, will reduce the tax due (eg. Family Tax Benefit).

The ATO provides an online Tax Calculator which will give you an estimate of tax due and net income.

Other Taxes

Capital Gains Tax (CGT)

Capital Gains on assets such as shares or investment property are included in the assessable income and taxed at the individual's highest rate of tax. However, if the asset has been held for at least one year, the liability is reduced by 50%. see ATO for more ...

Goods and Services Tax (GST)

GST was introduced in July 2000 and is applied at 10% to most goods and services. For the individual there is nothing to do (except pay it!). Businesses, however, must register and charge GST if their annual turnover exceeds $75,000. The business must account for GST on its sales and purchases and pay the difference to the ATO on a quarterly basis. see ATO for more ...

Stamp Duty

Stamp duty is payable on certain financial transactions and can be quite a nasty surprise for migrants. Rates differ from state to state, so follow the links below to get specific rates.
Real Estate
The biggest lump of stamp duty you are likely to pay is when you buy a house. For example, if you buy a $250,000 property in NSW, you will pay over $7,000 in stamp duty. You'll also have to pay duty on any mortgage you take out (about $500 on a $150,000 loan).
Vehicles
Stamp duty is payable when you buy a new or used vehicle. For example, a used car bought for $20,000 in Victoria would cost another $800 in stamp duty.
Other Transactions
Here are some of the other financial transactions that may attract stamp duty; rental agreements, buying shares, insurance and life assurance policies.
Stamp Duty Links - by state
NSWVICQLDWASATASNTACT

Tax for Contractors

Personal Services Income

This refers to tax legislation introduced in 2001 to prevent certain contractors from diverting their income through a company or trust in order to reduce tax or delay paying it.

Who is affected?

Contractors who operate as one-man companies and derive the majority of their income from a single source. Typically, IT contractors may come under this category.

See ATO for more....

Tax on Foreign Income

This section may be of some importance to migrants who may be considering leaving property or other investments in their former country. Anyone with endowment policies, pensions, unit trusts, investment trusts or shares in their former country may want to seek advice on their potential tax liability in Australia.

Foreign Income

This covers foreign wages or income such as rent from foreign property and dividends from shares in foreign companies. As a general rule, Australian residents must pay tax on all income, whether it arises in Australia or overseas. However, it may be possible to offset tax already paid in the source country.

See ATO for more....

UK & Australian Taxation - FAQs

Provided by UHY Haines Norton
Chartered Accountants
Am I taxed on monies I bring into Australia at the time I move to Australia?
Generally not. However, should you leave funds overseas waiting for a better rate of exchange, the movement in the rates from the date of residency to their actual transfer would be assessable/deductible in Australia.

Special rules apply to certain types of payments. For example, an income distribution from a UK trust after you arrive in Australia (become an Australian tax resident) could be subject to Australian tax.

What happens if I leave property in the UK?
Firstly you will need to obtain a current market value at the date of your arrival in Australia. This will be the cost base of the asset for Australian tax purposes.

What happens if I decide to rent out the property?
You will need to complete a UK Tax Return and report the rental income received less any expenses for the tax period 6 April to following 5 April, and pay your UK taxes accordingly.

In addition, as an Australian tax resident you will need to report the rental income received less any expenses for the financial year 1 July to following 30 June and pay your Australian taxes less any UK taxes paid.

Do I pay tax in Australia on my UK Income?
Yes, as an Australian tax resident you are subject to tax on your worldwide income & gains. (See next two questions regarding temporary residents who are generally exempt from tax on foreign income & gains)

Does my visa have any affect on my tax position?
The new temporary resident tax measures were introduced with effect from 1 July 2006. Individuals who qualify as 'temporary residents' will be exempt from Australian tax on certain foreign source income or capital gains.

So who are temporary residents?
A temporary resident is a person who holds a temporary visa. A temporary visa is one that enables a person to remain in Australia during a specified period, or until a specified event occurs, or while the holder has a special status. A person will not be a temporary resident if they are residents under the separate test laid down in the Social Security Act and their spouse holds a permanent visa. In effect, this means that they cannot be an Australian-resident citizen, permanent resident, or person who holds a protected special category visa.

Do I pay tax in Australia on my income in the UK, if I don't bring it to Australia?
Yes, the fact you choose not to bring the income into Australia has no affect on your Australian assessable income for tax purposes.

In the year I leave the UK am I entitled to a tax refund?
Depending on the date of your departure most individuals are entitled to a refund of UK tax (assuming you have paid tax throughout the year). A refund arises because you are entitled to a full year's worth of personal allowances, even though you have only been resident in the UK for a part year.

How do I claim a tax refund?
Complete a form "P85 Leaving the UK" and send this to the UK Inland Revenue along with your P45 from your last employer.

Is there anyone in Australia who can assist me with a UK tax return?
Yes, UHY Haines Norton Perth can assist you with the preparation and submission of your UK Tax Return.

Is there anyone in Australia who understands the UK & Australian tax system?
Yes, UHY Haines Norton Perth can advise you on your UK & Australian Taxation matters.

Does Australia have death taxes?
No, there are no death duties in Australia. However, as a UK domiciled individual you may still be caught by Inheritance Tax in the UK on your worldwide sited assets.

Am I entitled to a British State Pension?
To be entitled to a state pension you are required to have worked and paid 11 years National Insurance contributions for men, 10 years for women if born on or before 5 April 1945. Both men and women born after the 6 April 1950, only need to have paid 1 year's contributions to be entitled to 1/30 of the maximum UK State pension.

How much am I entitled to?
You can apply for a state retirement pension forecast which will advise you of what percentage of the state pension you are entitled to on reaching retirement age. Go to www.direct.gov.uk for an application form.

Can I make top up national insurance contributions?
Yes, if you are not eligible for a full state pension you may consider paying additional contributions to top up your pension entitlements. You may be able to top up by paying Class 2 or Class 3 national insurance rates. For these rates, please refer to our website www.uhyhnperth.com.au.

How are Jersey or Channel Island companies & trust treated?
This is a very complex question but in general terms, nothing is outside the scope of Australian tax and professional advice needs to be sought.

For further professional advice, please contact us at:
+61 8 9444 3400 | tax@uhyhn.com.au | www.uhyhnperth.com.au
16 Lakeside Corporate, 24 Parkland Road, Osborne Park, Perth. WA 6017

Tax Advisors

UHY Haines Norton is an association of independent Chartered Accountant firms in Australia and New Zealand and a member of UHY International Limited, an international network of independent accounting and consulting firms.

The national association was formed in 1984 and it is ranked in the top 25 accounting groups in Australia. We have offices in the six major cities and four regional locations.

UHY Haines Norton Perth provides a full range of migrant services related to tax planning, business migration and pension transfers. Migrants and overseas investors have benefited from our expertise for many years.

TAX
We have a unique team, dedicated to international and UK tax issues. Our tax knowledge is extensive and we deal with complex tax matters both domestically and internationally. We are one of the very few firms who have dual qualified UK and Australian tax experts resident in WA and advising in both jurisdictions. This in house expertise augments our international tax capabilities available through our membership of UHY International.

Other services include:

  • Business Migrant Advice
  • Business Development & Strategic Planning
  • Corporate Finance Advice
  • Audit & Assurance
  • Tax Planning & Compliance
  • Retirement & Estate Planning
  • Due diligences, investigations & evaluations
  • Financial Reporting
For further professional advice, please contact us at:
+61 8 9444 3400 | tax@uhyhn.com.au | www.uhyhnperth.com.au
16 Lakeside Corporate, 24 Parkland Road, Osborne Park, Perth. WA 6017

Other Tax Links

The Australian Taxation Office (ATO) has all the official details on tax for individuals and businesses.

MoneyManager online magazine has a number of useful factsheets about tax.

The CPA Australia website can be used to find a Certified Practising Accountant (CPA) by location and industry experience.

The Australian Securities & Investments Commission (ASIC) - regulator for Australian businesses, including financial advisors.

Disclaimer

Information on this website is intended to give the reader an overview of many aspects of life in Australia, such as healthcare, real estate, tax, superannuation etc.

While we at Aussiemove.com have performed a large amount of research on each subject area, we do not claim to be experts in those fields and we recommend that migrants discuss their requirements with companies specialising in those fields before making purchases, investments or other decisions concerning their move.

The content of this website is general in nature - no specific advice is intended.

We provide links to other companies as a service to our readers. We have taken reasonable care to ensure that each linked website does not contain offensive or inappropriate material. However, we are not responsible for the accuracy of any of the material in any linked website, or the advice that may be contained therein.