GSL / International Taxation / Australia

Australia tax system - taxation of Australian companies and individuals: VAT, income tax and capital gains. Tax treaties of Australia

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Taxes of Australia

Сorporate tax
Capital gains tax
30%(dividend), 10% (interest), 30% (royalty)
Withholding tax
Exchange control

Basic taxes (briefly)

Personal tax
Corporate tax (in detail)
The standard income tax rate is 30%. There is a reduced rate - 25%
Capital gains tax. Details
The normal rate
VAT. Details
There is no VAT in Australia. The equivalent is GST (Goods and Services Tax). The rate is 10%
Other taxes
Payroll Tax, Property Tax
Government fee
Stamp duty

Individual taxation

Australian tax residents pay income tax generally on their worldwide income, while non-residents pay income tax on income from sources in Australia.

Income tax is levied on a progressive scale. For tax residents of Australia there are the following tax rates:

  • on income up to AUD 18 200 - 0%;
  • on income between AUD 18 200 and AUD 45 000 - 19%;
  • on income between AUD 45 000 and AUD 120 000 - 32.5%;
  • on income between AUD 120 000 and AUD 180 000 - 37%;
  • on income over AUD 180, 000 - 45%.

Non-residents are taxed at a rate of 32,5% on income up to AUD 120 000. Income above this threshold is subject to the same rates as for residents.

Capital gains on the sale of assets as a whole are taxed at ordinary income tax rates. Capital gains losses are deductible only from the gain on the sale of assets. If you own an asset for more than 12 months, a discount of 50% of the gain is available. There are other exemptions.

When residents receive dividends from Australian companies are allowed a credit / refund the relevant portion of income tax paid by the Australian company.

Income Tax

Australian companies pay tax on their worldwide income; foreign companies pay tax on income from sources in Australia.

The rate of corporate income tax is 30%. For small businesses that meet certain conditions the tax rate is 26% in 2020 / 2021 (25% in 2021 / 2022).

Gains from the sale of assets are generally taxed at the corporate tax rate. Losses are reduced only by gain on sale of assets. Gains from the sale of shares in foreign companies engaged in an active business are not taxable, provided that at least a 10% interest has been held for at least one year. There may be a partial exemption in the portion attributable to the active business of the company being sold.

Dividends from an Australian company are tax-free by providing a credit against income tax paid by the distributing company. Dividends from a foreign company with 10% or more participation are not taxable.

CFC rules

A controlled foreign company is a foreign company in which 5 or fewer Australian tax residents have an interest (direct or indirect) of more than 50%, and where the Australian tax resident has control over the foreign company (in particular, if the interest together with related parties is more than 40%).

Undistributed "passive" profit of a CFC is included in the taxable income of Australian residents.

Profit of CFCs which are active abroad (passive income - less than 5% of the total income) is not taxable.

"Passive" profits include, among other things, profits from trading operations and services related to Australia.

For CICs from some countries (U.S., U.K., and others), fewer types of "passive" income are included in taxable income.

Withholding tax

No tax is withheld from dividend payments to non-residents unless they are paid out of profits on which no income tax was paid. In the latter case, the withholding tax rate is 30%.

The withholding tax rate is 30% for royalties, 10% for interest.

Tax can be withheld on payment of some other types of income.

Tax rates can be reduced in accordance with double taxation avoidance agreements (DTAs).

Goods and Services Tax (GST)

GST is similar to VAT. The rate of tax is 10%.

Social contributions

Individuals pay health care contributions, which are 2% of taxable income (except for low-income individuals). In addition, high-income individuals pay an additional 1-1,5% health care contribution in the absence of certain minimum voluntary health insurance.

There are mandatory pension contributions. Employers must pay a contribution of at least 9,5% on employee compensation (gradually increasing to 12% by 2025).

Fringe benefits tax (FBT)

FBT is paid by employers at a rate of 47% on non-cash payments (benefits) to employees (car or home loans, low-interest loans, etc.), increased by a certain factor. Such benefits, in general, are not included in the personal income tax base.

Property taxes

Taxes on landowners are levied at the state and municipal levels.

Some states also levy fees and additional taxes on foreign-owned land (individuals, corporations, and trusts).

At the federal level, a special fee is also imposed on aliens who own residential real property that remains vacant for six months or more.

Stamp Duty

Various states and territories in Australia levy stamp duties at different rates on transactions and documents (real estate transactions, vehicles, non-negotiable shares, insurance policies, etc.).

International tax treaties

Australia has 46 Double Tax Treaties (DTCs) and 26 Tax Information Exchange Agreements (TIEAs) with the following jurisdictions:

46 DTCs: Argentina, Austria, Belgium, Canada, Chile, China, Czech Republic, Denmark, Fiji, Finland, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Kiribati, Korea, Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Papua New Guinea, Philippines, Poland, Romania, Russia, Singapore, Slovakia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, UK, USA, Vietnam.

26 TIEAs: Anguilla, Antigua and Barbuda, Aruba, Bahamas, BVI, Belize, Bermuda, Cayman Islands, Cook Islands, Dominica, Guernsey, Gibraltar, Grenada, Jersey, Marshall Islands, Monaco, Montserrat, Netherlands Antilles, Isle of Man, Samoa, San Marino, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Turks and Caicos Islands, Vanuatu.

Australia has also signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral Convention entered into force for New Zealand on January 1, 2019.

Currency controls

In general, there is no restriction on foreign exchange transactions.

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