Australia Tax

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Australia Tax 

Dealing with tax, payroll, and employment regulations for your staff from overseas is always tricky and poses complications that demand expert guidance. Australia is no exception – for example, different personal tax rates apply to foreigners compared with Australian citizens. And there are plans for more changes from July 2022.

With over 20 years’ experience in the front rank of international payroll providers, Bradford Jacobs ensures our clients comply with every level of tax and employment law across the globe. By using our PEO-service, we will take care of the complicated legwork so that you can focus on your business goals. 

Bradford Jacobs’ dedicated specialists remove the burdens of worrying about these complications while you focus on building your business in a new territory.

We have made it our goal to keep track of the latest changes in the tax policies to always ensure complete compliance. To keep you informed and updated too, we created this guide which includes the basic facts regarding tax regulations in Australia.

Overview of Taxes in Australia

The Australian Tax Office (ATO) collects taxes from employees in Australia, where the tax year runs from July 1 till June 30. The tax rates for 2021 – 2022 are:

  • Personal Income Tax (PIT):
    - Tax free up to AU$18,200 (€11,691, US$13,256)
    Rates range from AU$18,201 at 19.0%, and four more to rates to up to AU$$180,001 (€115,641, US$131,124) at 45.0%
    - (Additional Medicare Levy of 2%)

  • Non-residents PIT
    - There is no tax-free amount for non-residents, who do not pay the Medicare Levy of 2%
    - Three rates up to AU$120,000 (€77,085, US$87,415) 32.5% to AU$180,000 (€115,641, US$131,124) 45.0%

    There are no local taxes on personal income.

  • Social Insurance Taxes: Neither employers nor employees contribute to social insurance taxes, with employees paying 2% on income towards the Medicare Levy.

  • Corporate Income Tax (CIT): Resident companies are taxed on their worldwide income at a standard rate of 30%, with Small and Medium Enterprises (SMEs) attracting a rate of 25% for the 2021/22 tax year, subject to integrity checks on their income.

  • Withholding Tax (WHT): WHT applies at various rates to different categories depending on any treaties that may be in force.

  • Goods and Services Tax (GST): The federal government levies 10% value added tax and distributes the revenue to individual states. GST-free (zero rated) categories include some foodstuffs, exports, health, medical and educational supplies, residential rents, and some financial services.

Australia Individual Tax – Single, Married

Tax liability depends on residency rules, not on citizenship or nationality. However, there were plans to amend regulations in the 2021-22 Budget, with ‘primary’ and ‘secondary’ levels of tests on residency qualifications and when an individual becomes a tax resident. These changes will apply from July 2022.

Generally, residents pay tax on both Australian and worldwide income. A non-resident individual is liable only for Australian-sourced income, other than income from interest, dividends or royalties which may be liable for Withholding Tax (WHT). Individuals working in Australia on contract may be considered residents if they reside there for more than six months.

Currently, Australian residents for tax purposes are those who are domiciled in Australia and those who are in Australia at least 183 days in the tax year. But in view of the potential realignment of residency qualifications, advice and extra care is advised. At Bradford Jacobs we are ready with that advice.

Personal Income Tax Rates

  • 0 - AU$18,200 (€11,661, US$13,173): 0%
  • AU$18,201 - AUS45,000 (€28,832, US$32,570): 19.0%
  • AU$45,001 AU$120,000 (€76,886, US$86,857): 32.5%
  • AUS$120,001 AUS180,000 (€115,339, US$130,285): 37.0%
  • AUS$ 180,001 and above: 45.0%

Note: Foreign employees have no tax-free allowance.

Employee Social Insurance Taxes

There is no contribution to the social security system as it is funded entirely by government. There is a 2% levy on income for Medicare.

Australia Individual Tax Rules

  • There are no joint returns for married couples, but each must include information about their partner on their own return
  • Foreign workers do not receive any tax-free allowance and are taxed on their entire income
  • Categories of taxable income include salaries, professional fees, income from rentals and the sale or acquisition of assets, interest, and dividends
  • Employers withhold employees’ tax and remit to the Australian Tax Office (ATO)
  • The tax year is from July 1 - June 30 of the following year and individual returns must be filed by October 31 with the ATO, via a myGov link on their website
  • Australian citizens are taxed on their worldwide income and may be taxed both in Australia and other countries where they have income

Indirect Taxes:

The standard rate for Goods and Services Tax (GST) is 10%. ‘GST-free’ (zero-rated or exempt) categories include most foods, health, medical and educational supplies, most financial services, and health insurance, although life insurance is input-taxed.

Australia Employers’ Social Security and Statutory Contributions

  • National Minimum Wage: Employers must comply with minimum wage requirements. In July 2021, Australia’s Fair Work Commission raised the basic minimum for full-time workers over 21 years old to AU$772.60 (€497, US$567) per week or AU$20.33 (€13, US$15) per hour. The rate applies till June 2022.

    Most employees’ minimum wages are set for their industry or sector, which cannot undercut the statutory national minimum. The national minimum applies to most private companies in Australia that are regulated by the Fair Work Act, (2009) and whose employees are covered by the National Employment Relations System.

    Part-time employees are paid pro rata on the national minimum for the hours they work. Casual workers receive ‘casual loading’ above the minimum as they are not entitled to benefits such as sick leave or paid vacations.

  • Superannuation: Employers paying a full-time, part-time, or casual employee more than AU$450 (€290, US$326) regular earnings per month must pay superannuation towards their pension. The minimum Super Guarantee (SG) is 10% of their earnings and is expected to be 12% by 2025. The SG contributions also apply to employees who are temporary residents of Australia. Employees can choose their own ‘super fund’ or take the employer’s default fund.

  • Social Insurance: Australia’s social security income support system is entirely funded by central government, without contributions from either employer or employees. The system is restricted to Australian residents, as defined by the Social Security Act 1991. Migrants generally have no access to social security payments for four years after their arrival. Employees pay 2% of their income towards the Medicare health scheme.

Australia Corporate Taxes

  • Corporate Income Tax (CIT): Resident companies are taxed on their worldwide income at a standard rate of 30%, with Small and Medium Enterprises (SMEs) pay 25% for the 2021/22 tax year, subject to integrity checks on their income.
  • Withholding Tax (WHT): WHT applies at various rates to different categories depending on any treaties that may be in force.
  • Capital Gains Tax (CGT): CGT is assessed as part of taxable income up to a maximum rate of 47%, equating to the maximum rate plus 2% Medicare Levy.
  • Wine Equalization Tax (WET): The federal government applies WET at 29% on the wholesale value (in addition to 10% GST) with rebates available up to a maximum of AU$300,000 (€192,665, US$218,505).
  • Payroll Tax: States and territories impose pay roll taxes at various rates, generally ranging from 0.5% to 4.85% against various thresholds.

Corporate Deductions and Capital Allowances:

Depreciation is allowed on assets with a limited life in categories such as mining, intellectual property, software, telecommunications systems. Accelerated depreciation is possible against various turnover limits. Some start-up expenses are deductible, including professional expenses, along with bad debts and donations to charities endorsed by the Commissioner of Taxation.

Avoid risks and make the right move

Australia’s tax regulations demand expert advice for incoming foreign companies, particularly as the 2021-22 budget proposed changes to come into effect from July 2022. Businesses cannot risk stumbling into mistakes over payroll and taxation, with the chance of fines and sanctions. Do not waste time worrying about your move into Australia - contact us today!