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Income Tax

Australia - Income Tax


Those who are resident in Australia are expected to pay Australian tax for all income earned worldwide. There are allowances for those who have to pay tax on some income in another country and this amount can be offset against the Australian income tax. There are some types of work such as charity work where people who are out of the country for long periods of time will be exempt from Australian tax on the monies they earn while abroad. Those in this situation should be prepared to pay tax in the country where they are living and working. If you are considered to be a non-resident then you will need to pay tax in Australia only on income earned within the country. Those who are on a temporary resident’s visa are considered to be residents for the purposes of taxation.

There are a number of criteria for assessing the residency status of a person in Australia. If the person’s main home is in the country or if they spend more than half of the tax year living there then they are considered to be residents. If a person makes contributions to a superannuation fund then they are also considered to be a resident.

Tax returns are filed annually for those who need to complete them and it is not possible to file a joint return with your partner. The tax year in Australia runs from the 1st July to 30th June each year. If you have an income of more than $6000 during the year then you are expected to pay taxes and file a return if applicable. Residents have until the 31st October of each year to file their return for the previous tax year. Some residents may be eligible for extended deadlines for filing but will be advised about this by the taxation department. If you are late with your tax return or do not file it at all then you can be fined or prosecuted for tax evasion. Tax returns can be completed online via the website of the Australian Tax Office or by post. Payments of tax owed can also be completed online.

There is a Pay As You Go withholding system for income tax in Australia but you are still required to file an income tax return. This system is used as a way to avoid getting a large tax bill once a year as your PAYG payments should cover the vast majority of it. These payments can be varied so that you can adjust them according to your income and outgoings.

All income is considered to be taxable including your main income from employment, any income earned from your own business, capital gains income and interest earned on savings and investments. If you are unsure how much you might be expected to pay then you can make use of the handy online calculators on the website of the Australian Tax Office before you complete your tax return. There are also a number of items for which you can make deductions and details on this and how to complete the tax return are also available from the website.

Processing your tax return can take up to 6 weeks if you send it in by mail. Those who have made use of the PAYG system may find that they are due a refund and you should have confirmation of this fairly quickly.

Income tax rates are progressive up to a level of 45%. For the tax year of 2010-11 the rates show that those who earn below $6000 do not pay income tax. For income between $6001 and $37,000 there is a rate of 15 cents for every dollar earned above the $6000 cut off. If you earn between $37,001 and $80,000 you pay $4650 plus 30 cents for every dollar earned above $37,000. For those who earn over $80,001 and $180,000 you pay $17,550 and an additional 37 cents for every dollar earned above $80,000. For anything over $180,001 you pay $54,550 and 45 cents for every dollar above $180,000.

Australia has a number of tax treaties in place with other countries including the UK, the US, France, Japan, Canada, New Zealand, Russia and South Africa, among others. The tax treaties prevent residents from being taxed on the same income in two countries.


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