1 COMING TO AUSTRALIA AN EMPLOYEE S TAX GUIDE July 2014
2 2 COMING TO AUSTRALIA INTRODUCTION TO BDO BDO is the fifth largest full service professional services firm in Australia and globally with offices in Adelaide, Brisbane, Cairns, Darwin, Hobart, Melbourne, Sydney and Perth, as well as 1,264 offices around the world, our national practice has 160 partners and over 1,200 staff. BDO has deep expertise in multiple specialist services, specifically audit, tax and advisory. The depth of our team provides reliability, technical expertise and global reach to match any other service provider. Our foundation of building close relationships with our clients allows us to be highly responsive and nimble to adapt to their ever changing needs. We have a unique blend of services, including corporate and international tax, corporate finance and valuations, business consulting, internal audit, risk advisory, specialist IT assurance services, forensic as well as the more traditional audit services. Fifth The BDO network is the world s fifth largest accountancy network 1,264 Offices everywhere you need them 56,000 Partners and staff worldwide 144 Present in over 144 countries
3 COMING TO AUSTRALIA 3 TABLE OF CONTENTS 1. Introduction 4 2. Visa Requirements 5 Visitors 5 Temporary Visas 5 Permanent Visas 5 Work Permits 5 APEC Business Travel Card 5 3. Tax Compliance 6 Tax Withholding Pay As You Go 6 Lodgement of Tax Returns 6 4. Residence 7 Residents 7 Temporary Residents 7 Foreign Residents 7 5. Categories of Income 8 Employment Income 8 Australian residents and temporary residents 8 Employee Share Schemes 8 Taxable value 8 Taxing Point 8 Australian Residents 8 Temporary Residents 9 Foreign Residents 9 Interest Income 9 Australian Residents 9 Temporary Residents 9 Foreign Residents 9 Dividend Income 9 Australian Residents 9 Temporary Residents 9 Foreign Residents 9 Dividend income 9 Australian residents 9 Temporary residents 9 Foreign residents 10 Capital Gains Tax 10 Australian Residents 10 Temporary Residents 10 Foreign Residents Taxes and Levies 11 Income Tax resident tax rates foreign resident rates 11 Temporary Budget Repair levy 11 Medicare Levy 12 Reciprocal Healthcare Agreements 12 Superannuation 13 Concessional Superannuation Contributions 13 Non concessional Superannuation Contributions 13 Division 293 Tax 13 Fringe Benefits Tax 14 Living Away From Home 14 Children s Education Costs 15 Home Leave 15 Relocation Costs Other Taxes and Levies 16 Goods and Services Tax 16 Payroll Tax 16 WorkCover 16 Property Rates 16 Land Tax 16 Stamp Duty Tax Planning for Employees Double Taxation Agreements 18 Tax Information Exchange Agreements 18
4 4 COMING TO AUSTRALIA 1. INTRODUCTION This guide is intended for individuals moving to Australia for employment purposes. It aims to provide an overview of the main Australian tax considerations and issues that affect employees working in Australia and is correct as at the date publication. BDO Australia s Tax Employment & Expatriate practice offers a full range of services to employees moving to Australia - whether on a temporary or permanent basis. We would be pleased to discuss any aspect of this guide and provide you with further information. This guide is general in nature and you should not act upon information contained in it without seeking professional advice based upon your personal circumstances. Details of our specialist contacts throughout Australia are listed at the end of this guide and details of our offices in your home country can be found at
5 COMING TO AUSTRALIA 5 2. VISA REQUIREMENTS Unless you are an Australian or New Zealand citizen, you generally need to apply for a visa to work in Australia. The class of visa will determine whether you may work in Australia. There are three main categories: Visitor Temporary visas Migrant. New Zealand citizens are generally granted an electronic visa automatically on arrival to Australia. Visitors There are a variety of visitor visas, which usually do not entitle you to work in Australia, including Electronic Travel Authority, subclass 601, subclass 651 and subclass 600 visas. Your nationality and the nature of your travel will determine which is the most appropriate. Temporary Visas A temporary visa generally entitles you to live and work in Australia for a specified period of time. These visas may also entitle your spouse and children to work and study in Australia and include: Sponsorship by an Australian or Overseas Businesses Australian or overseas businesses who are unable to meet their skills needs from the local labour market can sponsor overseas workers to fill skilled positions in Australia on temporary subclass 457 visas Service Sellers Temporary business visa available for foreign nationals who are representatives of overseas suppliers of services who are seeking to negotiate, or enter into, agreements to supply their services in Australia Visiting Accredited Religious Workers Sponsorship arrangements can be entered into for temporary visas for medical practitioners and educational workers Those employed via Labour Agreements and the Employer Nomination Scheme Spouses of temporary residents. Permanent Visas There are a variety of options for permanent migration visas, which include both business skills migration categories and employer sponsored migration categories. Applications for temporary and permanent resident visas can be very complex and it is recommended that specific advice be sought prior to making business plans that involve the transfer of principals or employees to Australia. APEC Business Travel Card Business visitors from Brunei, Chile, China, Hong Kong, Indonesia, Japan, Korea, New Zealand, Papua New Guinea, Peru, the Philippines, Malaysia, Singapore, Taiwan, Thailand and Vietnam can apply for an APEC Business Travel Card, which gives them visa-free travel to Australia and the other participating APEC countries.
6 6 COMING TO AUSTRALIA 3. TAX COMPLIANCE As an employee working in Australia, you will be required to file an annual income tax return. To lodge an Australian income tax return, you must have a Tax File Number (TFN). A TFN is issued by Australia s revenue authority, the Australian Taxation Office (ATO), and can be applied for online if in Australia, or by downloading a form from to be submitted manually together with supporting documentation. When you start work in Australia your employer should ask you for your TFN, and other details, by asking you to complete a TFN Declaration Form. This will enable your employer to make the correct tax withholdings from your earnings. If you do not provide your employer with your TFN Declaration Form within 28 days of commencing employment, your employer will withhold taxes at the highest combined income tax and Medicare levy rate of 49% (regardless of your average tax rate). You may also be asked for your TFN by your bank. While you do not have to provide it, if you do not, tax will be withheld from any interest paid to you at the top marginal tax rate. Tax Withholding Pay As You Go Employers are required to withhold tax under Australia s Pay-As- You-Go (PAYG) system each time salary or wages are paid to you unless they have a variation agreement in place with the ATO. The PAYG taxes are then remitted to the ATO on your behalf. At the end of the tax year, or on leaving employment, your employer will provide you with a PAYG Payment Summary showing wages paid to you and the PAYG withheld. This is similar to a P60 in the UK or a W-2 in the US. If you receive income that is taxable in Australia but has not been subject to withholding (eg: interest income or rental income), you may be asked to pay instalments towards your expected tax liability to the ATO. These are known as PAYG instalments. You will be notified by the ATO if you are required to pay PAYG instalments. PAYG instalments are credited towards your final tax liability. Lodgement of Tax Returns Spouses file separate tax returns and are independently taxed, with no provision for joint filing of tax returns. Your spouse may also be required to lodge an income tax return even if he/she is not working for a number of reasons. The most common ones are: Their taxable income exceeds the relevant tax free threshold They had tax withheld from payments they received They made an income loss or can claim a loss made in a prior year. The Australian tax year runs from 1 July to 30 June, with the tax return filing deadline being 31 October following the tax year end. If you use a tax agent to prepare and file your tax return, you may be granted an extension to file your tax return. The length of the extension will be advised by your tax agent and is based on your personal circumstances. Extensions can be granted to a date between March and May following the end of the tax year. You are generally not required to make a payment on filing your tax return. The ATO will calculate your tax liability based on your tax return and issue a Notice of Assessment showing any tax payable or refundable. The Notice of Assessment will advise the due date of any tax due.
7 COMING TO AUSTRALIA 7 4. RESIDENCE Broadly, there are three categories of residence for individual taxpayers in Australia with scopes of liability to tax as follows: Residents For income tax purposes, you will be regarded as a resident if you reside in Australia, within the ordinary meaning of the word. For individuals arriving in Australia, the ATO will usually consider that you reside in Australia if you arrive with the intention of living in Australia in a routine manner for six months or more. If you do not reside in Australia you may still be regarded as a resident if you meet one of the following tests: You are domiciled in Australia, unless the ATO is satisfied that your permanent place of abode is outside Australia You have been in Australia continuously or intermittently for more than half the income year, unless the ATO is satisfied that your usual place of abode is outside Australia and that you do not intend to take up residence in Australia You are a member of certain Australian government superannuation (pension) schemes. If you are a resident of Australia, you will be taxed on your worldwide income and gains, unless an exemption applies. Temporary Residents If you are a resident as defined above, you may also be regarded as a temporary tax resident if you: Hold a temporary visa granted under the Migration Act, and Do not have a spouse, either married or de-facto (includes same sex partners), who is an Australian citizen or a permanent resident. Temporary residents include New Zealanders who hold special category Visas (SCV). New Zealand citizens who hold Protected SCV can not qualify as temporary residents. It is recommended that all New Zealand citizens seek advice to confirm their Australian tax residency status. A temporary residency status can be held for as long as these conditions are met. Temporary residents are subject to tax on earnings relating to worldwide employment services performed while a temporary resident at resident tax rates but are exempt from tax in Australia on: Foreign sourced personal and investment income Capital gains (and losses) other than those arising the disposal of Taxable Australian Property (Australian real property and an indirect interest in Australian real property). However, whilst most residents are usually required to deduct withholding tax from interest paid to foreign lenders, temporary residents are not. Foreign Residents You will be treated as a foreign resident if you are not a resident or temporary resident. As a general rule, foreigners who are present in Australia for less than six months are considered to remain foreign residents (though this must be assessed on a case by case basis). As a foreign resident, you will only be taxed in Australia on: Australian sourced income (subject to withholding tax) Gains arising from the disposal of Taxable Australian Property (Australian real property and an indirect interest in Australian real property).
8 8 COMING TO AUSTRALIA 5. CATEGORIES OF INCOME Employment Income Salary or wages, including bonuses, commissions and allowances earned by you is considered to be sourced in the country where you perform the relevant employment duties, irrespective of where you are paid. As such, salary and wages earned by you while working in Australia is taxable in Australia, regardless of whether you are paid from an Australian or foreign payroll. Fringe benefits (non cash benefits) are not subject to income tax but to Fringe Benefits Tax (FBT), which is payable in the hands of the employer. Please refer to section 6 for further details. Australian residents and temporary residents As a tax resident or a temporary tax resident, you are subject to Australian income tax on your worldwide employment income. Salary and wages earned before your arrival in Australia but paid to you after your arrival when you are a resident, is taxable in Australia subject to claiming a Foreign Income Tax Offset (FITO), This income may be exempt if you are a temporary resident in some cases. Foreign residents Salary and wages relating to Australian employment services is taxable in Australia. However, income relating to foreign workdays will be exempt from Australian income tax if you are a foreign resident. Employee Share Schemes The taxation of Employee Share Schemes (ESS) interests is complex and your exposure to Australian income tax and possibly Capital Gains Tax (CGT) will depend on several factors once you have acquired an interest in an ESS. This may be an interest in shares directly, rights to acquire shares or options over shares. The factors to consider are: Your residence status when you first acquire the interest Whether the ESS interest qualifies for a reduction in the taxable amount Whether your ESS interest is at real risk of forfeiture and if so, your residence status when that real risk of forfeiture ceases The taxable value of the ESS interest. Taxable value Broadly, the taxable value of the ESS interest is the difference between its market value at the taxing point and the price you pay for it. This is called the discount. Taxing Point The taxing point occurs when the ESS interest is first acquired. However, if the ESS interest is subject to real risk of forfeiture or disposal restriction, amongst other factor, the taxing point may be deferred to when that real risk of forfeiture or disposal restrictions ceases. Australian Residents If you are an Australian tax resident at the taxing point of the ESS interest you are subject to tax on the discount received in respect to the interest. However, if a portion of the taxable value of the ESS interest relates to a period of employment outside Australia, you may be able to claim a foreign income tax offset in respect of any related tax that has been paid in the foreign country. Temporary Residents If you are a temporary tax resident at the taxing point, you are subject to Australian income tax on the Australian sourced portion of your ESS discount. Foreign Residents If you are a foreign resident at the taxing point of the ESS interest, you are only subject to income tax on the Australian portion of the discount.
9 COMING TO AUSTRALIA 9 Interest Income Interest income is generally sourced in the country where a requirement to pay the interest arises. Australian residents As an Australian resident, you are subject to Australian income tax on interest income from worldwide sources. You may be Foreign Income Tax Offset for foreign taxes paid on foreign sourced interest income. Temporary residents If you are a temporary tax resident, you will only be subject to tax on income from Australian sources. Foreign residents If you are a foreign resident, you will only be subject to tax on income from Australian sources. Australian sourced interest should have tax withheld from your financial institution before payment to you. Generally, the withholding tax rate is 10%. However, this may vary depending on whether Australia has entered into a Double Taxation Agreement (DTA) with your home country and the rate within the relevant DTA. Withholding tax is a final tax. You should notify your financial institution of your residency status so they withhold tax from your interest income. Where your financial institution does not withhold tax on your interest income, you will be required to pay the withholding tax at the time your tax return is completed. Dividend Income Dividends are generally sourced in the country where the profits of the paying company are sourced. This can be very difficult to determine and it is acceptable to source the dividends in the country where the paying company is listed. There are two types of Australian dividend payments: 1. Franked these are payments made from profits from which the company has already paid tax on. An imputation or franking credit is distributed to shareholders to recognise the underlying corporate tax paid at 30%. The 30% franking credit may be set against your liability on the grossed up dividend, other taxable income or any excess may be repaid to you. If you are a non resident, further tax is due on franked dividends. 2. Unfranked these are payments made from profits which have not already been subject to Australian corporate income tax and do not carry an imputation credit. Australian residents You will be subject to income tax on dividend income from worldwide sources if you are a tax resident of Australia. You may be able to claim a credit for foreign taxes paid on foreign sourced dividend income. If you earn Australian sourced dividend income, you need to declare the net dividend plus the franking credit as assessable income in your tax return. Temporary residents If you are a temporary tax resident, you will only be subject to tax on Australian sourced dividend income. If you earn Australian sourced dividend income, you need to declare the net dividend plus the franking credit as assessable income in your tax return.
10 10 COMING TO AUSTRALIA Foreign residents If you remain a foreign resident whilst on assignment to Australia, you will be subject to Australian tax on Australian sourced dividend income only. If you receive franked dividend income from Australian sources, no further tax is due. Any unfranked dividends should have 30% tax withheld before payment to you. This is a final tax, so you will not need to declare this dividend in your tax return if you need to lodge an Australian tax return for any other reason (unless tax has not been withheld from the dividend). The withholding tax rate may be reduced if you are a resident in a country with which Australia has a Double Taxation Agreement (DTA) that allows for this. The withholding tax rate may be reduced if you are a resident in a country with which Australia has a Double Taxation Agreement (DTA) that allows for this. Capital Gains Tax Capital Gains Tax (CGT) applies to assets acquired after 19 September 1985 but not to winnings from betting, lottery, other forms of gambling or games with prizes. There are also exemptions from gains or losses made from the disposal of your family home (main residence) and the sale of most motor vehicles. If the asset being disposed of was held for at least 12 months, a reduction in the taxable value is determined using one of two methods: If the asset was purchased after 21 September 1999, the gain is reduced or discounted by 50% If the asset was purchased before 21 September 1999, you have a choice to use either the discount method, or claim indexation which increases the cost base of the asset for inflation for periods of ownership up to 30 September 1999 only. Capital losses that arise on the disposal of assets may be used to reduce taxable capital gains made on other assets or carried forward indefinitely. Capital losses cannot be used to reduce other assessable income. Losses on personal use items are not allowed, except for certain specified exceptions Australian residents On becoming a tax resident of Australia, the cost base for CGT purposes of your assets is deemed to be their market value at the date you become a resident, where the assets were acquired while you were a foreign resident. This deemed acquisition rule does not apply to Taxable Australian Property, which includes Australian real property among other items. This means that effectively, you will only be subject to CGT based on the increase in value of your assets (other than Taxable Australian Property) from the date that you become a tax resident. If you leave Australia and become a foreign resident, you are deemed to have disposed of all of your assets at their market value at the date you cease Australian tax residency (ie; the day after your departure date). Please refer to BDO s Leaving Australia publication for further details. Temporary residents If you are a temporary resident, you are only subject to CGT on the disposal of Taxable Australian Property (ie: real property amongst other items). Foreign residents If you are a foreign resident of Australia, you are only subject to CGT on the disposal of Taxable Australian Property (ie: real property amongst other items). The 50% CGT discount does not apply for foreign and temporary residents who dispose of Taxable Australian Property or assets they have elected to treat as Taxable Australian Property on or after 8 May There are special rules for assets that were held prior to 8 May 2012, which are designed to allow foreign and temporary residents to ensure that only the gain accruing after 8 May 2012 is denied the discount.
11 COMING TO AUSTRALIA TAXES AND LEVIES Income Tax 2015 resident tax rates: The following rates apply from 1 July 2014 TAXABLE INCOME TAX RATE TAX ON INCOME BELOW THIS BRACKET 0 $18,200* Nil $0 $18,201 $37,000 19% $0 $37,001 $80, % $3,572 $80,001 $180,000 37% $17,547 $180,001 and over** 47% $54,547 *The tax free threshold level is prorated for part year residents. **Includes the Temporary Budget Repair levy of 2% The rates above to not include the Medicare levy (see the following paragraph for more information) foreign resident rates: The following rates apply from 1 July TAXABLE INCOME TAX RATE TAX ON INCOME BELOW THIS BRACKET 0 $80, % $0 $80,001 $180,000 37% $26,000 $180,001 and over* 47% $63,000 * Inlcudes the Temporary Budget Repair levy of 2% Foreign residents are not required to pay the Medicare levy. Temporary Budget Repair levy As part of the 2014 Federal budget the Government announced that it will impose a temporary Budget Repair levy of 2% on that part of a person s taxable income which exceeds $180,000. The levy will apply from 1 July 2014 and apply to the , and financial years.
12 12 COMING TO AUSTRALIA Medicare Levy Medicare is a government scheme that gives Australian residents access to health care. In addition to income tax, if you are a resident, you need to pay the Medicare levy at a rate of 2% on taxable income, subject to exemptions for low-income earners. A further Medicare levy surcharge may be charged if your adjusted taxable income (which includes taxable income, reportable fringe benefits and other specific items) exceeds $90,000 (singles) or $180,000 (couples) and you do not hold qualifying private medical insurance. The income threshold increases by $1,500 for each dependent child after the first. From the year onwards, the Medicare levy surcharge will be income tested against the following income tier thresholds: Singles Couples TIER 1 TIER 2 TIER 3 TIER 1 TIER 2 TIER 3 $90,001 - $105,000 $180,001 - $210,000 $105,001 - $140,000 $210,001 - $280,000 $140,001 or more $280,001 or more Rates 1.0% 1.25% 1.5% To be entitled to Medicare benefits and services, you must fall into one of the following categories: 1. A citizen of Australia, 2. Have been issued with or applied for a permanent visa or 3. Qualify under one of Australia s reciprocal healthcare agreements. If you and your dependants are not eligible for Medicare you are exempt from the Medicare levy and surcharge. Reciprocal Healthcare Agreements Individuals who arrive in Australia from a country with which Australia has a reciprocal health agreement may also be entitled to Medicare benefits and services. These agreements are designed to provide overseas visitors with broadly the same level of healthcare benefits that would be received by an Australian who visited the particular overseas country. Australia has signed reciprocal healthcare agreements with the following countries: Belgium Finland Italy Malta New Zealand Norway Republic of Ireland The Netherlands Slovenia Sweden United Kingdom To be covered by these agreements, you must generally have resided in one of these countries immediately prior to moving to Australia, or be a citizen in the case of Ireland and New Zealand. The level of benefits and services granted under these agreements are generally restricted to immediately necessary care only. As such, private medical insurance may still be required in order to obtain full coverage. Visitors from Italy and Malta will only be covered for a period of six months from the date of arrival in Australia and thereafter, will not be eligible for Medicare.
13 COMING TO AUSTRALIA 13 Superannuation Employers of most employees working in Australia are required to pay contributions for their employees into an Australian complying superannuation fund. Superannuation contributions are required at to be made into an approved Australian superannuation fund at the rate of 9.5% (rising by small increments each year until it reaches 12% on 1 July 2019) up to the Maximum Contributions Base (currently $49,430 per quarter for the year ending 30 June 2015). Contributions are not required in respect of exempt employees, which include: Non-resident employees in relation to work performed outside Australia Resident employees in relation to work performed outside Australia and employed by a non-resident employer Employees who receive salary and wages totalling less than $450 per calendar month Foreign executive employees who hold particular subclasses of visas (subject to additional requirements) Employees exempt under a totalisation agreement with another country. If you hold a temporary visa you may withdraw the funds in your superannuation account after you have left Australia permanently, subject to a 38% withholding tax. Please note New Zealand citizens cannot withdraw the funds until they reach retirement. Concessional Superannuation Contributions Concessional contributions include employer contributions (including contributions made under a salary sacrifice arrangement) and personal contributions claimed as a tax deduction by a self-employed person. Concessional superannuation contributions into a superannuation fund are usually taxed at a rate of 15% within the fund. Contributions up to $30,000 ($35,000 if aged 49 or over on 30 June 2014) per annum can be contributed into Australian superannuation tax effectively and counts towards an individual s concessional contributions cap as long as the sum of their total income and concessional contributions is less than $300,000 (see Division 293 tax below). Concessional superannuation contributions over the $30,000 (or $35,000) cap are included in the individual s assessable income and taxed at their marginal tax rate up to a maximum of 49%. Non Concessional Superannuation Contributions Non-concessional contributions include personal contributions for which you do not claim an income tax deduction (i.e. post tax contributions). Non concessional superannuation contributions are not taxed upon contribution up to a cap of $180,000 per annum (or $540,000 per annum where the cap is brought forward for two years). Contributions above this cap are taxed at an individual s marginal tax rate up to a maximum of 47%. Division 293 Tax An individual is generally liable to pay Division 293 tax if the sum of their income and concessional superannuation contributions is greater than $300,000. Division 293 tax will be charged at 15% of an individual s taxable concessional contributions above $300,000.
14 14 COMING TO AUSTRALIA Totalisation Agreements Australia has entered into agreements with a number of countries, which address the problem of international assignees being required to make social security contributions in both their home and host countries at the same time. Superannuation is treated as social security for this purpose. If Australia has an agreement in place with your home country, you may obtain a certificate from your home country authority which will exempt your employer in Australia from having to make superannuation contributions on your behalf. Australia currently has international totalisation agreements with the following countries: Austria Belgium Croatia Chile Czech Republic Finland Germany Greece Hungary Japan Latvia Republic of Ireland Republic of Korea The former Yugoslav Republic of Macedonia The Netherlands Norway Poland Portugal Switzerland The Slovak Republic United States. Fringe Benefits Tax As an employee you are not liable to income tax on non-cash remuneration, known as fringe benefits. Instead your employer is liable to FBT on fringe benefits at a rate of 47% for the year ending 31 March 2015 and 49% for the years ending 31 March 2016 & 2017 on the grossed up value of the benefit. Unless specifically excluded or subject to a concession under the FBT Act, all fringe benefits are taxable. Living Away From Home Various concessions exist in relation to benefits provided to employees who are required to live away from their usual place of residence for work purposes. In order to qualify as living away from home (LAFH) you would need to have an intention to return to your normal place of residence at the end of your employment or assignment. If you are LAFH for work purposes, your employer may provide you with tax free housing and a tax free food allowance for reimbursement of actual costs. Qualifying Criteria Given the first of the qualifying criteria set out below, very few employees coming to Australia will qualify for the LAFH tax concessions. In order to qualify for tax free food and accommodation allowances or benefits, you would need to meet the following three criteria: The duties of your employment require you to live away from a home in Australia where you usually reside and it is reasonable to conclude that you intend to return to that property. You have an ownership interest (this includes a lease) in the place you are living away from. The home you are living away from must continue to be available for your use throughout the LAFH period. It cannot be let or sublet to a third party.
15 COMING TO AUSTRALIA 15 If you qualify, the LAFH tax concessions will be available for the first 12 months that you are required to live away from home to perform the duties in a particular location. Accommodation This can be provided by direct payment to the landlord or agent, reimbursement to you of your actual accommodation costs or a cash allowance to cover your additional accommodation costs while in the host country. However, there are strict requirements to substantiate actual costs. Food This is a cash allowance paid by your employer directly to you to cover additional food costs whilst you are LAFH. The ATO publishes maximum amounts that it considers reasonable for this allowance on an annual basis. If the allowance is equal to or below the amount that the ATO considers reasonable, substantiation will not be necessary. However, if your allowance is greater than the amount the ATO considers reasonable, you will have to substantiate the expenses in full. Children s Education Costs If you are living away from a home that is in another country to where you are working, your employer can pay the costs of your children s education tax free if your child is under 25 years of age and subject to this being industry custom. The exemption applies to full-time education only, whether in Australia or abroad. This covers the costs of fees, books, uniforms, excursions and any other education costs. You do not need to be living away from a home in Australia to access this concession. Home Leave If you are living away from a home that is in another country to where you are working, a 50% reduction may apply to the taxable value of travel expenses paid by your employer for one holiday trip back to your home country, or to another country, per year for yourself and your family. You do not need to be living away from a home in Australia to access this concession. Relocation Costs If you have permanently relocated to Australia, or obtained permanent residency, the benefits that may be provided exempt of FBT are restricted to those connected with your relocation, incidental costs of disposal of your residence in your home country and, potentially, incidental costs on purchasing a home in Australia. You do not need to be living away from a home in Australia to access this concession.
16 16 COMING TO AUSTRALIA 7. OTHER TAXES AND LEVIES There are no gift, estate or death duty taxes in Australia. However, the disposal of an asset by gift is a realisation that may have CGT implications Goods and Services Tax An indirect, value added, tax known as the Goods and Services Tax (GST) is levied at the rate of 10% on the purchase of most goods and services. Payroll Tax Payroll Tax is levied by each state and territory government on the gross payrolls of employers operating in that state or territory. The tax is paid by the employer, not the employee. WorkCover WorkCover is a compulsory insurance scheme that employers are required to pay premiums towards and that provides support in the case of employee injury or sickness at work. Property Rates Property rates are levied by local authorities on properties to cover local services. If you are renting your property in Australia this is usually paid by the landlord. Land Tax Land Tax is levied by each state and territory government on the unimproved value of land. Exceptions apply for your main residence. Stamp Duty Stamp duty is levied by each state and territory government on documents and contracts for the purchase of real estate and cars.
17 COMING TO AUSTRALIA TAX PLANNING FOR EMPLOYEES Opportunities to reduce your (and your employer s) Australian tax liabilities arise by: Provision of FBT exempt benefits if you are LAFH Provision of FBT exempt benefits on permanent relocation to Australia Maintain investments outside of Australia if you are a temporary resident Consider the superannuation exemption rules for senior executives and assignees from countries with totalisation agreements with Australia Ensure that remuneration in respect of foreign and non-taxable duties is delivered to you before you arrive in Australia Claim exemption from the Medicare levy if appropriate Ensure that qualifying private health insurance is taken out to avoid the Medicare levy surcharge on your adjusted taxable income.
18 18 COMING TO AUSTRALIA 9. DOUBLE TAXATION AGREEMENTS Australia has entered into a Double Tax Agreement (DTA) with a number of countries, for the purpose of: Minimising double taxation by exempting certain income types from tax in one country, or allowing a country to credit tax paid in the other country against its own tax liability Determining which country has the right to tax income types or gains Restricting withholding tax applicable in one country when certain types of income are paid to residents of the other country Determining which country an individual is a tax resident of when both countries claim that the individual is a resident of their countries. DTAs generally prevail over domestic law in both countries in respect of income subject to the DTA. Tax Information Exchange Agreements Australia has entered into a number of Tax Information Exchange Agreements with various countries that allow for Australia and the other country to exchange information that may be relevant to the administration and enforcement of tax laws. Australia currently has DTAs with the following countries: Argentina Austria Belgium Canada Chile China Czech Republic Denmark Fiji Finland France Germany Hungary India Indonesia Ireland Italy Japan Kiribati Malaysia Malta Mexico New Zealand Norway Papua New Guinea Philippines Poland Romania Republic of Korea Russia Singapore Slovakia South Africa Spain Sri Lanka Sweden Switzerland The Netherlands Taipei Thailand United Kingdom United States Vietnam
19 COMING TO AUSTRALIA 19
20 ADELAIDE BRISBANE CAIRNS DARWIN HOBART MELBOURNE PERTH SYDNEY Distinctively different it s how we see you AUDIT TAX ADVISORY bdo.com.au SYDNEY/MELBOURNE Kumar Krishnasamy Partner Meera Srinivasan Manager PERTH Caylee Beazer Associate Director Ben Tay Manager BRISBANE Don Collins Partner This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances. BDO Australia Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO East Coast Partnership ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. BDO is the brand name for the BDO network and for each of the BDO member firms BDO East Coast Partnership. All rights reserved. TX
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