Living and Working in Australia is an exciting adventure. However, when paying Australian Expat Tax comes, quite a bit of paperwork and administration work has to be taken into account. It is best to seek services from an expat tax accountant while filing taxes. However, here is a guide that will help you understand the Australian Taxes for Expats.
Basics Of Australian Tax If You Are An Expat In Australia
You need to declare your tax return on your income in Australia as a foreign resident. This includes
- Any rental
- employment income
- Capital gains on Australian assets.
- Unless there is an exemption under the Australian tax treaty or tax law, Australian annuities, and pensions and annuities.
- There is no need to pay the Medicare levy, and in most cases, you are not eligible for Medicare health benefits.
- There is no tax-free threshold for you, which means that you have to pay tax for each dollar of income you are earning in the country.
- You would generally pay a higher tax rate than the Australian residents who have a tax file number.
- When you derive any Australian-sourced dividends, interests, or royalties, you don’t need to declare them. However, the Australian company or financial institution that pays you would already withhold tax. If you let them know that you are a foreign resident, this would be done.
Who Needs To Pay Tax in Australia?
Residents of Australia pay tax on their income received from anywhere globally.
Non-resident Australians need to pay Australian Taxes from income from Australian sources.
Some exceptions are available on certain incomes for expats who are qualified to be temporary residents. They are mostly exempted from paying Australian Tax if they have investment income from foreign-source. However, they need to pay Australian tax on foreign employment income, which is applied for the capital gains they realize on non Taxable Australian property (TAP) assets.
How Are Tax On Australian Expats Calculated?
You might want to know the basics about Australian Tax calculation before you perform an internet search for ‘personal accountant near me.‘
Australian tax for expats is calculated by subtracting expenses and losses deductible from the taxpayer’s assessable income.
Tax For Expats On Employment Income
The assessable income includes most cash compensations like salary, allowances, wages, etc. The non-cash compensations are subjected to Fringe Benefits Tax (FBT) payable by their employers.
- July 1st – June 30th is the Australian Tax Year.
- October 31st is the due date of your Australian Tax Return.
- By July 14th, You will receive the ‘Pay As You Go’ summary from your Australian Employer.
Business and Self Employment Income
An Australian tax is levied on self-employment or a business’s taxable income. In partnership, each partner’s share of taxable income is taxed.
Directors’ Fees
Director’s fees are taxed in the year of receipt, and the fees are considered personal earnings, and tax has to be paid.
Dividends:
All Australian resident shareholders’ dividends are included in their assessable income. Dividends paid from corporate profits that are taxed are known as Franked dividends. These are paid by Australian corporations and are grossed for the taxes already paid by the corporation. The personal tax return claim may include the underlying corporate tax as a credit.
Dividends that Australian non-residents receive from Australian sources are subjected to a withholding 30% (or under applicable treaties,15%) tax on the portion that is not franked- the portion paid from the corporate profits that are not taxed.)
2020 – 2021
Foreign Australian Resident Tax Rates
| Income | Tax Levied On This Amount Of Income |
| Till $120,000 | Nil |
| From $120,001 To $180,000 | 32.5 cents for every $1 |
| From $45,001 To $120,000 | $39,000 + 37 cents for every $1 over $120,000 |
| $180,001 and Above | $51,667 + 45 cents for every $1 over $180,000 |
Note: These Tax rates apply to foreign residents in Australia.
Your visa type does not determine residency for taxes.
Things To Keep In Mind
You would get your Australian Tax File Number (TFN) between 10 to 28 days of processing.
You should give your TFN to the Employer within 28 days of working on the job.
If the Employer does not receive your TFN, 49% of the payment to a resident employee and 47% to a foreign resident employee will be withheld.
Australian Resident for Tax Purposes: Are You One?
ATO’s process of determining whether you are an Australian resident differs from the Department of Immigration and Border Control method. This might be confusing for people who have temporary work visas.
The ATO uses the “resides” test to determine residency.
The factors they look at are:
- Why have you moved to Australia?
- Are you working in Australia? Where and for how long?
- Have you opened bank accounts?
- Do you live in six or twelve months leased accommodation?
Advantages Of Hiring An Expat Tax Accountant.
Expat tax return is a highly complex process of taxing in Australia. You must consider hiring the services of an expat tax accountant to file your return as an expat. The expert expat tax accountants would not only help you in the filing, but they will also ensure that you make a good amount of savings on the tax obligations.
These professionals will help you with the effective lodgement of tax returns, clear tax assessment, and claiming your foreign credits. They are experts in ATO’s expat tax rules. Assessing your taxing circumstances is important before lodging the income tax return. The experts will inform you about the taxable dividends, capital gains, or rental income. You would also get to have a clear idea about any Australian tax exemptions you are eligible for on your income.
Final Words
Your expat tax filing in Australia would not seem complicated or overwhelming when you appoint a good expat tax accountant. They will also ensure that you get to make savings on your hard-earned income by lodging the tax returns correctly.
