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Personal Taxation in Australia

Personal Income taxation AustraliaDomicile and residency requirements
A person will be treated as an Australian resident for Tax purposes if:

  • He/she is resident on ordinary concepts; or
  • He/she is domiciled in Australia; or
  • He/she is physically present in Australia for more than 183 days in a year of income; or
  • He/she is a member of a Commonwealth Government superannuation scheme or is the spouse or child under 16 of such person.

Generally Australian resident individuals pay tax on their worldwide income including capital gains. For the 2008–2009 and earlier financial years, employment income taxed in a foreign country where the foreign service is for more than 90 days is exempt. This exemption was abolished with effect from July 1, 2009 (other than for certain aid and charitable workers), with any double taxation addressed with foreign tax offsets.

To avoid double taxation, foreign-sourced income is taxed on a gross basis with a foreign income tax offset being available for tax paid at source. If the foreign tax exceeds the Australian tax payable the excess is lost forever. There are separate classes of income.

Australian Resident individuals are subject to the attribution rules in broadly the same way as companies are.
Only half the capital gains derived are included in assessable income, but they are then taxed at ordinary rates.

Non-residents of Australia for tac purposes are taxed on:

  • Australia-sourced income; and
  • Capital gains arising from the sole of taxable Australian property.

Dividend, interest and royalty income is generally subject to withholding tax (see withholding tax section above) and is hence excluded from taxation by assessment.

Taxable Australian property (Real estate) includes:

  • Real property in Australia;
  • Shares in a company the assets of which are mainly real property;
  • Business assets used in a permanent establishment in Australia; and
  • Derivables of any such assets.

Temporary residents of Australia
A temporary resident is an individual who holds a temporary visa granted under the Migration Act 1958; and neither they or their spouse is an Australian resident under the Social Security Act 1991. Temporary residents are generally treated as non-residents with only Australian sourced income being subject to tax in Australia.

Foreign source income is not taxed and the attribution rules do not apply.
A person will only be able to be classed as temporary resident if they hold a temporary resident visa for migration purposes.

Main personal income tax rates & bands
The top rate of personal income tax for 2012 is 45 percent with progressive bands of 29 percent, 30 percent and 37 percent.

Australia has a full imputation system for the avoidance of double taxation on dividends. This means that shareholders are relieved of their tax liability to the extent that profits have been taxed at the corporate level. Dividends paid out of profits on which corporate tax has been paid entitle shareholders to an offset for corporate tax paid.

Social Security/national insurance payments
Not applicable.

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Posted by on May 21 2013. Filed under Personal 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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