Tax in Australia

Printer-friendly versionSend somebody a link to this page

Income Tax

Employment

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

Self-Employment

Those in business for themselves are required to complete a quarterly Business Activity Statement (BAS) to account for their business tax, GST, PAYG withholding 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 $4000, 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 income tax rates can be found at the ATO website.

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....

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.