Important Tax Provisions in Australia

Tax Provisions in Australia

When residing in Australia, it is important to have an awareness of what the taxation requirements are. The reason for this is that failing to follow the proper taxation regulations can cause you to have to pay penalties later on. While every individual or business owner’s situation is different, it is important to research and/or seek out the required expertise to be ensure that you are documentation and paying your taxation while adhering to the current regulations in Australia. In order to learn more details about taxation in Australia, read the discussion below:

Tax Brackets in Australia for Individuals and Small Businesses

If you are confused about how to file your taxes in Australia, be sure that you are aware about the differences in regulations between individuals, foreign citizens, and business owners within Australia. If you fall into all three categories, it is wise to get a second opinion to ensure that you are filing in the proper way. Currently, individual tax rates in Australia are calculated by the table below:

Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000

An important factor to be aware of with these taxation rates is that they do not include taxation related to the Medicare levy that is typically calculated at 2% or the temporary budget repair levy applied at 2% for incomes exceeding $180,001

In terms of business taxation, it is wise to be aware of what sort of business that you have within Australia in order to be sure that you are paying the proper taxes. There have been some switches referring to small business tax rates in recent years. An example of these changes include the lower company tax rate decreasing to 27.5%. In order to qualify for this taxation benefit a small business would have to demonstrate that they have a turnover of less than $10 million AUD annually and that they have been operating a business either all or part of the year. This tax incentive has been greatly helpful to companies that are just trying to get established in Australia, which can be more costly than other markets.

How Australia’s Taxation Compares to the Rest of the World

In terms of corporate taxation, Australia has a higher rate than the United States currently. For example, President Trump just lowered America’s corporate tax rate to 21% and the UK has a corporate tax rate of 21% for mid-range companies as well. Australia, in contrast, has a corporate tax rate that rests between 27.5 and 30%. This is substantially higher, which is why many companies consider carefully whether entering their entities into the Australian market is a wise fiscal decision.

Compliance to Tax in Australia

It is important to be aware of Compliance Tax Statistics within Australia to get a better feel for potential costs for your business entity or personal taxation. In terms of individual taxation, the total cost of managing affairs has increased over the preceding years to 2.344 million AUD per year. In terms of individuals, the average amount of hours spent was between four and five hours preparing tax returns. For companies, the average amount of hours spent on tax compliance was hovering between seven and eight hours. For partnerships, the average amount of time spent on tax returns was between eight and nine hours. This data indicates that while Australia has a very streamlined and efficient governmental structure, taxes are still expensive and meticulous to prepare. That said, individuals and companies are incentivized to comply with the fear of penalties that could be quite expensive.

Easy Tax Tips for Newcomers to Australia

Foreign residents in Australia should be aware that different taxation applies to their particular situations. For example, the following chart applies to foreign residents in Australia:

Taxable income Tax on this income
0 – $87,000 32.5c for each $1
$87,001 – $180,000 $28,275 plus 37c for each $1 over $87,000
$180,001 and over $62,685 plus 45c for each $1 over $180,000

Foreign residents are not required to pay the Medicare levy or 2% tax for incomes in excess of $180,001 as of 2017. Furthermore, it is important to investigate whether your home country has a taxation agreement with Australia to avoid being taxed twice. For example, a country such as the UK has a very long history with Australia and several agreements in terms of trade and taxation. Across the board, it is wise for foreign citizens to hire an accountant that has an expertise between their home country and Australia to ensure the lowest possible tax rates that are still complying with their taxation obligations within Australia.

Concluding Remarks on the Subject

Australia is one of the most incredible and developed markets in the world. It is important to remember that the cost of both living and doing business within Australia is quite expensive. It is important that individuals and businesses are aware of the potential taxation costs before entering the Australian market to ensure they are not surprised and are able to afford the taxation in Australia.