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Corporate Taxation in Australia

Sydney Business District (CBD)Company resident of Australia companies are liable to income tax in respect of all sources of income wherever arising.
A company is deemed to be a resident of Australia when:

  • It is incorporated in Australia;
  • It trades in Australia and has its voting power controlled by Australian resident shareholders; or
  • It trades in Australia and has its central management and control in Australia.

Central management and control is a question will usually be in the place where the directors meet to take decision about the business of the company.

The Australian tax year starts from July 1 until June 30. A company can apply to the ATO (Australian Tax Office) for a substituted tax year. It will be the case where the demand is made so as to ensure that the tax year of a resident company coincides with the tax year of its overseas holding company.

Income tax in respect of companies is collected under a self-assessment system whereby companies are required to calculate and remit their own tax by specified due dates. For most companies the lodgment dates are October 28, February 28, April 28 and July 28 with the instalment being calculated by reference to the company income tax rate and is based generally on the income which was reflected for the immediately preceding tax year.
If a company fails to pay tax by the due date a general interest charge (GIC) may apply.

Depreciation is allowed in respect of motor vehicles used in the conduct of the business, income-producing buildings and some intellectual property assets such as patent rights, copyright and design.

Interest that relates to the derivation of income is normally tax deductible subject to:

  • Thin capitalisation rules which prevent multinational corporations from allocating a disproportionate amount of debt to their Australian operations; and
  • A debt/equity test establishes certain rules for determining whether an amount is actually interest or not. If not treated as interest, a deduction will not be allowed.

Australia Corporate Tax Rates
Since 2001 tax rate applicable to resident companies in respect of trading profits and other income has been fixed at a standard flat rate of 30%. This rate will be cut to 29% from 2012/2013 for small businesses and to all businesses from 2013/2014.
Non-resident companies are also taxed at 30%. Much of the income of a non-resident company will be subject to withholding tax and they will only be taxed on capital gains if the gain relates to an asset that is taxable Australian property.

Capital Gains Taxation in Australia
There is no formal capital gains tax as such in Australia but since the 19th of September 1985 capital gains in respect of assets acquired after that date are taxed at ordinary company income tax rates (i.e. 30%).

Loss deductions in Australia
Trading losses can be offset against all income received in the same accounting period or carried forward indefinitely and offset against future trading profits. In Australia, there is no concept of loss carry-back against precedent year profits.
In order for a company to carry forward losses continuity of ownership or continuity of the same business tests must be met.

Group Consolidation Laws in Australia
From the 1st of July 2002, entities that form part of the same fully owned group may consolidate and be treated as a single entity for income tax purposes. Therefore, all intra-group transactions will be disregarded for tax purposes.

Two or more resident companies and their wholly owned resident subsidiaries that are wholly owned by a foreign parent company may also choose to form a consolidated group and benefit from single entity treatment.

For more details: Australian Taxation Law

To register a company in Australia please visit

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Posted by on May 22 2012. Filed under Corporate Taxation. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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