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Australian Taxation of Foreign Nationals
I N T E R N AT I O N A L A S S I G N M E N T S E R V I C E S
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Table of Contents
Introduction 7
1. Will I have to pay tax in Australia during my assignment? 8
1.1 The Australian tax system 8
2. Will I be an Australian tax resident during my assignment? 9
2.1 Residence for Australian tax purposes 9
2.2 Dual residence 10
3. Taxation of residents 11
3.1 General principles 11
3.2 Calculation of taxable income 11
3.3 Assessable income 12
3.3.1 Employment income 12
3.3.2 Capital gains 13
3.3.3 Dividend income 15
3.3.4 Other income 16
3.3.5 Employee share plans 16
3.3.6 Attributable income of CFCs & FIFs 18
3.4 Allowable deductions 19
3.5 Foreign tax credit system 20
3.5.1 Rental income 21
3.5.2 Dividend income 22
3.5.3 Interest income 22
3.6 Offsets 23
3.6.1 Dependant offsets 23
3.6.2 Medical expenses offset 23
3.6.3 Parenting allowance 23
4. Taxation of non-residents 24
4.1 General principles 24
4.2 Calculation of taxable income 24
4.3 Assessable income 24
4.3.1 Employment income 24
4.3.2 Capital gains 25
4.3.3 Passive income 25
4.4 Allowable deductions 26
5. Lodgment and payment procedures 27
5.1 Will I have to lodge a return? 27
5.2 When will I have to lodge a return? 27
5.3 Assessment procedure 28
5.4 Collection of tax at source 28
5.5 PAYG Instalments 28
5.6 Amendment and objection process 30
5.7 Private rulings 30
5.8 Tax file number 30
6. Procedures and tax consequences on departing Australia 31
6.1 General principles 31
6.2 Capital gains tax 31
6.3 Deferral of income and capital gains 32
7. Fringe Benefits Tax 33
7.1 Assessable income or fringe benefit 33
7.2 Rate of tax 33
7.3 FBT returns 34
7.4 Treatment of specific items of remuneration 34
8. Other taxes 37
8.1 Payroll tax 37
8.2 Property taxes 37
8.3 Stamp duty 37
8.4 Superannuation guarantee charge 37
8.5 Interest Withholding Tax (“IWT”) 38
8.6 Other taxes 38
9. Business visas and work permits 39
9.1 Short Stay Business Visas 39
(Subclass 456 and Electronic Travel Authorities)
9.2 Long Stay Business Visas (Subclass 457) 40
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10. Social security and retirement benefits 41
10.1 Health system 41
10.2 Australian superannuation and termination benefits 42
10.2.1 Superannuation contributions 42
10.2.2 Withdrawal of benefits 44
10.3 Foreign superannuation and termination benefits 45
10.3.1 Payments relating to a period when you were 45
a non-resident of Australia
10.3.2 Transfer of benefit from an overseas fund 45
to another fund
10.4 Other social security benefits 46
11. Double tax treaties and tax havens 47
11.1 Basic principles of double tax treaties 47
11.2 Tax havens 47
12. Tax planning 48
12.1 Structure of remuneration package 48
12.2 Timing issues 48
12.3 Deferring certain actions until after departure 49
12.4 Other planning 49
13. Other considerations 50
13.1 Exchange control 50
13.2 Purchase of Australian real estate 50
Appendix A 51
Checklist of procedures in year of arrival 51
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Introduction
This booklet is designed to provide you with an understanding of the Australian
tax implications of undertaking employment in Australia. It combines a general
explanation of the law as at August 2002 with an overview of the tax issues that
you need to consider in preparing for, and during the course of, your Australian
assignment.
Note that all tax rates are contained in a separate brochure. Click on the links to
go directly to the relevant brochure.
We know that having relocated to Australia, you have many issues to consider.
This booklet cannot be an exhaustive tax analysis but serves as an introduction to
give non-tax experts quick access to the important tax considerations involved in
relocating to Australia.
Tax planning is critical to the success of any overseas assignment. It is important
to address the tax issues in both Australia and your home country prior to the
commencement of the assignment. With proper planning, you and your
employer can minimise your tax liabilities and avoid potential pitfalls.
Deloitte Touche Tohmatsu International Assignment Services tax specialists can
assist with assignment tax planning. With tax specialists in our offices
throughout the world we can advise you on both Australian and foreign tax
issues. In addition, we can assist you with projections of the total remuneration,
tax and relocation costs for your Australian assignment.
At the time of publication of this booklet, the Australian Government is
contemplating substantial income taxation changes as a result of the Review of
Business Taxation undertaken in July 1999. Some of the RBT recommendations
specifically address the taxation of foreign nationals working temporarily in
Australia.
Legislation was introduced into parliament earlier this year which sought to
reduce the tax burden on temporary residents by removing tax on most sources
of foreign income and capital gains, as of 1 July 2002. Although the bill was
rejected by the opposition parties, the government has indicated that it plans to
push ahead with these tax reforms. Please refer to our website for articles and
updates in relation to tax reform and other issues.
Please note, the information and analysis in this booklet are not a substitute for
competent professional advice. While every effort has been made to ensure that
the text is correct, we cannot assume any legal responsibility for the accuracy of
any particular statement. No action should be initiated without consulting your
professional advisors. If you require further information regarding the matters
dealt with in this booklet, please contact any of our offices. A list, with telephone
numbers is on a the back cover of this publication.
7
1. Will I have to pay tax in Australia during my
assignment?
1.1 The Australian tax system
Generally speaking, you are taxed on your income in the year that you
receive it. You will be taxed differently depending on whether you are
a resident or a non-resident for tax purposes. The Australian tax year
for individuals ends on 30 June and each individual liable to tax must
file a separate tax return.
Residents of Australia (refer 2.1) are subject to tax on gross income
from worldwide sources. However, if foreign tax is payable on income
derived overseas, the Australian tax payable will generally be reduced
by a credit for the foreign tax paid (refer 3.5).
Non-residents of Australia are taxable only on Australian source
income, excluding interest, royalties and dividends which are subject
to withholding tax at source.
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2. Will I be an Australian tax resident during my
assignment?
2.1 Residence for Australian tax purposes
Your residence for immigration purposes does not determine and is
not affected by your residence for tax purposes. For Australian
taxation purposes, you are a resident of Australia if you:
• reside in Australia; or
• have an Australian domicile (see below), unless the Commissioner
of Taxation is satisfied that your permanent place of abode is
outside Australia; or
• have been physically present in Australia for more than 183 days of
any income year (an Australian tax year begins 1 July and ends 30
June), unless the Commissioner is satisfied that your usual place of
abode is outside Australia and that you have no intention of taking
up residence in Australia.
A non-resident is defined as being a person who is not a resident of
Australia, that is, a person who does not meet any of the criteria for
residency set out above.
In the Commissioner’s view, “residency” is determined having regard
to whether an individual establishes and maintains a routine or
“mode of life” that is relatively similar to the life enjoyed before
entering Australia. The following factors will be relevant:
• purpose of your presence in Australia;
• your family and employment ties;
• maintenance and location of your assets; and
• your social and living arrangements.
Where your day-to-day behaviour over a period of six months is
similar to that before arriving in Australia, you will generally be
regarded as residing in Australia from the date of arrival.
Most individuals coming to Australia on an assignment expected to
last more than 6 months will be regarded as tax residents of Australia.
Your residency status must be determined for each year of income.
If you are a resident of Australia for only part of the year, you are
taxable as a resident for that part-year.
9
The concept of domicile is more permanent than residency. You have
a domicile of origin in the country in which you were born. You may,
at a later stage, acquire a domicile of choice in a different country if
you regard that country as “home”. Most foreign nationals working
temporarily in Australia are unlikely to have an Australian domicile.
2.2 Dual residence
In some situations you may be a tax resident and subject to tax in
both Australia and your home country under the domestic law of each
country.
Australia has concluded a number of treaties with other countries to
avoid double taxation in these circumstances. These double tax
treaties override Australian tax laws in the event of conflicting
provisions. “Tie breaker” clauses set out criteria to determine the
country in which you will be treated as a resident for the purposes of
determining which country has first taxing rights on income covered
by the treaty, in the event that you are a resident of both countries
under their respective tax laws.
These “tie-breaker” clauses vary from treaty to treaty (and the relevant
treaty must therefore be referred to) but usually include some or all of
the following factors:
• the country in which you have a permanent home available;
• the country in which you have a habitual abode;
• the country with which you have closer personal and economic
relations; and
• your country of citizenship.
The relevant Australian treaty must be reviewed to conclude your
residency for treaty purposes.
As a general rule, if you are not regarded as a resident of Australia for
treaty purposes (even though you are an Australian resident under
Australian domestic law) you will be subject to Australian tax only on
income from sources in Australia.
If you are an Australian tax resident you will want to read section 3
“Taxation of residents”. If you are not to be an Australian tax resident,
you may wish to turn directly to section 4 “Taxation of non-residents”.
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3. Taxation of residents
3.1 General principles
As a resident taxpayer you are liable to tax on income from both
Australian and foreign sources.
You are also taxable on net capital gains from disposal of worldwide
assets acquired, or deemed to be acquired, after 19 September 1985.
Assets comprise any form of property and include intangible property.
If you are entitled to claim Medicare benefits you will be subject to the
Medicare Levy of 1.5% on your taxable income. If you are a higher
income earner and do not have private health insurance you may be
subject to a further 1% Medicare levy surcharge (refer 10.1).
A tax-free threshold on taxable income is available to you as a resident
(refer to “Personal Tax Rates” in the IAS Tax Summary). This
threshold may be decreased if you are a part-year resident.
As a resident you will be taxed at progressive rates which are detailed
in the “Personal Tax Rates” section in the IAS Tax Summary.
Where you have paid foreign tax on foreign sourced income, credit for
that tax is allowed against Australian tax payable on that income,
subject to certain limitations (refer 3.5).
Foreign sourced employment income derived from a continuous 91
day period of foreign service may be exempt from Australian tax (eg a
bonus in resect of previous overseas employment).
If you are a tax resident you may be eligible for certain personal
offsets which can reduce your Australian tax liability (refer 3.6).
3.2 Calculation of taxable income
As a resident individual you are taxable on your “taxable income” for
each year of income ending 30 June.
Taxable income is calculated by deducting from “assessable income”
all “allowable deductions” relating thereto for a particular year of
income. “Assessable income” does not include “exempt income”.
1 1
Resident tax rates are applied to taxable income to determine gross tax
payable from which any foreign tax credits and offsets are deducted to
determine the net tax payable.
3.3 Assessable income
Generally, your assessable income as a resident can be classified
under the following headings:
3.3.1 Employment income
Your gross income includes most cash remuneration arising from
your employment. Cash remuneration comprises salaries, wages,
commissions, bonuses and allowances.
Certain cash allowances, being living-away-from-home allowances
(“LAFHAs”), are subject to the fringe benefits tax (“FBT”) regime and
are therefore not income. An allowance is a LAFHA if it is provided to
you while you are living away from your usual place of residence to
compensate for additional expenses incurred and other disadvantages
suffered in order to fulfil employment duties.
Benefits-in-kind, such as accommodation, low-interest loans and
motor cars, provided to you or your associate by your employer are
not included in your assessable income. Instead, your employer is
liable to FBT on the taxable value of these benefits (refer chapter 7).
A lump sum payment that you receive as a consequence of
termination of employment or office is taxable on a concessional
basis. “Bona fide” redundancy payments are tax-free up to certain
limits (refer to “Superannuation and ETPs” in the IAS Tax Summary).
Termination payments are subject to a surcharge if your adjusted
taxable income exceeds the “Surcharge Threshold” (refer to
“Superannuation and ETPs” in the IAS Tax Summary). The surcharge
is levied only on the portion of the termination payment relating to
the period post 20 August 1996. Bona fide redundancy payments are
not subject to the surcharge.
Lump sums received on termination of employment can be rolled
over, i.e. deposited directly into an Australian superannuation fund,
approved deposit fund or other approved roll-over fund. Tax then
becomes payable by the fund on the contribution. You will be liable to
further tax when you withdraw an amount from the fund.
1 2
3.3.2 Capital gains
Capital gains on sale of assets acquired after 19 September 1985 are
assessable. Assets comprise any form of property and include
intangible assets such as options, rights under restrictive covenants,
etc., but exclude motor vehicles. The net capital gain is included in
your taxable income and subject to income tax, generally at your
marginal tax rate.
Capital losses may be used to offset your capital gains. Any excess
capital loss may be carried forward indefinitely to offset any gains
realised in future years.
Where you have held an asset for less than 12 months prior to
disposal, the entire capital gain is included in your taxable income.
Where you have held the asset for 12 months or more prior to
disposal, you can elect between two methods for calculating the
amount of capital gain to be included as assessable income. These
methods are the “Indexation Method” and the “Exemption Method”
(see below).
• Under the “Indexation Method”, the capital gain is determined
after indexing the capital cost of the asset for the appropriate
inflation rate as published by the Australian Statistician. As part of
the transition to the new “Exemption Method”, indexation has been
frozen at 30 September 1999.
• Under the “Exemption Method”, you can elect to claim an
exemption of 50% of the nominal capital gain from the disposal of
each asset. In other words, this method allows you to report a
capital gain equal to 50% of the excess of the sales proceeds over
the unindexed cost base of the asset disposed. Indexation is not
applicable under this method.
On becoming an Australian resident, you are deemed to have
acquired at that time, for a consideration equal to their market value,
most post 19 September 1985 assets that you own. Assets which are
specifically excluded from the rules are assets having the “necessary
connection with Australia” and assets which are specifically exempt
from CGT (refer below).
1 3
Assets having the “necessary connection with Australia” are subject to
the capital gains tax (“CGT”) rules regardless of your residency status.
Assets which fall into this category are effectively located in Australia
and include:
• Australian real estate;
• shares in Australian private companies;
• interests in Australian partnerships and trust estates;
• assets used in Australian businesses;
• interests of 10% or more in Australian public companies and unit
trusts;
• options to acquire any of the above; and
• the benefits of certain “restrictive covenants” (eg non-compete
clause payments)
Your main residence is exempt from CGT provided that the property
has been your main place of residence at all times prior to the
disposal and has not been used for income producing purposes.
If you cease to occupy your main residence whilst on assignment in
Australia, you can elect that the property continue to be regarded as
your main residence for CGT purposes, until the earliest of the
following times:
• when the dwelling again becomes your main residence;
• when you dispose of the dwelling; or
• when the dwelling has been used for income producing purposes
for a total of six years.
The exemption from CGT is available even if the residence is used for
income producing purposes (ie rented out) during your absence and
you do not resume residence prior to disposal.
There is also an effective exemption for personal use assets such as
items of furniture and electrical appliances where the cost of the asset
was $10,000 or less. However, certain assets, such as works of art and
antiques, are subject to the CGT rules on disposal if the acquisition
cost is at least A$500.
The CGT implications upon departure from Australia are discussed in
detail in Chapter 6.
1 4
A capital gain arising from the sale of an asset may attract tax in the
country of source as well as in Australia. If a capital gain arising from
a foreign source is taxable both in the source country and in Australia,
you may claim a foreign tax credit for the foreign tax paid, up to the
amount of Australian tax payable on the gain (refer 3.5).
3.3.3 Dividend income
As a resident you are subject to Australian tax on dividends received,
regardless of their source. Australian sourced dividends are subject to
the dividend imputation system, whereby as a shareholder you are
entitled to a tax offset for the company tax paid on underlying profits.
Dividends may be fully franked (where paid out of profits on which
full company tax has been paid), partly franked (where paid out of
profits on which only partial company tax has been paid) or unfranked
(where paid out of profits on which no company tax has been paid).
The following example illustrates the mechanics of the imputation
system for a top marginal rate individual shareholder.
Fully Unfranked franked dividends
dividends $$
Taxable profits of company 100 100
CCoommppaannyy ttaaxx ppaaiidd aatt 3300%% 30 0
Net profit paid as a fully franked
dividend to shareholder 70 100
Shareholder receives cash dividend 70 100
Imputation credit attached 30 0
Gross amount included in
assessable income 100 100
Shareholder subject to tax thereon
at 47% (excluding Medicare levy) 47 47
Less: Imputation credit (30) 0
TTaaxx aaccttuuaallllyy ppaayyaabbllee bbyy sshhaarreehhoollddeerr 17 47
TToottaall ttaaxx eeffffeeccttiivveellyy bboorrnnee bbyy
sshhaarreehhoollddeerr oonn ccoommppaannyy pprrooffiittss 47 47
1 5
Your gross amount of foreign sourced dividends is fully taxable in
Australia (refer 3.5.2).
3.3.4 Other income
As a resident you are subject to tax on all other income (including
interest, rent, royalties, income from partnerships, trusts, pensions,
businesses and any other income from any activity derived from any
source, world-wide).
Your foreign losses cannot generally be offset against Australian
source income (refer 3.5)
Certain foreign investment earnings you derive within a tax
advantaged savings plan in your home country are likely to be subject
to Australian tax.
3.3.5 Employee share plans
The taxation of shares and options granted under employee share
plans depends upon whether you acquired the shares and options
before or after 28 March 1995.
Where you were granted the shares or options to acquire shares under
an employee share acquisition scheme (“ESAS”) before 28 March
1995, the rules governing their taxation are as follows:
• As a general rule, you are subject to tax at the time that
“unrestricted shares” are acquired under an ESAS. The assessable
benefit is the difference between the market value at that time and
the amount paid to acquire the shares.
• However, where you elected to bring forward the taxing point to
either the time when the options were granted or “restricted
shares” acquired, no gain is recognised at the time that the options
are exercised or restrictions on shares are lifted.
• On disposal of shares acquired under an ESAS, you will be subject
to capital gains tax (refer 3.3.2 for more details) on any further gain
arising on disposal.
1 6
Where you were granted the shares or options to acquire shares under
an ESAS on or after 28 March 1995 (subject to transitional rules
which allow some rights or shares acquired after 28 March 1995 but
before 1 July 1996 to be treated under the old rules), the rules
governing their taxation are as follows:
• Where an ESAS meets certain conditions, it will be “qualifying”,
and liability to tax can be deferred for up to 10 years from date of
grant. A “qualifying” ESAS must involve ordinary shares (or
options in respect thereof ) in either the employer company or
holding company of the employer. The shares or options will not be
“qualifying” when offered to employees with a shareholding of
more than 5% in the company. The shares (but not options) must
be offered to at least 75% of all permanent employees of the
employer.
• Where the conditions are not met an ESAS will be “non-
qualifying”, and you will be subject to tax on the value of the
discount inherent in the option or share at the date of original
grant, regardless of any restrictions on exercise or sale thereof.
• There are specific rules for determining the market value of
unlisted options, taking into account the share price, exercise price
and exercise period of the options and ignoring any restrictions
attached to the options. Under these rules most options will have a
value at grant date.
• If a qualifying ESAS satisfies certain additional conditions
including being offered on a non-discretionary basis with a 3 year
minimum disposal restriction, a $1,000 exemption of taxable value
per annum is available to you, if you elect to be taxed up front on
all ESAS benefits granted in a particular year.
• On disposal of shares acquired under an ESAS, you will be subject
to capital gains tax (refer 3.3.2 for more details) on any further gain
arising on disposal.
If you are subject to tax in your home country upon the acquisition of
the shares or options, a foreign tax credit may be claimed in respect of
the foreign tax paid on the gain (refer 3.5) in order to reduce the
Australian tax payable. Care must be taken in these situations to avoid
double tax on the gain, particularly since there are no clearly defined
Australian tax rules regarding the source of the gain.
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Professional advice should be sought from Deloitte Touche Tohmatsu
on the application of these rules if you acquire shares or options or
exercise options acquired under an ESAS while on assignment in
Australia.
3.3.6 Attributable income of CFCs & FIFs
There are three different regimes which can operate to “attribute”
income to you as an Australian tax resident.
Attribution means that you are assessed on income you do not
actually receive, where that income is received by a foreign entity in
which you have an interest.
The Controlled Foreign Company (“CFC”) rules apply to attribute
income to you as an Australian resident shareholder in respect of
profits derived by a foreign company that is controlled by 5 or fewer
Australian residents.
The Foreign Investment Fund (“FIF”) regime can apply to assess you
on the annual increase in market value of your non-controlling
interests in foreign companies and trusts unless:
• you hold a temporary resident visa in Australia lasting no more
than 4 years and you have not applied for permanent residency; or
• the total value of your investments in FIFs does not exceed
A$50,000; or
• the investments are in foreign public listed companies which do
not engage in certain prohibited activities (such as funds
management and financial intermediation services); or
• the interest is held in a foreign employer sponsored
superannuation fund; or
• the interest is held in a US corporation or certain other US entities
subject to tax on worldwide income; or
• the interest is held in a US mutual fund.
The Foreign Life Assurance Policy (FLP) regime can apply to assess
you on the annual increase in surrender value of any FLPs in which
you have an interest.
1 8
The non-resident trust estate rules can attribute income to you as an
Australian resident if you have transferred property or services to a
non-resident trust or have received a distribution from a non-resident
trust.
The rules under which these regimes operate are complex and
professional advice should be sought on their potential application.
3.4 Allowable deductions
Generally, expenses and losses are deductible provided you incur
them in gaining or producing assessable income. However, expenses
of a private, domestic or capital nature are generally not deductible.
Commonly allowable deductions include:
• interest paid on funds you borrow to invest in income producing
assets;
• depreciation of assets used to produce your assessable income;
• donations to approved organisations;
• employment-related expenses such as the cost of tools of trade,
trade journals, business related seminars and regular subscriptions
to trade, professional and business associations;
• business related travel expenses but not cost of travel from home to
work;
• car expenses including all costs or outgoings that are incurred in
maintaining and operating a car for employment related (ie
business) purposes (allowable car expenses do not include the
expenses of operating an employer provided vehicle or the costs of
travel from home to work); and
• tax agent fees that you pay.
Refer to our flyer “Record keeping requirements” for details regarding
the evidentiary requirements that must be fulfilled in order to support
employment related deductions claimed in your income tax return.
1 9
There is no standard deduction and you must be able to comply with
specific substantiation rules where work-related claims exceed $300
in a year of income. When you make a claim for such expenses, you
must declare in your tax return that you have the necessary receipts
and other records (eg travel diaries for most overseas travel) to
substantiate the claim.
Contributions you make to your home country pension or tax
advantaged savings arrangements are not allowable as tax deductions
in Australia. Generally company contributions to such schemes would
not be considered assessable income to you, but the tax treatment
would depend on the terms of the individual scheme. Such
contributions may be subject to fringe benefits tax or may be non-
deductible to your employer.
3.5 Foreign tax credit system
The Foreign Tax Credit System (“FTCS”) provides a mechanism for
relief from double tax where you derive foreign income and foreign
tax has been paid on that income.
The source of an item of income is factual and is determined
separately in each case. While there are general rules regarding
different types of income, consideration must always be given to the
facts surrounding each case. In general terms, income is sourced as
follows:
IInnccoommee ttyyppee FFaaccttoorrss ddeetteerrmmiinniinngg ssoouurrccee
Employment Where the duties are performed
Dividend Where the profits, out of which the dividend is
paid, are earned
Interest Where the obligation to pay the interest arose
Rental Where the property is situated
Under the FTCS the Australian tax otherwise payable on foreign
income is reduced by the amount of foreign tax paid. The credit in
respect of any year is limited to the amount of Australian tax payable
on the particular class of foreign income or the actual amount of
foreign tax paid, whichever is less.
2 0
For this purpose there are two classes of income relevant to
individuals:
• passive income; and
• other foreign income
Passive income includes dividends, interest, annuities, rents, royalties,
capital gains, commodity gains and attributed income (refer 3.3.6).
Other foreign income includes employment and business income.
Where the foreign tax credit claimed is limited to the amount of
Australian tax on the particular class of foreign income, any excess
foreign tax paid can be carried forward for up to 5 years to be offset
against your Australian tax on foreign income of that class in a
subsequent year.
Where there is an overall foreign loss from a particular class of
foreign income, that loss may be offset only against future income
from that particular class (i.e. it is “quarantined”). For this purpose,
interest is a separate class of foreign income to other passive income.
Hence your foreign interest income cannot be offset against your
rental loss. Your foreign interest income is assessable and your
foreign rental loss may be used only to offset income of that class in
the same or a future year.
Capital losses are separately quarantined under the general capital
gains tax provisions (refer 3.3.2).
3.5.1 Rental income
You may rent out your home while you are on assignment in
Australia. The rental income is assessable, for Australian tax
purposes, and deductions may be claimed for expenses of
maintaining your home. If you are also subject to tax on this income
in your home country, a credit may be claimed for the foreign tax
paid.
As of 1 July 2001, interest and borrowing expenses incurred in
relation to a foreign rental property are fully deductible in your
income tax return. However where you have a net foreign rental loss
generated by other deductions, this loss is not deductible against your
Australian source income. It may only be offset against your other
foreign sourced income of the same class (see above).
2 1
If you pay mortgage interest to an overseas bank or financial
institution as a resident of Australia, you are generally required to
remit interest withholding tax equal to 10% of the mortgage interest
paid. You may not claim a deduction for the mortgage interest in your
tax return unless this tax has been paid (refer 8.5).
Our flyer “Common rental deductions” lists deductions that you can
claim against your rental income, including an outline of the main
rental property depreciation assets.
3.5.2 Dividend income
The gross amount of foreign sourced dividends you receive (after
grossing up for foreign withholding tax paid thereon) is taxable. You
will be allowed a credit for any foreign tax paid on the income.
Where you receive the dividends from a country with which Australia
has entered into a Double Tax Treaty, the credit is limited to the rate of
tax specified in the relevant treaty (refer to Australia's Double Taxation
Treaties), notwithstanding that foreign tax may have been deducted in
excess of this amount. A refund claim for the tax deducted in excess
of the treaty rate must be separately made to the relevant foreign tax
authority.
You are not entitled to a credit for any foreign underlying tax paid by
the foreign company on profits out of which the dividend is paid.
3.5.3 Interest income
As a resident you are subject to Australian tax on all interest derived
regardless of its source. You may claim a credit for foreign taxes you
pay on foreign sourced interest. In the case of interest received from
treaty countries, the foreign tax credit is limited to the rate of tax
specified in the relevant treaty (normally 10% but sometimes 15%).
Foreign tax may have been deducted in excess of this amount in
which case a refund claim for the tax deducted in excess of the treaty
rate must be made separately to the relevant foreign tax authority
(refer to Australia's Double Taxation Treaties).
2 2
3.6 Offsets
Details of the rates of personal offsets available to resident taxpayers
are contained in “Offsets” in the IAS Tax Summary.
3.6.1 Dependant offsets
As a resident taxpayer you may be entitled to claim an offset against
Australian taxes payable where you maintain your spouse or your
dependent parent or parent-in-law during the year.
3.6.2 Medical expenses offset
As a resident taxpayer you are allowed an offset for unreimbursed
medical expenses above a certain threshold incurred in obtaining
medical treatment for you or your dependants (refer to “Offsets” in
the IAS Tax Summary).
3.6.3 Parenting allowance
Dependent spouses with dependent children may directly receive a
tax-free parenting allowance in cash, on a fortnightly basis, from
Centrelink.
Eligibility for the allowance depends upon the immigration residency
status and the income of the dependent spouse, as determined for
Social Security purposes. It is unlikely that a spouse holding a
temporary resident visa will be eligible for these allowances.
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4. Taxation of non-residents
4.1 General principles
As a non-resident you are subject to Australian tax only on your
Australian sourced income.
As a non-resident you are subject to tax on gains derived from the
disposal of certain assets having a necessary connection with Australia
(refer 4.3.2).
As a non-resident no Medicare Levy is payable (refer 10.1).
No tax-free threshold is available and tax is payable at progressive
rates (refer to “Personal Tax Rates” in the IAS Tax Summary).
No concessional offsets are available to you as a non-resident.
You are liable to withholding tax at the rate of 10% on Australian
interest, 30% (reduced by most treaties to 15%) on the unfranked part
of any Australian dividend income and 30% (reduced treaty rate of
10%) on Australian royalties (refer to Australia's Double Taxation
Treaties). You will not be subject to Australian tax on franked
dividends you receive.
4.2 Calculation of taxable income
Your taxable income is calculated by deducting from “assessable
income” all “allowable deductions” relating thereto for a particular
year of income.
However, as a non-resident you are taxable only on Australian sourced
income, and may claim allowable deductions only for expenditure that
relates to that income.
4.3 Assessable income
4.3.1 Employment income
Generally employment income is sourced where the services are
performed. Accordingly, as a non-resident you are not subject to
Australian tax on your earnings for services performed outside
Australia.
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Where you perform services both in and out of Australia, it is usually
necessary for you to keep detailed records of all workdays to enable an
appropriate apportionment between Australian and foreign source
earnings, based on time spent in and out of Australia.
In certain circumstances employment income for services in Australia
may be exempt from Australian tax through the operation of a double
tax treaty (refer 11.1).
4.3.2 Capital gains
The capital gains tax (“CGT”) regime is described at 3.3.2.
As a non-resident, you are subject to tax only on capital gains derived
from the disposal of assets having the necessary connection with
Australia acquired after 19 September 1985. These assets are
described at 3.3.2.
4.3.3 Passive income
Australian source interest you derive as a non-resident is subject to
withholding tax at source (i.e. withheld and remitted by the payer) at
the rate of 10% of the gross amount of the interest. This represents a
final tax liability on such income and the income need not be
included in your Australian tax return. It is your responsibility to
advise the payer of your non-resident status.
Australian source unfranked dividends that you receive while non-
resident are subject to withholding tax at source at the rate of 30% of
the gross dividend, unless Australia has concluded a double tax treaty
with your country of residence (refer to Australia's Double Taxation
Treaties), in which case a 15% (in most cases) withholding tax rate will
apply.
The withholding tax is a final tax liability on such income and the
income need not be included in your Australian tax return.
Australian source franked dividends that you receive while non-
resident are not subject to withholding tax or to any further Australian
tax in your hands and are not required to be included in your
Australian tax return.
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Australian source rental income is taxed on an assessment basis and
is not generally subject to tax withholding at source. It is therefore
required to be included in your tax return.
Australian source royalty income is subject to withholding tax at
source at the rate of 30% of the gross royalty, unless Australia has
concluded a treaty with your country of residence (refer to Australia's
Double Taxation Treaties), in which case a 10% (in most cases)
withholding tax rate will apply. The withholding tax is a final tax
liability on such income and the income need not be included in your
tax return.
4.4 Allowable deductions
Generally, expenses and losses are deductible only to the extent to
which they are incurred in gaining or producing Australian source
assessable income.
Expenses of a private, domestic or capital nature are generally not
deductible. Refer to section 3.4 for a list of the most common
deductions.
As with resident individuals, no standard deduction applies and you
must retain proper documentary evidence to substantiate any
deductions claimed.
Expenses incurred in earning Australian sourced interest and
dividends are not allowable deductions.
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5. Lodgment and payment procedures
5.1 Will I have to lodge a return?
If you are a resident of Australia you must lodge a separate tax return
if your taxable income exceeds the tax free threshold for the year (refer
to “Personal Tax Rates” in the IAS Tax Summary). You may also need
to lodge a return if your income is below the threshold but you have
had tax deducted from income at source (e.g. tax instalment
deductions from salary).
If you are a non-resident and you derive any Australian source
assessable income you must lodge a return. Assessable income does
not include dividend, interest or royalty income that is subject to the
withholding tax provisions.
Where you and your partner receive income jointly, you must each
include your share of the income in your own return (for example net
rental income from a jointly owned property).
5.2 When will I have to lodge a return?
The Australian tax year ends on 30 June and income tax returns must
normally be lodged by the following 31 October, although this can be
varied each year by the Commissioner of Taxation (“Commissioner”).
If your return is prepared by a registered tax agent, such as Deloitte
Touche Tohmatsu, lodgment may be deferred provided you are
registered on the tax agent's program by the date set for that purpose
by the Commissioner.
Tax agents are required to progressively lodge returns on their
program and ensure that all returns are lodged by the due dates
determined annually by the Commissioner. The due date is
determined by the amount of tax that you paid in the previous year,
and whether your prior year return was lodged by its due date and can
vary from the end of October to mid-May of the following year.
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5.3 Assessment procedure
Shortly after lodgment of your tax return the Commissioner issues an
assessment notice specifying the taxable income, tax assessed, credits
allowed for foreign taxes, tax already paid and offsets. There is either a
net refund, in which case a cheque is attached to the assessment
notice, or a balance due for payment no earlier than 21 days from the
issue date of the assessment. You may elect to have a tax refund
deposited directly into a nominated bank account. A tax liability may
be paid by direct debit on request.
The assessment is usually based on information contained in the
return, although the Commissioner is not obliged to rely solely on
this information.
A default assessment may be issued if you fail to lodge a return or a
return is found to be unsatisfactory.
5.4 Collection of tax at source
Tax on your employment income is withheld by way of the Pay As You
Go (“PAYG”) Withholding system.
Technically, the use of an offshore payroll does not avoid the PAYG
withholding system. We recommend that you seek professional advice
from Deloitte if you are paid by an overseas employer and PAYG
withholding is not being deducted from your salary.
Tax on your investment income may be withheld at source, either by
non-resident withholding tax or at the top marginal rate of tax if you
do not provide your tax file number to the investment body (refer 5.8).
5.5 PAYG Instalments
If you had business or investment income on your last income tax
return in excess of $1,000 and you had a tax liability of more than
$250, you are generally liable to make tax payments under the Pay As
You Go (PAYG) Instalment system.
If you are liable to pay PAYG instalments, you will be notified by the
ATO. You will receive an Instalment Activity Statement which will
contain an instalment rate calculated by the ATO based on your latest
assessed income tax return.
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Most PAYG instalment payers will calculate their instalments by
multiplying the instalment rate by their instalment income.
Instalment income includes:
• fees received for services;
• employee share plan income;
• interest;
• rent; and
• dividends.
Salary and wages are excluded.
Instalment income does not include capital gains.
PAYG instalments will usually be made quarterly. You have the option
of making an annual payment where the following criteria are
satisfied:
• your most recent notional tax (as advised by the ATO, usually
corresponding to business and non CGT investment income from
the previous year) was less than $8,000; and
• you (or a partnership in which you are a partner) are not registered
or required to be registered for GST.
Quarterly payments will be due no earlier than 21 days after the end
of each quarter. Instalments for most taxpayers will therefore be due
on 21 October, 21 January, 21 April and 21 July. Note that the ATO can
extend these deadlines. The date for annual payments will be no
earlier than 21 October following the tax year-end.
You are able to vary the amount of each instalment in line with
variations in your income. This can be done by applying to the ATO to
vary the instalment rate.
If your notional tax is in excess of $8,000 or if you are registered for
GST purposes or are in a partnership registered for GST purposes
you can choose to pay an amount notified by the Commissioner or
you can calculate actual income subject to PAYG.
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5.6 Amendment and objection process
You can request an amended assessment to correct an error made
when preparing the original return. This request should be made
within four years of the issue of the assessment notice.
You have four years in which to object to an assessment. Objections
must be lodged in writing and state fully the grounds upon which
they are based.
The Commissioner must provide a written decision on the objection.
You can appeal against an objection decision if still dissatisfied.
5.7 Private rulings
You may request a private ruling to obtain the Commissioner's view
on the application of a particular tax law.
A private ruling issued by the Commissioner in respect of an
arrangement which commenced after 30 June 1992 is generally
binding on the Commissioner, but can be overridden by a subsequent
Public Ruling in its prospective application.
5.8 Tax file number
Every person liable to taxation in Australia must obtain a tax file
number (“TFN”).
You must complete an application form and present at least two types
of original approved identity documents (eg passport, birth certificate)
with the application to the Australian Taxation Office ("ATO”).
You must provide your TFN to your employer within 28 days of
commencing employment. Failure to do so creates an obligation on
the employer to deduct tax instalments from your salary at the top
marginal rate (currently 48.5%).
If you are an Australian resident you should provide your TFN to your
relevant financial institutions to avoid tax being withheld from
income at the top marginal rate.
If you are a non-resident you should advise your Australian financial
institutions to deduct withholding tax at source from investment
income.
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6. Procedures and tax consequences on
departing Australia
There are a number of matters that you will need to address shortly
before departing Australia. These matters generally apply only if you
cease to be a resident of Australia when you depart.
6.1 General principles
As a foreign national leaving Australia permanently, you will not be
subject to any special administrative requirements other than to
ensure normal tax return ruling requirements are competed (either
before or after departure).
No tax clearance certificate or notification to the ATO is required prior
to departure from Australia.
If you depart Australia during a tax year it will often be necessary to
vary your PAYG instalments based on your estimated income for that
year, if this is less than the income on which PAYG instalments have
been determined.
6.2 Capital gains tax
Upon ceasing to be an Australian resident, you are deemed to have
disposed of all assets then held, to which the CGT provisions apply, at
their market value at that date. Certain assets excluded from these
rules include:
• assets acquired before 20 September 1985;
• assets having the necessary connection with Australia (refer 3.3.2);
and
• assets held at the date that residence commenced, or acquired by
inheritance, provided you were not a resident in Australia for more
than 5 years in the last 10 years prior to ceasing residence.
You may therefore be subject to tax on unrealised gains, including
exchange rate variances in respect of assets held overseas.
However, you may elect to treat all assets otherwise deemed to be
disposed of as assets having the necessary connection with Australia.
The effect of the election is that no gain is recognised at the time of
departure from Australia and the actual capital gain on ultimate
disposal will be subject to Australian tax. If appropriate, the election
should be made for the tax year that you cease Australian residency.
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The Protocol to the US/Australia Double Tax Agreement is expected to
take effect from 1 July 2003 and offers protection against double
taxation of capital gains for US citizens working in Australia as it has
detailed rules allocating taxing rights in respect of capital gains.
Under the Protocol, US Citizens who elect to defer the Australian
CGT will, if they ultimately sell the assets after returning to the US,
pay tax on the whole gain only in the US. If the gain is realised when
the individual has a tax-home in a third country, the individual will
have to pay Australian capital gains tax, but US domestic law provides
a mechanism for allowing a credit for the Australian tax in such
circumstances.
If an individual departing Australia chooses to recognise the deemed
disposal in Australia at departure, such disposal may, if so elected by
the individual, also be recognised for US tax purposes. In this case,
the individual will be considered to have sold and immediately
reacquired the asset for US purposes at its fair market value at that
time. This will ensure that US citizens may claim a credit for the
Australian tax paid against their US tax liability.
6.3 Deferral of income and capital gains
In order to not trigger an Australian tax liability before departing
Australia, you should consider deferring the exercise of any options
and the disposal of any assets to which the CGT or ordinary income
tax provisions apply, until after departure from Australia.
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7. Fringe Benefits Tax
7.1 Assessable income or fringe benefit
It is necessary to distinguish between the items included in a
remuneration package which are assessable income to you, upon
which you are subject to income tax, and items which are fringe
benefits, upon which your employer is subject to fringe benefits tax
(“FBT”). The chart at 7.4 summarises the standard tax treatment of
most commonly provided remuneration items.
Where a benefit is subject to the FBT regime it is exempt from
income tax in your hands.
Whether an employer seeks to recover any FBT costs against your
gross remuneration package is a matter of contract between you and
your employer.
Your employer must report the grossed-up value of all fringe benefits
provided to you for any FBT year, on your annual payment summary.
An exemption is provided where the taxable value (i.e. before the
gross-up) is less than $1,000. You must report the amount on your tax
return and it is taken into account for the purpose of computing
certain charges, including the superannuation surcharge (refer 10.2.1).
7.2 Rate of tax
FBT is levied on the grossed up taxable value of all fringe benefits.
The gross-up factor depends on whether or not your employer can
claim an input tax credit under the Goods and Services Tax (“GST”)
for the benefit year (refer to “Fringe Benefits Tax” in the IAS Tax
Summary). The purpose of the gross-up is to equate the cost of
providing a fully taxable fringe benefit with the cost of providing an
equivalent benefit as salary for a top marginal rate taxpayer.
FBT is a tax-deductible expense to the employer.
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7.3 FBT returns
The FBT year ends on 31 March and employers are required to lodge
an annual return to report the taxable value of all benefits provided,
ascertained in accordance with specific valuation rules.
The taxable value of fringe benefits can be reduced by:
• any contribution made by you towards the provision of the benefit
(eg running costs paid by you on an employer provided car); and
• the amount for which you could have claimed an income tax
deduction if you had personally incurred the expense (eg the
business use of a home telephone paid for by your employer).
Certain benefits, such as Australian superannuation, are exempt from
FBT and are not required to be included in an FBT return.
7.4 Treatment of specific items of remuneration
As a general rule cash remuneration, including most allowances to
cover estimated expenses, is income to you while benefits in kind and
reimbursements of actual expenditures incurred by you are fringe
benefits.
Typical benefits included in an expatriate's remuneration package and
their usual treatment for FBT purposes are shown in the following
table. The actual tax treatment will depend upon your individual
circumstances.
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3 5
Accommodation (1)
Base Salary
Business Subscriptions
Car allowance
Car provided
Car for spouse
Car parking
Children's education (1)
Domestic help
Employee shares and options
Entertainment reimbursed
Frequent flyer benefits from employer paid travel (2)
Home leave (1)
Home telephone (part business use)
Home purchase and sale costs (4)
In-house benefits
Language lessons (English for migrants)
Laptop computer
Leasing of household goods (1)
Life insurance premiums
Living away from home allowance (LAFHA) (1)
Low or interest free loan
Medical insurance premiums
Mobile phone
Orientation briefings
Relocation expenses including storage
Settling-in allowance
Sporting club subscriptions
Australian Superannuation contributions
Tax equalisation payments (3)
Australian tax return preparation fees
Utilities
Type of BenefitSubject to
income Tax No FBT Concessional FBT
Fringe Benefits
Full FBT
The following notes should be read in conjunction with the table:
1. You must be living away from home in order for the benefit to be
either exempt from, or subject to, concessional FBT. As a general rule,
you will be considered to be living away from home if you are
working in Australia on an assignment of a finite duration with a
definite intention to return to your home country to live at the
completion of the assignment.
2. Where you pay for the membership into a frequent flyer scheme, the
value of benefits obtained from the use of frequent flyer points
accumulated from employer paid travel are generally non-assessable
income to you and also exempt from FBT, unless the membership of
the scheme was obtained by arrangement between the employer and
an airline. Where an employer pays your membership fee for use of
an airport lounge, the fee itself is specifically exempt from fringe
benefits tax.
3. The tax treatment of tax equalisation payments depends upon the tax
equalisation arrangements in place. However, tax equalisation
settlements are usually treated as part of your assessable income.
4. You must have changed your usual place of residence and sold a
house at the former location within a certain time period for the
benefits to be exempt from FBT.
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8. Other taxes
There are a number of indirect taxes levied by State governments and
municipal authorities, which are relevant to foreign nationals working
in Australia. The more commonly encountered taxes are briefly
described below.
8.1 Payroll tax
Payroll tax is levied by each State government on the gross payrolls of
employers operating in that State. Most States exempt employer
groups with a total payroll of under $500,000 from the tax and adopt
a maximum rate of tax of 6.85%. The tax is payable by the employer.
8.2 Property taxes
There are two types of property tax:
• Rates levied by local authorities on all properties to cover the cost of
community services; and
• Land tax levied by State governments at varying rates on the
unimproved value of land. In most states, it is not applicable to the
average home but may apply to investment properties.
8.3 Stamp duty
Stamp duty is a tax imposed by State governments on certain
documents including contracts for the purchase of houses and cars.
Bank debits tax is payable on withdrawals from bank accounts in
some states of Australia.
8.4 Superannuation guarantee charge
A non tax-deductible charge is imposed on employers for failing to
provide a minimum level of superannuation contributions for each of
their full-time, part-time and casual employees.
The required employer contribution level is determined based on a
percentage of ordinary time earnings (refer to “Superannuation and
ETPs” in the IAS Tax Summary).
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The charge is equal to any shortfall in contribution plus a penalty for
failure to comply.
At present there are certain limited classes of employees for whom
contributions are not required, including:
• “prescribed employees” (refer 10.2.1);
• employees that are exempt under a totalisation agreement
(refer 10.2.1);
• employees aged 70 and over; and
• employees receiving salary and wages of less than $450 a month.
8.5 Interest Withholding Tax (“IWT”)
All residents of Australia, who pay interest to a non-resident of
Australia, are required to withhold and remit to the ATO, a tax equal
to 10% of the gross interest paid. An exception is provided where the
interest is incurred as an expense of carrying on a business overseas.
You are liable to interest withholding tax if you are a tax resident and
pay mortgage interest to a bank in your home country, regardless of
whether your residence is used for income producing purposes. This
interest withholding tax should be remitted via an Instalment Activity
Statement (refer 5.5) although you will need to complete an additional
form to have this information added to your quarterly statement.
US citizens will be exempt from IWT once the Protocol to the Double
Tax Agreement between Australia and the US takes effect. The
Protocol is expected to take effect from 1 July 2003.
8.6 Other taxes
There are no death, estate, gift or wealth taxes in Australia. Sales tax is
a Federal tax, which is generally imposed on the last wholesale sale of
new goods imported into or manufactured and consumed in
Australia.
Goods and Services Tax (GST) is levied on most goods and services at
a rate of 10%.
The Tourist Refund Scheme is a GST recovery mechanism which
permits an outbound traveller from Australia to recover GST paid on
goods which are being exported as accompanied baggage. The refund
will be paid on goods costing $300 (GST inclusive) or more, bought
from the same store, no more than 30 days before you leave.
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9. Business visas and work permits
All nationals, excluding Australian and New Zealand citizens, require
a valid visa to enter and remain in Australia. The appropriate type of
visa will depend on an individual's intended length and purpose of
stay. The time involved in securing a visa is usually greater the longer
the period of stay required.
The following visa classes may be suitable for persons seeking to
enter Australia for business or employment purposes.
9.1 Short Stay Business Visas (Subclass 456 and Electronic Travel Authorities)
Individuals intending to visit Australia for business purposes such as
negotiations, speaking at or attending conferences, or fulfilling
contractual obligations for an overseas employer may apply for a
Short Stay Business visa if they are not required to remain in
Australia for more than three months.
These visas accommodate most business/work activities that will not
have adverse consequences for employment or training opportunities,
or conditions of employment, for Australian citizens or Australian
permanent residents.
However, applicants for Short Stay Business visas must not intend to
undertake any business-related employment or training activity in
Australia as this is not a work visa and persons seeking to engage in
paid employment in Australia should apply for the Long Stay
Business visa (Subclass 457).
For nationals of certain countries, the Short Stay Business visa is
available as an Electronic Travel Authority (ETA), an electronically
stored visa which can be obtained from travel agencies, airlines or
over the internet.
Individuals who are not eligible for an ETA, can make an application
for a Subclass 456 Temporary Business (Short Stay) visa at the nearest
Australian diplomatic mission or, in some countries, certain local
travel agents, through agency arrangements.
It is not possible to apply for a subclass 456 or ETA visa in Australia.
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9.2 Long Stay Business Visas (Subclass 457)
Subclass 457 visas provide for long-term stay and employment in
Australia for periods of more than three months and up to four years
for expatriate personnel in the following categories:
• employees of Australian based companies;
• personnel from offshore companies seeking to establish a branch
of the company in Australia, participate in joint ventures or
undertake employment in relation to a contract awarded to an
offshore company;
• independent executives seeking to establish new businesses or join
existing businesses in Australia; certain services sellers; and
• certain persons accorded diplomatic-type privileges and immunities
To seek a Subclass 457 visa for an expatriate to work for an
organisation in Australia, there are generally three processing steps
administered by immigration as follows;
• the employer must be approved as sponsor;
• the employer must then lodge a business nomination which
describes the activity (vacancy/position) to be undertaken by the
expatriate and that nomination must be approved; and
• a vviissaa aapppplliiccaattiioonn must be made by the applicant.
Subclass 457 visas are granted with multiple entries for a specific
period of time (up to 4 years). The primary or main applicant is only
entitled to work in Australia for the sponsoring organisation in the
nominated occupation approved by immigration. Provisions exist in
Australian immigration law for Subclass 457 visa holders to change
employer or occupation in Australia.
The sponsorship, nomination and visa application can be lodged with
a local or overseas Australian immigration office. Subclass 457 visa
applications may include the primary applicant's spouse and
dependent children.
Provisions exist in Australian immigration law for Subclass 457 visas
to be extended from within Australia for a further temporary stay or
permanent residence.
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10. Social security and retirement benefits
10.1 Health system
The Medicare levy is a compulsory form of health insurance
administered by the Australian Government.
If you are a tax resident of Australia you are generally subject to the
Medicare levy, collected as part of the tax system. No levy is payable if
your taxable income is below a certain level and phasing-in provisions
apply to low income earners. If you are liable to the Medicare levy, you
must pay an additional 1% surcharge if you are a high income earner
and you do not have private hospital insurance with an Australian
registered health fund (refer to “Medicare levy” in the IAS Tax
Summary).
If you are a non-resident of Australia, you are not subject to the
Medicare levy or surcharge.
Part year residents are entitled to a proportionate reduction in the levy
for the period of non-residence.
If your earnings are below the relevant thresholds you will receive a
tax offset if you have private health insurance.
As an incentive to take out private health insurance with a health fund
registered in Australia, you may be able to receive a reduction in the
cost of private health insurance in the form of an offset. The offset
can be claimed either as a direct reduction in the insurance premium,
a cash or cheque rebate from Medicare or as an income tax offset.
Most expatriates working in Australia on temporary resident visas are
ineligible for Medicare benefits. However contributors to government
health schemes in the United Kingdom, Finland, Malta, Italy, Sweden,
New Zealand and the Netherlands are entitled to receive limited
reciprocal rights under Medicare.
If you are not entitled to Medicare benefits you may apply to the
Minister of Health for a certificate of ineligibility to Medicare benefits
which will relieve you of liability to the Medicare levy and surcharge.
This application is generally filed at the end of an income year and
cannot be filed for a future period.
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The benefits available under Medicare cover only certain treatment by
doctors, so private medical insurance cover is common and
recommended.
None of the agreements that Australia has entered into with other
countries regarding social security benefits (totalisation agreements)
limit the liability to the Medicare levy.
Under “Lifetime Health Cover”, health funds are required to increase
premiums over a base rate depending on the age when a member
first takes out hospital cover with a registered health fund. If you join
after the age of 30, you will pay a 2% premium loading for each year
you delay joining. The loading is capped at a maximum of 70% above
the premium payable by a person who joins at the age of 30.
10.2 Australian superannuation and termination benefits
10.2.1 Superannuation contributions
Your employer is required to make a minimum annual contribution
to superannuation on your behalf, calculated as a percentage of salary
up to a maximum income threshold. Failure to contribute the
required amount will result in a non-deductible superannuation
guarantee charge being imposed on your employer (refer 8.4).
Any superannuation contributions made by an Australian employer to
an Australian complying superannuation fund are deductible to the
employer provided they are within the deductible limits (refer to
“Superannuation and ETPs” in the IAS Tax Summary).
Superannuation contributions made by your employer as well as fund
earnings are assessable to the superannuation fund (at the rate of only
15% for a “complying” resident fund which satisfies various prudential
requirements).
A surcharge is imposed on the fund in respect of deductible
contributions made on behalf of employees and by self employed
individuals where the individual's “total income”, broadly defined as
taxable income plus deductible superannuation support, exceeds a
certain threshold. If your total income exceeds the threshold a 15%
surcharge will be imposed on the fund (refer to “Superannuation and
ETPs” in the IAS Tax Summary).
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Employees cannot generally claim a tax deduction for their own
contributions to superannuation, although this may be effective in
certain limited circumstances.
EExxeemmppttiioonn ffrroomm ssuuppeerraannnnuuaattiioonn
Your employer may not need to make superannuation contributions
on you behalf if:
• You meet the criteria for exemption from superannuation as a
“prescribed employee”:
you hold a subclass 456 or 457 temporary resident visa or ETA
equivalent (956 and 957); and either
a) Have been appointed as the company's national (or deputy
national) managing executive, or state manager; or
b) i) Are a senior executive, or are otherwise establishing a business
activity in Australia on behalf of the company; and
ii) Your position carries substantial executive responsibility; and
iii) You have the appropriate qualifications; and
iv) Your role is a full time position; or
• You meet the criteria for exemption from superannuation under a
totalisation agreement:
a) You are from a country with which Australia has a totalisation
agreement which provides relief from superannuation, and
b) You would otherwise be covered by the social security / compulsory
pension laws of both countries; and
c) Your assignment period (both expected and actual) is within the
prescribed limits; and
d) Your employer obtains a Certificate of Coverage from the relevant
home country authority.
Australia has negotiated social security agreements that include relief
from dual social security/superannuation obligations with the
following countries:
• USA
• Portugal
• Netherlands.
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The agreements with the USA and Portugal took effect from
1 October 2002 and the agreement with the Netherlands is expected
to take effect from 1 April 2003.
10.2.2 Withdrawal of benefits
You can generally only withdraw benefits from an Australian
superannuation fund on:
• death;
• permanent disability; or
• ermanent retirement from the work force.
As of 1 July 2002, accumulated superannuation benefits may be
refunded to certain foreign nationals who have permanently departed
Australia. Access to accumulated benefits will be granted where:
• You entered Australia on an eligible temporary resident visa; and
• Your visa has expired or been cancelled; and
• You have permanently departed Australia.
There is an administrative requirement to satisfy the Superannuation
Trustee that the funds may be released.
The refund of accumulated superannuation entitlements will be
subject to a final withholding tax at a rate dependent on the type of
contributions made into the fund. For compulsory superannuation
guarantee charge contributions the rate is 30% (if you are less than
age 55). This tax is a final tax and you are not required to report the
payment in your Australian tax return.
Certain components of lump sum termination benefits that you
receive (including payments of pensions and annuities which do not
comply with certain standards) which do not in total exceed a
“reasonable benefit limit” (RBL) are taxed at concessional maximum
rates. For the current rates and RBL, refer to “Superannuation and
ETPs” in the IAS Tax Summary.
Any benefit in excess of your RBL which you take as a lump sum is
taxed at the top marginal tax rate of 47% plus the Medicare levy (if
applicable).
4 4
Lump sum benefits from an Australian fund cannot be rolled over to
a foreign superannuation fund without incurring a tax liability,
although tax deferral may be available upon rollover to another
complying Australian fund.
10.3 Foreign superannuation and termination benefits
10.3.1 Payments relating to a period when you were a non-resident of Australia
((ii)) FFoorreeiiggnn ssuuppeerraannnnuuaattiioonn ppaayymmeennttss
Generally, if the foreign fund benefit was accumulated while you were
a non-resident of Australia and is paid out within 6 months of you
becoming an Australian resident, it will be exempt from Australian
tax.
However, if the benefit is received outside the 6 month period, a part
thereof will be assessable. The amount subject to tax will (with certain
exclusions) be the excess received over your accumulated entitlement
in the foreign fund on the day you became a resident plus additional
contributions thereafter. You may claim a foreign tax credit for foreign
tax paid on the amount that is assessable in Australia.
((iiii)) FFoorreeiiggnn tteerrmmiinnaattiioonn ppaayymmeennttss
In most cases, any other lump sum payment made solely in
consequence of termination of a period of foreign employment is
exempt from Australian tax, even if received after you again become
an Australian tax resident.
10.3.2 Transfer of benefit from an overseas fund to another fund
If you transfer a benefit from an overseas fund to another fund it is
treated in the same way as a benefit payment and is subject to tax at
the time of the transfer. The amount you transfer will be a “member
undeducted contribution” to the recipient fund and can thus be
subsequently withdrawn free of Australian tax, e.g. certain UK
pensions can be transferred in a tax effective manner to certain
approved Australian funds.
4 5
10.4 Other social security benefits
While Australia operates a social security system which provides
pension, health, unemployment and a range of other benefits to low
income earners, no special contributions have to be made to this
system, either by employer or employee, other than the Medicare levy.
Family allowances are paid to families supporting children under 18
years of age and certain full-time dependent students. In addition a
non-working spouse may be eligible for the parenting allowance
(refer 3.6.3). On arrival in Australia you should contact your local
Centrelink office to ascertain eligibility for such benefits.
Australia has entered into a number of totalisation agreements with
other countries for the provision of social security benefits. These
agreements provide a definition of residency for social security
purposes and determine an individual's entitlement to welfare
payments such as unemployment, age and widow pensions.
4 6
11. Double tax treaties and tax havens
11.1 Basic principles of double tax treaties
Australia has entered into a number of double tax treaties (refer to
Australia's Double Taxation Treaties). Australia's tax treaties generally
follow the OECD model and are designed to minimise the likelihood
that you are subject to double tax on the same income in two different
countries.
Common provisions found in most of the treaties include:
• exemption from Australian tax on income derived (when you are a
resident of another country) from employment in Australia which
is not attributed to a fixed base of the employer in Australia,
provided you are present in Australia for less than 183 days in the
tax year and, as a general rule, are subject to tax on the
employment income in your country of residence;
• dividends received when you are a resident of one country from a
company resident in the other country subject to tax at no more
than 15% in the country of source;
• interest received when you are a resident of one country from a
source in the other country subject to tax at no more than 10% in
the country of source; and
• pensions and annuities derived when you are a resident of one
country normally subject to tax only in that country.
11.2 Tax havens
There are no tax havens within Australia.
Effective controlled foreign company (“CFC”) and foreign investment
fund (“FIF”) legislation exists which precludes a resident of Australia
from sheltering income offshore in a tax haven (refer 3.3.6).
4 7
12. Tax planning
Various planning techniques are available to foreign nationals
working in Australia. Their practical application will vary depending
upon your personal situation. The following techniques are a guide
only as to what may be suitable and professional advice should always
be obtained regarding the practical application of a particular
technique.
12.1 Structure of remuneration package
• You should agree on the structure of your remuneration package
prior to arrival to maximise the tax advantage arising from the
inclusion of benefits which are either exempt from, or subject to
concessional FBT (refer 7.4).
• Include a living away from home allowance as compensation for
additional expenses incurred and other disadvantages suffered
where you are required to live away from your usual place of
residence in order to undertake employment duties. Such
allowances are, to the extent that they represent allowances for
reasonable additional accommodation and food costs, tax free.
Annual tables are published to determine the reasonable food cost
component. (Refer to “Fringe Benefits Tax” in the IAS Tax
Summary).
• Consider provision of Australian superannuation in excess of
statutory contribution levels. Any home country tax implications of
an Australian superannuation fund should also be considered.
12.2 Timing issues
• Time arrival and departure dates on shorter term assignments to
take advantage of possible treaty exemptions in the first and last
year of an assignment.
• Receive allowances not directly related to the Australian assignment
before becoming a resident of Australia.
• Receive bonuses relating to previous employment before becoming
a resident of Australia.
• Receive bonuses in relation to Australian employment after
becoming a non-resident if a double tax treaty is applicable to
exempt such income from Australian tax.
4 8
• Minimise liability to income tax and CGT by restructuring
ownership of foreign assets acquired after 19 September 1985
before becoming resident in Australia.
• Exercise employee share options before becoming an Australian
resident.
12.3 Deferring certain actions until after departure
• Do not dispose of assets potentially subject to CGT while a resident
of Australia.
• Do not exercise options granted under an employee share plan
while a resident of Australia.
• Do not receive restricted shares under an employee share plan
while in Australia.
12.4 Other planning
• Split unearned income (e.g. interest and dividends) between adult
family members or across several tax years to take advantage of
lower marginal rates.
• If a tax resident, consider investing in Australian companies to take
advantage of imputation credits attached to franked dividends paid
by such companies (refer 3.3.3).
• Structure assignment to be able to claim that you are solely
resident of another country under a treaty, thereby ensuring
Australia has no taxing rights on certain types of income.
4 9
13. Other considerations
13.1 Exchange control
Exchange control was abolished some years ago.
However cash transfers into or out of Australia that exceed $10,000
must be reported to the Australian Transaction Reports and Analysis
Centre. It is the responsibility of the cash dealer to report the cash
transfer. Cash dealers are primarily financial institutions but include
other persons and institutions that have the capacity to collect
significant sums of cash.
Various tax reporting requirements may be imposed on transfers of
currency from Australia to designated countries considered tax
havens.
13.2 Purchase of Australian real estate
If you are a temporary resident and wish to purchase Australian real
estate you will generally be required to obtain approval from the
Foreign Investment Review Board. Such approval is not easily granted
to temporary residents for immigration purposes.
No special tax concessions apply regarding the purchase or
construction of a personal home. Interest on borrowed funds used for
this purpose is not tax deductible. However, any gain on disposal of
an individual's principal residence is exempt from CGT.
Limited tax deductions are available for maintenance costs required
for the business use of a home study. More significant deductions are
available if a portion of the home is used as a place of business.
5 0
Appendix A
Checklist of procedures in year of arrival
5 1
Does my letter of assignment detail the intended terms of my
arrangements regarding length of stay and remuneration package?
Has my remuneration package been structured in the most tax-
effective manner for FBT purposes?
Am I going to be in Australia less than 183 days in a year of income
and qualify for exemption from tax by reason of a double tax treaty?
Am I a resident or non-resident of Australia for tax purposes?
Have I obtained a tax file number?
Have I advised my employer and all investment bodies of my tax file
number?
Have I registered with a tax agent to obtain extended tax return
lodgment arrangements?
Am I keeping details of days worked in and out of Australia if I am a
non-resident or my foreign earned income is subject to tax overseas?
Have I obtained a record of the market value of all post CGT assets
held at the date that I became a resident of Australia, in case I should
sell them while resident in Australia?
Have I made any necessary elections regarding employee
shares/options granted to me before I became a resident of
Australia?
Do I need to continue to file an overseas tax return while in Australia
and if so, have I made the necessary arrangements for its
completion?
Am I on an Australian payroll and will I be getting an Australian
payment summary in respect of my earnings for each tax year or will
I need to obtain annual details of my earnings paid by a foreign
employer to report on an Australian tax return?
2.1
3.3, 7.4
11.1
2.1
5.8
5.8
5.2
4.3
3.3.2
3.3.5
5.4
Procedure Done See paragraph
5 2
Am I aware of the need to maintain a travel diary for all overseas
business trips?
Am I keeping records to substantiate all expenditure that is tax-
deductible?
Have I registered with an Australian private health insurance fund to
avoid the Medicare levy surcharge?
Do I qualify for social security benefits?
Will I have to pay instalments of tax under the PAYG instalment
system?
Procedure Done See paragraph
3.4
3.4
10.1
10.4
5.5
ACTUARIAL
ASSURANCE & ADVISORY
CORPORATE FINANCE
CORPORATE REORGANISATION
ENTERPRISE RISK SERVICES
FORENSIC
DELOITTE GROWTH SOLUTIONS
MANAGEMENT SOLUTIONS
RE:SOURCES
TAX
You can contact the following
DELOITTE AUSTRALIAN IAS PRACTICES
SSyyddnneeyy
Grosvenor Place
225 George Street
Sydney NSW 2000
(02) 9322 7000
MMeellbboouurrnnee
505 Bourke Street
Melbourne VIC 3000
(03) 9208 7000
BBrriissbbaannee
Riverside Centre
Level 26, 123 Eagle Street
Brisbane Qld 4001
(07) 3308 7000
PPeerrtthh
Central Park
152-158 St George's Terrace
Perth WA 6000
(08) 9365 7000
AAddeellaaiiddee
Deloitte House
190 Flinders Street
Adelaide, SA 5001
(08) 8407 7000
InternationalInternationalInternationalInternationalInternationalAssignment ServicesAssignment ServicesAssignment ServicesAssignment ServicesAssignment ServicesTTTTTax Sax Sax Sax Sax Summarummarummarummarummaryyyyy2002/2003
ContactsSydney (02) 9322 7000 Sally Morton Stephen Coakley
Melbourne (03) 9208 7000 Sarah Lane
Adelaide (08) 8407 7000 John Rawson
Brisbane (07) 3308 7000 Lisa Hando
Perth (08) 9365 7000 Ross Atkins
Australian Tax Timeline1 July 2002
Beginning of the 2002/03 Australian tax year
28 October 2002
Last date for payment of 1st quarterly PAYG instalment for 2002/03
31 October 2002Last date to be listed on Deloitte’s lodgment program to obtain anextension to the tax return filing deadline.
28 February 2003Last date for payment of 2nd quarterly PAYG instalment for 2002/03
28 April 2003Last date for payment of 3rd quarterly PAYG instalment for 2002/03
(+/-) 30 April 2003Last date for lodgment of 2001/02 return
~2 weeks after lodgment2001/02 income tax assessment issues from ATO
30 June 2003End of the 2002/03 Australian tax year
28 July 2003Last date for payment of 4th PAYG instalment for 2002/03
21 October 2003
Last day for payment of 2002/03 annual lump sum PAYG w w w. d e l o i t t e . c o m . a u
Personal Tax Rates
Resident Non ResidentTaxable Income $ Tax $ % On Excess Taxable Income $ Tax $ % On Excess
6,000 Nil 17 Nil Nil 29
20,000 2,380 30 20,000 5,800 30
50,000 11,380 42 50,000 14,800 4260,000 15,580 47 60,000 19,000 47Note:
(1) The general tax-free threshold of $6,000 is reduced in a year ofpartial residence
Medicare Levy (Residents Only)
Medicare levy 1.5%
Medicare levy surcharge (1) 1%Threshold
Individuals Families
Medicare levy $14,539 $24,534(2)
Medicare levy surcharge $50,000 $100,000(3)
Note:(1) Applies to taxpayers with income above the threshold without
approved private patient hospital cover(2) Plus $2,253 for each child(3) Plus $1,500 for each child after the first
Certain individuals on temporary resident visas are ineligible for Medicarebenefits and can apply to the Minister of Health for a certificate of exemption
Superannuation and Eligible Termination Payments
Employer Contributions
Age of Employee Maximum Deductible Contributions 2002 – 2003
Less than 35 $12,651
35 – Under 50 $35,138
50 Years and Over $87,141
Superannuation Contributions and Termination Payments Tax Surcharge
Adjusted Taxable Income $ Surcharge 2002 – 2003 %
Nil - 90,527 Nil
90,527 - 109,924 Adjusted Taxable Income less $90,527
$1,295
Over 109,924 15
Superannuation Guarantee
Employers must contribute 9% of an employee’s earnings base (to a maximumearnings base of $29,220 per quarter in 2002/03) to a complyingsuperannuation fund.
FBT continued
FBT on Cars – Statutory Formula
Annualised Kilometres Travelled Statutory Fraction Applied to Car Cost
14,999 or less 26%
15,000 to 24,999 20%
25,000 to 40,000 11%
40,001 or more 7%
Offsets
◗ 20% rebate on unreimbursed medical expenditure over $1,500
◗ Dependent spouse tax offset (2001/02) – $1,437
◗ Low income earner tax offset – $150
◗ Family Tax Benefit (FTB) Part B– youngest child under 5 - $2,836,– youngest child 5 or over - $1,978
Notes:
(1) Spouse tax offset reduced by $1 for every $4 by which thespouse’ s net income exceeds $282
(2) Low income earner tax offset is reduced by $1 for every $4 whichthe taxpayer’s income exceeds $20,700
(3) FTB reduced by 30¢ for every $1 by which the spouse’s income exceeds$1,752
This publication is of a general nature, intended as a background briefing only. It is not intended tobe relied upon as, nor to be a substitute for, specific professional advice. No liability will be acceptedfor any loss occasioned to any party acting upon or refraining from acting in reliance on informationcontained in this publication. The liability of Deloitte Touche Tohmatsu is limited by, and to theextent of, the Accountants’ Scheme under the Professional Standards Act 1994 (NSW). © 2002 Deloitte Touche Tohmatsu. All rights reserved. Printed in Australia.
Tax-free Amount of Bona Fide Redundancy Payments
The tax-free amount of a bona fide redundancy or approved earlyretirement scheme payment is the lesser of:
(i) the actual payment received; or
(ii) $5,623 plus $2,812 for each whole year of employment servicecompleted. It should be noted that the tax-free amount calculatedabove, does not represent part of an ETP.
Withholding Tax on Australian Income Received by Non Residents
◗ Unfranked dividends(1) 30%
◗ Interest 10%
◗ Royalties(2) 30%Note:
(1) Reduced to 15% by most tax treaties(2) Reduced to 10% or 15% by most tax treaties
Reasonable Benefit Limits (RBLs)
RBL Standard Limits 2002 – 2003
Lump Sum $562,195
Pension $1,124,384
LAFH – Tax exempt reasonable food allowance (FBT year ending 31 March 2003)
Family Size Tax Free Allowance Tax Free AllowancePer Week $ Per Annum $
1 Adult 122 6,3442 Adults 179 9,3083 Adults 170 8,8402 Adults, 1 Child 191 9,9322 Adults, 2 Children 170 8,8402 Adults,3 Children 198 10,2963 Adults, 1 Child 198 10,2963 Adults, 2 Children 226 11,752
4 Adults 226 11,752Note:
(1) Children are persons younger than 12 years at the beginning of theFBT year, ie 1 April. In relation to larger family groupings, anallowance based on the above figures plus $57 for eachadditional adult and $28 for each additional child is accepted
Fringe Benefits Tax (FBT)
General
◗ FBT rate on grossed up value 48.5%
◗ Gross-up factor – benefits for which employer canclaim input tax credit under GST 2.1292
◗ Gross-up factor – benefits for which employer cannotclaim input tax credit under GST 1.9417
◗ FBT benchmark interest rate 6.05%
Visit our client resources website for access to Australian taxinformation and administration documents you will need during your
international assignment – https://www.ozeorganiser.com
InternationalInternationalInternationalInternationalInternationalAssignment ServicesAssignment ServicesAssignment ServicesAssignment ServicesAssignment ServicesTTTTTax Sax Sax Sax Sax Summarummarummarummarummaryyyyy2002/2003
ContactsSydney (02) 9322 7000 Sally Morton Stephen Coakley
Melbourne (03) 9208 7000 Sarah Lane
Adelaide (08) 8407 7000 John Rawson
Brisbane (07) 3308 7000 Lisa Hando
Perth (08) 9365 7000 Ross Atkins
Australian Tax Timeline1 July 2002
Beginning of the 2002/03 Australian tax year
28 October 2002
Last date for payment of 1st quarterly PAYG instalment for 2002/03
31 October 2002Last date to be listed on Deloitte’s lodgment program to obtain anextension to the tax return filing deadline.
28 February 2003Last date for payment of 2nd quarterly PAYG instalment for 2002/03
28 April 2003Last date for payment of 3rd quarterly PAYG instalment for 2002/03
(+/-) 30 April 2003Last date for lodgment of 2001/02 return
~2 weeks after lodgment2001/02 income tax assessment issues from ATO
30 June 2003End of the 2002/03 Australian tax year
28 July 2003Last date for payment of 4th PAYG instalment for 2002/03
21 October 2003
Last day for payment of 2002/03 annual lump sum PAYG w w w. d e l o i t t e . c o m . a u
Personal Tax Rates
Resident Non ResidentTaxable Income $ Tax $ % On Excess Taxable Income $ Tax $ % On Excess
6,000 Nil 17 Nil Nil 29
20,000 2,380 30 20,000 5,800 30
50,000 11,380 42 50,000 14,800 4260,000 15,580 47 60,000 19,000 47Note:
(1) The general tax-free threshold of $6,000 is reduced in a year ofpartial residence
Medicare Levy (Residents Only)
Medicare levy 1.5%
Medicare levy surcharge (1) 1%Threshold
Individuals Families
Medicare levy $14,539 $24,534(2)
Medicare levy surcharge $50,000 $100,000(3)
Note:(1) Applies to taxpayers with income above the threshold without
approved private patient hospital cover(2) Plus $2,253 for each child(3) Plus $1,500 for each child after the first
Certain individuals on temporary resident visas are ineligible for Medicarebenefits and can apply to the Minister of Health for a certificate of exemption
Superannuation and Eligible Termination Payments
Employer Contributions
Age of Employee Maximum Deductible Contributions 2002 – 2003
Less than 35 $12,651
35 – Under 50 $35,138
50 Years and Over $87,141
Superannuation Contributions and Termination Payments Tax Surcharge
Adjusted Taxable Income $ Surcharge 2002 – 2003 %
Nil - 90,527 Nil
90,527 - 109,924 Adjusted Taxable Income less $90,527
$1,295
Over 109,924 15
Superannuation Guarantee
Employers must contribute 9% of an employee’s earnings base (to a maximumearnings base of $29,220 per quarter in 2002/03) to a complyingsuperannuation fund.
FBT continued
FBT on Cars – Statutory Formula
Annualised Kilometres Travelled Statutory Fraction Applied to Car Cost
14,999 or less 26%
15,000 to 24,999 20%
25,000 to 40,000 11%
40,001 or more 7%
Offsets
◗ 20% rebate on unreimbursed medical expenditure over $1,500
◗ Dependent spouse tax offset (2001/02) – $1,437
◗ Low income earner tax offset – $150
◗ Family Tax Benefit (FTB) Part B– youngest child under 5 - $2,836,– youngest child 5 or over - $1,978
Notes:
(1) Spouse tax offset reduced by $1 for every $4 by which thespouse’ s net income exceeds $282
(2) Low income earner tax offset is reduced by $1 for every $4 whichthe taxpayer’s income exceeds $20,700
(3) FTB reduced by 30¢ for every $1 by which the spouse’s income exceeds$1,752
This publication is of a general nature, intended as a background briefing only. It is not intended tobe relied upon as, nor to be a substitute for, specific professional advice. No liability will be acceptedfor any loss occasioned to any party acting upon or refraining from acting in reliance on informationcontained in this publication. The liability of Deloitte Touche Tohmatsu is limited by, and to theextent of, the Accountants’ Scheme under the Professional Standards Act 1994 (NSW). © 2002 Deloitte Touche Tohmatsu. All rights reserved. Printed in Australia.
Tax-free Amount of Bona Fide Redundancy Payments
The tax-free amount of a bona fide redundancy or approved earlyretirement scheme payment is the lesser of:
(i) the actual payment received; or
(ii) $5,623 plus $2,812 for each whole year of employment servicecompleted. It should be noted that the tax-free amount calculatedabove, does not represent part of an ETP.
Withholding Tax on Australian Income Received by Non Residents
◗ Unfranked dividends(1) 30%
◗ Interest 10%
◗ Royalties(2) 30%Note:
(1) Reduced to 15% by most tax treaties(2) Reduced to 10% or 15% by most tax treaties
Reasonable Benefit Limits (RBLs)
RBL Standard Limits 2002 – 2003
Lump Sum $562,195
Pension $1,124,384
LAFH – Tax exempt reasonable food allowance (FBT year ending 31 March 2003)
Family Size Tax Free Allowance Tax Free AllowancePer Week $ Per Annum $
1 Adult 122 6,3442 Adults 179 9,3083 Adults 170 8,8402 Adults, 1 Child 191 9,9322 Adults, 2 Children 170 8,8402 Adults,3 Children 198 10,2963 Adults, 1 Child 198 10,2963 Adults, 2 Children 226 11,752
4 Adults 226 11,752Note:
(1) Children are persons younger than 12 years at the beginning of theFBT year, ie 1 April. In relation to larger family groupings, anallowance based on the above figures plus $57 for eachadditional adult and $28 for each additional child is accepted
Fringe Benefits Tax (FBT)
General
◗ FBT rate on grossed up value 48.5%
◗ Gross-up factor – benefits for which employer canclaim input tax credit under GST 2.1292
◗ Gross-up factor – benefits for which employer cannotclaim input tax credit under GST 1.9417
◗ FBT benchmark interest rate 6.05%
Visit our client resources website for access to Australian taxinformation and administration documents you will need during your
international assignment – https://www.ozeorganiser.com
Australia’s Double Taxation TreatiesThe following table sets out those countries with which Australia has entered into doubletaxation treaties together with the source country tax limits applicable to dividends, interestand royalties.
Country Dividends % Interest % Royalties %Argentina 10-15 12 10-15Austria 15 10 10Belgium 15 10 10Canada 15 15 10China 15 10 10Czech Republic 5 or 15 10 10Denmark 15 10 10Fiji 20 10 15Finland 15 10 10France 15 10 10Germany 15 10 10Greece No limit No limit No limitHungary 15 10 10India 15 15 10-20Indonesia 15 10 10-15Ireland 15 10 10Italy 15 10 10Japan 15 10 10Kiribati 20 10 15Korea 15 15 15Malaysia 15 15 15Malta 15 15 10Netherlands 15 10 10New Zealand 15 10 10Norway 15 10 10Papua New Guinea 15-20 10 10Philippines 15-25 15 15-25Poland 15 10 10Romania 5 or 15 10 10Russia 5 or 15 10 10Singapore 15 10 10Slovak Republic 15 10 10South Africa 15 10 10Spain 15 10 10Sri Lanka 15 10 10Sweden 15 10 10Switzerland 15 10 10Taiwan 15 10 12.5Thailand 15-20 10-25 15United Kingdom 15 10 10United States 15 10 10Vietnam 10-15 10 10
as a
t 1 A
pril
2001
Tax Services Case Studies
Common Rental Deductions
• Advertising
• Agents commission/management fees
• Bank charges
• Body corporate fees/strata levies
• Borrowing expenses eg. application fee, stamp duty on mortgage
• Cleaning
• Construction cost of building write-off
• Council rates
• Depreciation (refer below)
• Gardening
• Insurance
• Morgage interest on loans used to acquire property
• Land tax
• Legal fees/leasing preparation
• Pest control
• Repairs and maintenance – undertake during period of
assignment to obtain a tax deduction
• Safe deposit box
• Stationery, telephone and postage
• Travel costs
• Water rates
Rental Property Deductions
Outlined below are some of the
common rental deductions
that you can claim against
your rental income. Please
note that you should maintain
records of these expenses in
order to maximise the
available deductions on your
income tax returns.
TA X S E R V I C E S R E N TA L P R O P E R T Y D E D U C T I O N S
TA X S E R V I C E S R E N TA L P R O P E R T Y D E D U C T I O N S
Common Depreciable Items
Where applicable, note the date of purchase and purchase cost of
the following items:
• Air-conditioner
• Blinds
• Carpets
• Curtains/drapes
• Dishwasher
• Furniture and fittings
• Heater
• Hot water service
• Light fittings
• Microwave
• Stove
• Rangehood (above stove)
• Refrigerator
• Security system
• Sprinkler system
• Washing machine
Tax Services Case Studies
What is written evidence?
A receipt is the most common form of written evidence. To be a
valid receipt the following information must be recorded:
1. the name of the supplier
2.the amount of the expense
3. the nature of the goods or services
4.the date the expense was incurred,
5. the date of the document.
You can add the day the expense was incurred or the nature of the
goods or services, if these items are not originally shown. However,
additional supporting evidence will be necessary (ie. credit card
statement). Credit card statements are accepted instead of a receipt,
provided all the necessary information is recorded on the statement.
If the expense is a small item (ie. less than $10 and up to a
maximum of $200 in aggregate for the year) or it is considered
unreasonable to expect you to get a receipt, you can keep an
expense diary instead of getting written evidence. The information
that needs to be kept in an expense diary is the same as that
shown on a valid receipt, as noted above.
Record Keeping for Employment Related Deductions
In Australia, income tax is
calculated on the basis of a
person’s taxable income. Taxable
income is calculated by deducting
‘general’ and ‘specific’ deductions
incurred in the year of income from
the total assessable income for
that year.
An allowable deduction is an
expense that is directly related to
your income earning activities.
However, you cannot claim a
deduction if the Commissioner of
Taxation considers the expense is of
a private or capital nature. For most
employment related deductions, it
is necessary to obtain written
evidence to prove your claim.
Failure to keep this written
evidence could result in the
Commissioner of Taxation
disallowing your claim for a
deduction.
You must keep documents used to
prepare your income tax return for
5 years from the date the return
was lodged.
TA X S E R V I C E S R E C O R D K E E P I N G F O R E M P LO Y M E N T R E L AT E D D E D U C T I O N S
TA X S E R V I C E S R E C O R D K E E P I N G F O R E M P LO Y M E N T R E L AT E D D E D U C T I O N S
When is written evidence necessary?
It is not necessary for you to keep written
evidence if your employment expenses do not
exceed $300 for the year. If the total amount of
your claims exceeds $300 you will need to have
written evidence of the total amount of your
claim. However, this $300 limit does not include
expenses related to overtime meal allowances,
travel allowances and car expenses.
Travel allowances
If your employer pays you an allowance to cover
travel expenses, you do not have to have written
evidence provided your claim does not exceed the
rates specified by the Commissioner of Taxation.
These rates change each year and are different for
each location. You should contact your Deloitte tax
adviser for further information about the rates.
For overseas travel the Commissioner provides
daily rates only for meals and incidental expenses.
You must keep written evidence of accommodation
costs incurred whilst travelling overseas.
If you wish to claim a deduction in excess of the
Commissioner’s reasonable rates, you will need
written evidence of your total expenses.
If your employer does not pay an allowance to
cover travel expenses, you can still claim a
deduction for travel expenses. However, you will
need to have written evidence of all expenses.
Where you are travelling for periods in excess of 5
consecutive nights, you need to keep a travel
diary. In this diary you must keep details of each
business activity undertaken whilst travelling.
Each entry must contain details of the nature of
the activity, the day and time when it began, how
long it lasted and where the activity took place.
What records must you keep for
depreciation claims?
If you are claiming depreciation, you must keep a
record of the purchase of the item. The purchase
document must record the same information that
would be recorded on a receipt.
You must keep this written evidence for 5 years
after the last year in which a depreciation claim is
made on the property.
How can you work out your motor
vehicle expense deduction claims?
If you own or lease a motor vehicle, there are 4
methods that you can use to work out your claim.
You must use one of the following methods.
However, you can use a different method for each
year and for each car.
1. Log Book method
This method requires you to keep a log book for 12
weeks for all business related trips commencing in
the first year in which you wish to use this method
and then every 5 years thereafter. In the log book
you must record the following:
• the date the trip began and ended
• the odometer readings at the start and end of
the trip
• the kilometres travelled on the journey,
• the purpose of the trip.
The purpose of a log book is to determine your
percentage of business related usage of your
motor vehicle.
TA X S E R V I C E S R e c o r d K e e p i n g f o r E m p l o y m e n t R e l a t e d D e d u c t i o n s
Generally, expenses of home to work travel is
considered to be of a private nature and is
therefore, not deductible.
You must also keep written evidence of all
expenses incurred during the year.
You must keep a record of the odometer readings
of the motor vehicle at the start and end of each
year of income.
If you have not kept written evidence of your fuel
and oil expenses, the expense can be worked out
by using your odometer readings.
The log book method is the best method to use if
you are using your car extensively during the year
for business purposes.
2. Cents per kilometre
Your claim is worked out by multiplying the
business kilometres travelled during the year by
the rate specified by the Commissioner for cars.
These rates vary each year based on the engine
capacity of the car.
This method is limited to a maximum of 5,000
business kilometres travelled during the year. (ie. if
you travel in excess of 5000 business kilometres,
your claim is limited to 5000 kilometres)
It is not necessary to keep detailed records of the
kilometres travelled. You only have to be able to
provide a reasonable estimate of how you
determined the kilometres travelled.
This method is better where low business
kilometres are travelled during the year or
inadequate car expense records have been
maintained.
3. One-third of actual expenses
This method is only available if you travel more
than 5000 business kilometres during the year.
Under this method you are required to keep
written evidence of all expenses incurred during
the year. You are entitled to claim a deduction of
one-third of these expenses. If you haven’t kept
written evidence of fuel and oil expenses, the
claim can be determined by odometer readings.
4. 12% of original cost of car
This method is only available if you travel more
than 5000 business kilometres during the year.
The calculation is based on the original cost of the
car to you but limited to the motor vehicle
depreciation cost limit determined annually by
the Commissioner of Taxation. However, if the
car is only owned for part of the year, the claim is
apportioned accordingly. You must keep a record
of the cost you paid for your car.
If you have any further questions
concerning the written evidence required
to correctly claim tax deductions, please
contact your Deloitte tax adviser.
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