Expatriate tax ebook - Australia

Facts and figures

Pre arrival procedures
Employment visas
Tax year
Tax returns and compliance
Income tax rates
Sample income tax calculation

Pre arrival procedures
Expatriates who require a work visa must apply for this before taking up employment in Australia. It is, therefore, important that the expatriate’s employment contract and benefit package is structured tax efficiently before the contract is submitted to DIMIA (the immigration authority).

Employment visas
Businesses are able to sponsor personnel from overseas for a temporary visa, valid for up to four years. Expatriates taking up sponsorship need to demonstrate that:

• they have the skills which match the vacancy
• they will be paid in accordance with the company nomination
• they meet health and character requirements.

The expatriate’s spouse may be included on the same visa application.

Tax returns and compliance
31 October is the due date for filing tax returns. Clients filing through a tax agent, such as Grant Thornton Australia, can obtain an extension to file.

Tax year
The Australian financial year runs from 1 July to 30 June.

Income tax rates - resident individuals 2008/2009

Taxable income (AUS $)	Tax payable (AUS $)
0 - 6,000 6,001 - 34,000 34,001 – 80,000 80,001 – 180,000 180,001 and over	0 15% of amount over 6,000 4,200 + 30% of amount over 34,000 18,000 + 40% of amount over 80,000 58,000 + 45% of amount over 180,000

Income tax rates – non-resident individuals 2008/2009

Taxable income ($)	Tax payable ($)
0 - 34,000  34,001 – 80,000 80,001 – 180,000 180,001 and over	29%  9,860 + 30% of amount over 34,000  23,660 + 40% of amount over 80,000  63,660 + 45% of amount over 180,000

Sample income tax calculation for year ending 30 June 2008
Assume a married expatriate in Australia for the entire income year. Neither the spouse nor children have any separate income. 

The expatriate’s income consists of a salary package of AUS$185,000 consisting of:
	AUS ($)
Base salary	$141,000
Living away from home accommodation allowance	$ 26,000
Provision of motor vehicle – fully maintained	$ 18,000
Salary package	$185,000
Additional investment income of:
Interest	$5,000
Capital gain or sale on shares held for > 12 months	$ 4,000
Foreign dividend (withholding tax $1,500)	$ 8,500
Professional subscriptions are paid by employer meanwhile the expatriate maintains minimum required Australian health cover to prevent the 1% Medicare Levy Surcharge.
Taxable income:
Base salary	$141,000
Interest	$ 5,000
Foreign dividend (grossed up for withholding tax)	$ 10,000
Capital gain	$4,000
Less 50% CGT discount	( $ 2,000 )
	$158,000
Tax on taxable income:
Tax on $150,000	$ 47,100
Tax on $8,000 @45%	$ 3,600
	$ 50,700
Medicare levy 1 ½ % @ $158,000	$ 2,370
	$ 53,070
Less credit for withholding tax on Dividends	( $ 1,500 )
Tax payable	$ 51,570
Effective Australian rate of tax paid on total salary package and investment income	25.5%
Living away from home allowance (LAFHA) exempt from income tax and fringe benefit tax (FBT) where taxpayer living away from usual place or residence employer pays FBT on motor vehicle fringe benefit (note, in ordinary salary packaging arrangements, the cost of FBT would be costed back into the expatriate's salary package such that the employer was not ‘out of pocket’) subscriptions not subject to FBT under the ‘otherwise deductible rule’

Information about Australia:

• introduction 
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities