Australia

You will be considered a tax resident in Australia if your permanent domicile is in the country or you have been in Australia more than half a given year (unless your place of abode is outside Australia and you don’t intent to reside in the country) or you are an Australian employee.

Tax residents are subject to personal income tax on their worldwide income, whereas non-residents are taxed on their income derived from Australia.

If you hold a provisional visa, you will be considered a temporary resident, and therefore your foreign-source income may not be subject to taxation.

The personal income tax rate is progressive up to 45% for annual income in excess of AUD54,232 (AUD62,685 for non-residents).

An additional tax of 2% applies to income in excess of AUD180,000, both for residents and non-residents.

Capital gains are treated as ordinary income, though if the asset is held by a tax resident (excluding temporary residents) for more than one year, a 50% discount may apply. Nonresidents are also subject to a non-final withholding tax of 10%.

Dividends received from resident companies are taxable income, but a tax offset is usually available to prevent double taxation. For dividends received from foreign sources, a foreign tax credit may be also available. Interests and rental income are subject to taxation at standard rates.

Australia has enacted controlled foreign company (CFC) regulations. Foreign companies controlled by residents that fail the “active income test” (usually when passive income is more than 5%), might have their passive income subject to taxation, whether the income is passed at the personal level or not. Ranges to determine whether a company passes the ‘active income test’ or not, will depend on its jurisdiction of residence.

States and territories levy land taxes. Transfers of assets are subject to a stamp duty at rates up to 5.75%. There is no net worth tax, nor inheritance taxes in Australia.

There is a Goods and Services tax, which applies to transactions of goods and services. The standard rate is 10%.

Regarding corporate taxation, resident entities are subject to a 30% tax on their worldwide income. A reduced tax rate of 28.5% may apply for those companies whose turnover is less than AUD2 million. There are several available tax breaks and exemptions for companies engaging in R&D activities.

Dividends from resident entities are usually entitled to a tax offset. Dividends from a foreign source may be exempted if the parent company holds at least 10% of the shareholding of the payer entity, otherwise they may be taxable.

Capital Gains are treated as ordinary income. An exemption may apply to those from the disposal of shares, if the parent company holds at least 10% of the capital of the subsidiary.

Dividends paid to non-residents may be exempt from withholding taxes, provided that profits were already taxed, otherwise they may be subject to a 30% withholding tax. Payments on interests abroad are usually subject to 10% withholding tax, however certain interests may be exempt. Royalties are usually taxed at 30%. These rates may be reduced or eliminated under a tax treaty.

For further information on corporate taxation, legal framework and tax treaties, check out incorporations.io/australia.

This should not be construed as tax advice. We have access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circumstances. Contact us for further information.