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Australia: Related Information

Individual Non-Resident Taxation in Australia

A person is resident in Australia if any of the following situations apply:

  • He is domiciled in Australia and does not have a permanent and indefinitely continuing place of abode abroad;
  • He is not domiciled in Australia but has been in Australia either continuously or intermittently during the fiscal year for 183 days or more (unless he can satisfy the Commissioner that his usual place of abode is outside Australia and that he does not intend to take residence up in Australia and does not intend to live in Australia for more than 2 years).
  • The resident goes abroad to work but his term of employment abroad is less than 2 years and he intends returning to Australia
  • Other factors to be taken into account and which alone or in combination indicate Australian residence are
    • The individual's permanent home is in Australia
    • The individual's habitual abode is in Australia
    • The individual's closest personal and economic ties are in Australia

Non-residents are taxed on income "sourced" in Australia, including the following situations:

  • The income was earned through a branch or permanent establishment located in Australia and owned by the non-resident individual. Permanent establishment normally denotes a physical presence of more than 6 months in the fiscal year.
  • The income was earned from a contract accepted by an Australian agent authorized to accept contracts on behalf of a non- resident principal. Thus although the principal is non resident it is the resident agent who accepts the offer meaning that the contract is made within Australia (since under Australian law the place where the contract is accepted is the place where the contract is made). Where a contract is made within Australia the income is deemed to be sourced from within Australia for tax purposes. (If the resident agent only sought out customers and it was the foreign principal who negotiated and executed the contract then the contract would have been made outside Australia and so for tax purposes the source of income would be outside Australia).
  • A combination of some or all of the following circumstances applied to the contract executed by the non resident:
    • The contract for services was signed in Australia
    • The contract for services is to be performed in Australia
    • Australian law is the implied or express proper law of the contract
    • Australian currency is the currency of payment
    • One or both of the parties to the contract resides in Australia
  • Rental income from Australian real estate owned by a non-resident individual is deemed to have an Australian source and is therefore taxable in Australia.

As a partial exception to the rule, an employee will not pay tax in Australia on his income if:

  • His employer is non-resident in Australia, and
  • His employer is resident in a country which has a double taxation treaty with Australia, and
  • The employee stays in Australia for less than 183 days in a fiscal year

There is no separate capital gains tax in Australia, but capital gains are taxed as income; therefore a non-resident's Australian capital gains (on 'taxable Australian property')will be taxed, except that the profitable sale of shares held by a non-resident in a resident company are free of tax provided the shareholding is not more than 10% and the shares are shares in a public company and have been held for not less than 5 years.

In June 2004 income tax cuts for Australian individuals earning between $52,000 and $80,000 were passed by the federal parliament, despite strongly stated opposition by the Australian Democrats and the Green Party.

A 47-11 vote in the Senate secured passage for the Tax Laws Amendment (Personal Income Tax Reduction) Bill 2004, which increased the personal income tax thresholds for the 42% and 47% brackets for the 2005/2006 financial year.

Speaking on behalf of the Treasurer in the Senate, Rod Kemp announced that over the coming four years, more than 80% of taxpayers would remain in or below the 30% tax bracket. The AAP quoted him as observing that:

"The personal tax cuts in this bill continue the government's commitment to ongoing structural reform. They increase the reward for those that wish to work overtime, seek promotion or acquire skills, and they strengthen the international competitiveness of the tax system."

In February, 2006, then Treasurer Peter Costello set out proposed improvements to the taxation arrangements for temporary residents which he said would give Australia one of the most competitive expatriate taxation regimes in the world.

The Taxation Laws Amendment (2006 Measure No. 1) Bill 2006, introduced into parliament on February 16 of that year, represented the third time that the National/Liberal government had attempted to make improvements to the expat tax regime, after two previous attempts were blocked by Labor Party opposition.

However, Costello explained that the new bill, introduced as part of the 2005/6 budget, went further than the previously blocked legislation which would have applied a tax exemption to a temporary resident for a period of 4 years, only if the temporary resident had not been an Australian resident within the previous 10 years.

"The Government will now remove these time limits as they provide unnecessary disincentives and distortions for individuals wishing to remain working in Australia," Costello said in a statement at the time.

The measure was designed to apply to holders of a temporary visa, with the exception of those who are directly or indirectly treated as residents for social security purposes.

Under the legislation, holders of a temporary visa are not to be taxed on foreign source income. They continue to be taxed on all Australian source income and salary and wages generally, including income from employee shares or rights.

Further, under the legislation, capital gains taxation of temporary residents were aligned with non-residents. The combination of these changes ensure that the capital gains tax rules for departing residents do not apply to temporary residents.

"The changes will significantly reduce administrative and compliance costs. It will also further reduce the cost to Australian businesses of employing expatriates," Costello observed, going on to note that the changes had been "welcomed" by business.

"The Government is committed to assisting businesses to access the skilled labour needed to compete internationally," the Treasurer at the time added.

If you were a non-resident for the full year, the following rates applied for 2006/07:

Taxable income Tax on this income
A$0 – A$25,000 29c for each $1
$25,001 – $75,000 $7,250 plus 30c for each $1 over $25,000
$75,001 – $150,000 $22,250 plus 40c for each $1 over $75,000
Over $150,000 $52,250 plus 45c for each $1 over $150,000

For 2007/08 they were:

Taxable income Tax on this income
A$0 – $30,000 29c for each $1
$30,001 – $75,000 $8,700 plus 30c for each $1 over $30,000
$75,001 – $150,000 $22,200 plus 40c for each $1 over $75,000
$150,001 and over $52,200 plus 45c for each $1 over $150,000

For 2008/09 they were:

Taxable income Tax on this income
A$0 – $34,000 29c for each $1
$34,001 – $80,000 $9,8600 plus 30c for each $1 over $34,000
$80,001 – $180,000 $23,360 plus 40c for each $1 over $80,000
$180,001 and over $63,660 plus 45c for each $1 over $180,000

For 2009/10 they were:

Taxable income Tax on this income
A$0 – $35,000 29c for each $1
$35,001 – $80,000 $10,150 plus 30c for each $1 over $35,000
$80,001 – $180,000 $23,650 plus 38c for each $1 over $80,000
$180,001 and over $61,650 plus 45c for each $1 over $180,000

For 2010/11 and 2011/12:

Taxable income Tax on this income
A$0 – $37,000 29c for each $1
$37,001 – $80,000 $10,730 plus 30c for each $1 over $35,000
$80,001 – $180,000 $23,630 plus 37c for each $1 over $80,000
$180,001 and over $60,630 plus 45c for each $1 over $180,000

Non-residents are not required to pay the Medicare levy.



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