Moving to... Australia

Welcome to your tax information guide on moving to the Australia. Our detailed Q&A guide has been split into 6 key areas in order to help you find the information you need – quickly and easily!  If you require further help, simply click here to contact us.

This guide is for reference only and professional tax advice should be taken before any action is taken.

Before/Once you arrive

Q. Do I need a work permit to work in Australia?
A. All nationals, excluding Australian and New Zealand citizens, require a valid visa to enter and remain in Australia. The type of visa sought by an expatriate should be dependent on the length and purpose of stay.

Q. Should I complete any documentation upon arrival in Australia?
A. If you are a foreign national then you should apply for an Australian tax file number when you become a resident of Australia for tax purposes.

If you will remain non-resident for tax purposes you are required to notify Australian financial institutions of this. This will ensure that the required withholding tax is deducted and remitted by financial institutions at source. Failure to notify the financial institutions may result in penalty tax being payable.

Q. Should I open an offshore bank account or is it OK to have an account on the Australian mainland?
A.Offshore bank accounts do not create tax advantages from an Australian perspective but they may be advisable from a home country tax perspective. It is important to note that Australia has introducd new tax legislation with respect to foreign exchange gains and losses that present additional complications for tax payers with offshore investments.

If you will remain non-resident for tax purposes, interest earned from Offshore bank accounts will not be subject to Australian  tax and may therefore be beneficial.

Tax - Basics

Q.  What is the tax year?
A. 1 July to 30 June.

Q. How will I be taxed in Australia?
A. Liability to Australian tax will depend upon your residence status and the source of the income. Australian residents are subject to tax on worldwide income and capital gains. If you are non-resident then you will be liable for Australian income tax on Australian source income and on capital gains from the disposal of taxable Australian assets.

Q. How is tax residence determined?
A. You will be a resident of Australia for taxation purposes where you satisfy any of the following tests:

• You are considered domiciled in Australia, unless the tax authorities are satisfied that your permanent place of abode is outside Australia.

• You have been in Australia for more than 183 days in the tax year, either continuously or intermittently, unless the tax authorities are satisfied that your usual place of abode is outside Australia and you have no intention up taking up residence in Australia.

• You are a member of a superannuation scheme established under the Superannuation Act 1990, or an eligible employee for the purposes of the Superannuation Act 1976 or the spouse or a child under 16 years of a person covered by either Act.

The question of whether you are a tax resident of Australia is a question of fact and circumstances. It is to be determined on a year-by-year basis by reference to the particular circumstances of each case.

The Commissioner has also issued a taxation ruling on the residency status of short-term visitors (two years or less) to Australia. The ruling has focused on the behaviour of the visitor and whether the behaviour is consistent with the person 'residing' there.

There are a number of factors which the tax authorities will consider. These include the following:

• Intention or purposes of presence;

• Family and business/employment ties;

• Maintenance and location of assets; and

• Social and living arrangements.

If you enter Australia on pre-arranged employment contract for a period greater than six months, the position adopted by the Australian Taxation Office will generally regard you as a tax resident for the entire period of your stay. It should be noted that a period of less than six months might also be sufficient grounds for tax residency if your behaviour is consistent with “residing” in Australia.

Q. What does ‘Domicile’ mean?
A. In Australia, a person's domicile is, generally, the place considered to be your permanent home.  A domicile of origin is obtained at birth and a domicile of choice is obtained only when you make a conscious decision to change your domicile of origin.  For a place to be regarded as your domicile of choice, you must (1) actually reside in that place and (2) intend to remain there permanently or for an indefinite period.  If you are an expatriate in Australia and intend to stay there for a limited period you will almost invariably retain the domicile that you had before your arrival in Australia.

Q. Are there any regional or state taxes?
A. No. There are no municipal, provincial, cantonal, or church taxes in Australia.

Q. Can I file a joint tax return with my spouse?
A. No. Married persons are taxed separately, not jointly, on all types of income. Joint filing of returns by spouses is not permitted.

Q.  What rate of tax will I pay in Australia?
A.  Total Tax Payable = (Taxable income x Tax rates) - rebates + Medicare Levy

Q. Can I claim a tax deduction for charitable contributions?
A. Charitable contributions made to approved organisations are deductible.

Q. Are any other tax deductions available?
A.  Business expenses are deductible for employees although, entertainment expenses or expenses of a capital, private or domestic nature are not. Deductible expenses include technical journals, professional association memberships and subscription and car and travel expenses. Commuting expenses to and from work are not deductible.

Depreciation on assets used for income producing purposes, home office expenses and other expenses relating to business or income producing purposes may be allowed.

Personal pension fund contributions, tax agent fees paid by the employee and prior year losses (which carry forward indefinitely) are available as a deduction for both business and non-business expenses.

Further, some rebates may be claimed. E.g. 20% of unreimbursed eligible medical costs that exceed A$1,500.

Q. I will also be paying tax in my home country. Am I being taxed twice?
A. Foreign tax credits are available to mitigate potential double taxation. Generally, a resident of Australia is entitled to claim a credit for foreign tax actually paid on foreign-source income that is assessable in Australia, up to the amount of the Australian tax payable on that income. 

Similarly, if you remain taxable in your home country on income earned in Australia a foreign tax credit may be available in your home country.
 
Where you receive certain investment income e.g. dividends and interest, 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 tax treaty, notwithstanding that 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 made separately to the relevant foreign (home) tax authority.

Tax - Administration

Q.  Do I need to file an Australian tax return?
A.  Yes.

Q. When does it need to be filed?
A. Returns should be filed by 31 October following the end of the relevant tax year on 30 June.

Q.  Can the filing deadline be extended?
A. The filing deadline can be extended if you are registered with, and the tax return is prepared by, a tax agent.

Q. What is the procedure for paying tax?
A. Pay As You Go (PAYG) is the system for the collection and remittance of income tax, Medicare levy and HECS liabilities.  PAYG has two main components, PAYG Withholding and PAYG Instalments. 

PAYG Withholding is a system by which taxpayers deduct amounts from payments made to others and remit these amounts to the Australian Tax Office.  Employment income is also subject to tax withholding at source under the PAYG system. Tax is also withheld at source from Australian interest and dividend income if you do not provide your tax file number to the paying institution.

Where a taxpayer has “base assessment instalment income” (income other than wages or salaries) of A$1,000 or more or their most recent tax return resulted in a tax debt of A$250 or more, the taxpayer will generally be required to pay PAYG Instalments. 

For the majority of taxpayers, the PAYG instalments will be payable quarterly. Each instalment will be due 21 days after the end of the quarter.

Tax - Income from Employment

Q. Will non-cash compensation be taxable (e.g. housing)?
A. Generally, employer provided benefits are subject to Fringe Benefits Tax (FBT) payable by the employer, not income tax.

Australia does provide for special tax concessions when employers provide certain benefits to employees who are considered to be living away from their usual place of residence. Tax-free living-away-from-home (LAFH) allowances and benefits are available under FBT rules. Accommodation, relocation expenses, and a reasonable food allowance can be provided tax free in these circumstances.

Employees are considered to be living away from home ("LAFH") if they are required to live away from their usual place of residence in order to perform their employment duties and are expected to return to their home country at the completion of the assignment. The Australian Taxation Office ("ATO") has established a practice whereby it will regard an overseas employee as living away from his or her usual place of residence where it is established that the employee is only in Australia for a period of up to four years.
 
Australia also has complicated rules regarding the taxation of employee shares and options and specific taxation advice should be obtained.

Q.  I will be working in different countries while living in Australia. Will all of my employment income be taxable in Australia?
A. If you are regarded as resident in Australia you will be taxable on worldwide employment income, regardless of where the duties are carried out.

If you are regarded as a non resident you will be taxable on Australian-source income only, although you may be exempted from Australian tax if you remain liable to tax in your home country and you qualify for exemption under the conditions of a tax treaty between Australia and your home country.
 
However, the Australian Taxation Office has recently issued a Public Ruling indicating that the circumstances in which an exemption from Australian tax is available under its tax treaties will be very limited and therefore specific advice on the issue should be obtained.

Tax - Other

Q. Will I pay Australian tax on investments and rental income generated in my home country?
A. If you are regarded as resident of Australia you will be liable to Australian tax on your worldwide income, although foreign tax credits may be available in respect of foreign tax paid on foreign source income.

Q. Does Australia have a Capital Gains Tax regime?
A. Net capital gains are included in assessable income and are subject to income tax.  Any transfer of assets may have capital gains ramifications.  The disposal or deemed disposal of any asset brings the capital gains tax provisions into operation.  Certain relief's are, however, available in the form of rollover elections, which operate to defer capital gains tax liability.

For capital gains tax purposes, an asset is any form of property, tangible or intangible, although it must be an asset having the necessary connection with Australia if a gain on its disposal is to be subject to capital gains tax in the hands of a non-resident.

Capital gains tax was not introduced in Australia until 19 September 1985.  Accordingly, it applies only to disposals of assets acquired, or deemed to have been acquired, on or after 20 September 1985.

Both resident and non-resident individuals are liable for capital gains tax. 

A resident taxpayer is liable for capital gains tax on gains from the disposal of all assets, worldwide, unless specifically excluded.  If a gain from the disposal of an asset located abroad has already been subject to a foreign capital gains tax, a resident taxpayer may be able to claim a credit against Australian tax for the foreign tax paid.

A non-resident taxpayer is liable for capital gains tax on gains from the disposal of specific types of assets that are associated with Australia, known as assets having the necessary connection with Australia.  The liability of a non-resident may be further restricted under the terms of a double tax treaty.  Assets having the necessary connection with Australia include:

• Land and buildings situated in Australia,

• Assets that are—or have been—used in a business or trade carried on by the taxpayer through a permanent establishment in Australia,

• Shares in a private company resident in Australia,

• Shares in a public company resident in Australia, provided that the taxpayer or one or more associates (or both together) owned, at any time within the five years before disposal, at least 10% of the company’s issued share capital,

• An interest in a resident partnership or trust,

• Options or rights to acquire any of the assets listed above,

• The benefits of certain “restrictive covenants” (e.g., non-complete clause payments),

• Any other asset deemed to be an asset having the necessary connection with Australia as a result of an election by an individual becoming a non-resident of Australia (see below for further details).

A special deemed disposal and acquisition rule applies when the residence status of a taxpayer changes.  When you cease to be resident in Australia for tax purposes you are generally deemed to have disposed of all assets acquired since 19 September 1985, other than assets having the necessary connection with Australia, for their market value.  If you become resident in Australia while owning assets acquired after 19 September 1985, other than assets having the necessary connection with Australia, you are deemed to have acquired those assets at the time you become resident at their then market value.

It is possible to elect to override the deemed disposal rule on all affected assets and defer any tax charge until the assets are actually disposed of at some later date following departure.  Furthermore, if you have been resident for fewer than five out of the ten years immediately preceding your departure, you are not deemed to have disposed of any assets owned at the time you became resident, or any assets acquired by inheritance whilst a resident.

Q. What do I need to know about any other tax regime, e.g. Inheritance, Estate or Wealth tax?
A. There are no inheritance, estate, wealth or gift taxes in Australia. However, there is a Stamp Duty regime together with a number of indirect taxes which may affect the cost of living in Australia (Goods and Services Tax and land tax for example).