Taxation Service

Taxation Services – What we offer

Tax Returns

 

Income Tax Returns

Income Tax Returns are required to be lodged annually for all taxpayers, reporting taxable income for the year. The Australian financial year runs from 1 July to 30 June.  However, with ATO approval, it is possible for companies to have a different accounting period known as a ‘substituted accounting period’ or SAP.  There are a limited range of circumstances in which a SAP will be granted.  Being a subsidiary of a foreign company or a branch with a different tax year is sufficient to allow alignment of year-end.  For example, an Australian subsidiary of a US company may elect to have a 31 December  year end with ATO approval.

The due dates for lodgement of the tax return generally depend upon whether the taxpayer is an individual or a company and the year end.

Income tax returns for individuals are generally due for lodgement by 31 October.  The income tax return lodgement due dates for companies with a 30 June year end is the following 28 February.  The ATO puts out the lodgement due dates each year.

Fringe Benefits Tax Returns

A FBT return has to be lodged with the ATO reporting the fringe benefits provided over the period from 1 April to 31 March. The FBT return is due for lodgement by 31 May.

Australian Taxation

The most common taxes which new businesses setting up in Australia face are Income Tax,Goods and Services Tax,Fringe Benefits Tax, and Superannuation.

 

Income Tax

 

Taxation of companies

An Australian resident company is subject to Australian tax  on its income from all sources, whether in or out of Australia.  A company incorporated in Australia is generally considered to be a resident of Australia.  Companies with a turnover of less than $10 million are taxed at 27.5%. The income tax rate is 30% if the turnover exceeds $10 million.

A company can distribute dividends to its shareholders without any further tax withholding, provided the dividends are distributed out of profits after tax (also known as franked dividend). Otherwise, a 30% dividend withholding tax will apply.  This tax rate may be further reduced for shareholders from countries with which Australia has a tax treaty and at the rate prescribed in the treaty.

Transactions with international related parties are required to comply with Transfer Pricing Guidelines, which require pricing to be determined on an arms-length basis.

Taxation of foreign branches

The taxable income of a foreign branch is taxed at 30% and is worked out on a similar basis as that for a company, with the exception that a branch is only taxable on income from Australian sources.

Where a tax treaty protection is available, a foreign investor will generally not have a taxable presence in Australia if there is no ‘Permanent Establishment’ in Australia as defined in the treaty.

Taxation of individuals

Businesses sending employees to work in Australia need to pay close attention to how these employees will be taxed.  This is especially so where the individual is coming from a country with tax rates lower than Australia.

Income tax is calculated on an individual’s taxable income and charged at progressive tax rates.  Individuals are classified as either residents, temporary residents or non residents.  Determining whether an individual is a resident of Australia for income tax purposes depends on the detailed circumstances of each person.

A resident of Australia will generally be liable to Australian income tax on their worldwide income and capital gains.

A ‘non resident’ or a ‘temporary resident’ of Australia is generally only liable to Australian income tax on income sourced in Australia (although the ‘temporary resident’ may be assessable on worldwide income in limited cases, such as, salary and wage income).  Individuals working in Australia would generally be categorised as ‘temporary residents’ and taxed at the rates applicable to residents.

As every person’s circumstances are different, there may be various tax credits, tax offsets (rebates), levies, liabilities, and tax treaty provisions, which may apply.

Under Australian law, there are different tax rates for residents and non-residents. Resident individuals pay tax on their taxable income at progressive rates ranging from 0 to 45 per cent.

Please refer the below table

Resident tax rates 2018–19

Resident tax rates 2018–19
Taxable incomeTax on this income
0 – $18,200Nil
$18,201 – $37,00019c for each $1 over $18,200
$37,001 – $90,000$3,572 plus 32.5c for each $1 over $37,000
$90,001 – $180,000$20,797 plus 37c for each $1 over $90,000
$180,001 and over$54,097 plus 45c for each $1 over $180,000

The above rates do not include the Medicare levy of 2%.

The above rates include changes announced in the 2018-19 Federal Budget.

Foreign residents

These rates apply to individuals who are foreign residents for tax purposes.

Foreign resident tax rates 2018–19

Foreign resident tax rates 2018–19
Taxable incomeTax on this income
0 – $90,00032.5c for each $1
$90,001 – $180,000$29,250 plus 37c for each $1 over $90,000
$180,001 and over$62,550 plus 45c for each $1 over $180,000

The above rates include changes implementing changes announced in the 2018-19 Federal Budget.

Children

If you are under the age of 18, and receive unearned income (for example, investment income), special rates apply.

Working holiday makers

These rates apply to working holiday maker income regardless of residency for tax purposes.

You are a working holiday maker if you have a visa subclass:

  • 417 (Working Holiday)
  • 462 (Work and Holiday).

Working holiday maker tax rates 2018–19

Working holiday maker tax rates 2018–19
Taxable incomeTax on this income
$0 – $37,00015c for each $1
$37,001 – $90,000$5,550 plus 32.5c for each $1 over $37,000
$90,001 – $180,000$22,775 plus 37c for each $1 over $90,000
$180,001 and over$56,075 plus 45c for each $1 over $180,000

The above rates include changes announced in the 2018-19 Federal Budget.

Fringe Benefits Tax

Fringe Benefits Tax (FBT) is a tax levied on the employer on benefits provided to employees.  Most benefits are subject to FBT.  Examples are:

  • Housing benefits or allowances
  • Private use of motor vehicles provided by the employer
  • Entertainment
  • Provision of private health insurance.

Benefits provided are grossed up and FBT at 47% is imposed on the grossed up value.  Certain benefits, such as superannuation are exempt from FBT while other benefits such as motor vehicles are concessionally taxed. The effect of taxing fringe benefits in this way is that employers pay FBT equivalent to the income tax that an employee on the top marginal rate of tax receiving the benefit would have paid had they purchased the benefit themselves from their after tax income. The FBT is deductible to the employer for income tax purpose.

Given the high FBT rate it is important to plan and structure compensation and benefits.

A FBT return has to be lodged with the ATO reporting the benefits provided over the period from 1 April to 31 March. The FBT return is due for lodgement by 31 May

Payroll Taxes

Payroll tax is payable by employers based on the amount of wages they pay to Australia. Each state has seperate payroll tax rates and exemption thresholds.  Payroll tax is only payable when the total amount of Australian wages paid by an employer reaches the threshold.

Regarding payroll tax and threshold.