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Australia Tax Overview
Like all other countries, Australia has its system of tax laws that determine who pays taxes and at what rate. These rules often play a major role in determining whether a company does business in — or even relocates to — the country.
This tax overview will look at the three most important categories of tax laws in Australia: personal taxes, corporate taxes, and value-added taxes.
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Australia Personal Taxes
Here’s everything you need to know about personal taxes in Australia:
Who Is Taxed?
In Australia, both residents and non-residents are subject to taxes on all income generated within the country. To be considered a resident, a worker must live in Australia for at least 183 days out of the year.
What Is the Tax Rate?
Australia’s personal tax rate for residents is based on earnings bands:
- Up to AUD 18,200: 0% tax
- AUD 18,201 to AUD 45,000: 19% tax
- AUD 45,001 to AUD 120,000: AUD 5,092 + 32.5% on excess
- AUD 120,001 to AUD 180,000: AUD 29,467 + 37% on excess
- AUD 180,001 and over: AUD 51,667 + 45% on excess
An additional Medicare tax levy of 2% is applied to all residents.
For non-residents, the tax rate begins at a flat rate of 32.5% for all income generated from sources in Australia. This tax applies to all amounts up to AUD 120,000. Additional tax rates of 37% and 45% apply to those who earn higher incomes. No Medicare tax levy is applied to non-residents.
National vs. International Income
Australian residents are assessed on both national and worldwide income. However, individuals who pay taxes to foreign countries may claim a tax credit if a double tax treaty exists between Australia and the payor country.
Capital Gains, Exemptions, and Other Considerations
They tax capital gains in Australia at the regular personal income tax rate. However, a 50% discount applies for capital gains that occur on property held for longer than 12 months.
There are no Social Security taxes in Australia outside of the 2% Medicare levy. They charge property taxes on owned real estate and vary based on state and locality. Australia does not have inheritance, gift, or estate taxes.
Australia Corporate Taxes
Here’s everything you need to know about corporate taxes in Australia:
Who Is Taxed?
Australia taxes resident companies, meaning those that meet one of the following conditions:
- The company is legally incorporated in Australia
- The corporate headquarters or fiscal domicile is in Australia
- A branch or extension of a foreign country operating in Australia
- Residents of Australia control voting power
They tax resident companies on worldwide income. If a double taxation agreement exists between Australia and a company resident in a foreign country, generally, only business profits derived from a permanent establishment in Australia are taxable. They may offset foreign income.
What Is the Tax Rate?
They tax all companies at a flat tax rate of 30% unless they are “small or medium-sized businesses.” Small or medium-sized businesses with an annual turnover of less than AUD 50 million are subject to a flat tax of 25%.
An integrity measure ensures that only companies with less than 80% of their income derived from passive sources are eligible for the reduced tax rate.
What Is Taxable Income?
All income generated from Australian-based sources is considered taxable under Australian tax laws. In addition, worldwide income is also taxable unless taxes are paid to a foreign country with which Australia has concluded a double tax agreement.
A superannuation tax is required for all Australian employers. Employers are required to pay an additional 10% of their employees’ earnings towards a registered superannuation fund, or retirement savings account, on behalf of the employees.
Tax Incentives and Deductions
Australia has established a number of double tax treaties with other countries. These treaties allow credits for tax paid overseas.
In addition to foreign tax credits, Australia has established several tax incentive programs for specific industries. These incentives are mostly targeted towards mineral and petroleum exploration, venture capital, and research and development activities.
Australia VAT Taxes
Value-added taxes, better known as VAT taxes, are a common form of consumption tax. In Australia, these are known as Goods and Services Tax (GST). Here’s what you need to know about GST taxes in Australia:
Who Is Taxed?
GST taxes are levied on most products and services in Australia. Companies that have a GST turnover of AUD 75,000 or more or that operate a rideshare company must register for GST. They must then file a GST return with the government through the BAS System.
Some items are exempt from GST taxes:
- Food (with some exceptions)
- Health, medical, and educational supplies
- Health insurance
- Exports on goods and services
This last one is especially important, as companies producing goods for export may be eligible to recoup taxes paid during the production process.
What Is the Tax Rate?
The GST tax rate in Australia is a flat 10%.
GST taxes may be paid monthly, quarterly, or annually, depending on the regular turnover.
Is Australia Right for Your Business?
SERVIAP is a leading Professional Employer Organization (PEO) ready to help your business expand operations throughout the Western Hemisphere. PEO is a model of co-employment, where we assume total responsibility for your talent, allowing you to focus on the strategic activities of your organization.
Contact us today to learn more about how you can expand your business in Australia.
