Expatriate tax ebook - Australia

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes 
Social security taxes  
Stock options 
Wealth taxes 
Other specific taxes

Capital gains tax
Australia imposes a tax on net capital gains at the taxpayer’s marginal rate of tax. Residents, other than temporary residents, are taxed on gains from worldwide sources, whereas non-residents and temporary residents are taxed on gains realised on assets that are considered to be ‘taxable Australian property’ (which is largely limited to Australian real property).

Australian residents, other than temporary residents, are deemed to have disposed of their non-taxable Australian property for market value upon ceasing Australian residency, potentially crystallising a capital gain in Australia.

Inheritance, estate & gift taxes
There are no inheritance or gift taxes in Australia.

Investment income
Interest, dividends and other investment income is included in assessable income and subject to tax based on residency and source.

Local taxes
There are no local state income taxes in Australia. However, states impose stamp duty on the acquisition of certain assets, securities or interests.

Real estate tax
All income derived from Australian real estate is included in assessable income and subject to tax. Rental income derived outside of Australia will only be assessable for non-temporary Australian residents.

Non-capital outgoings related to deriving rental income are allowable as tax deductions, so too is depreciation.

Australia’s States and Territories impose stamp duty on the transfer of real estate, while levying an annual land tax on real estate holdings.

Social security taxes
There are no social security taxes in Australia. However, employers must pay 9% of an employee's salary and wages into an Australian superannuation fund.

Stock options
Stock options are taxed based upon the “discount” received, that is, the difference between the market value of the stock option and any amount paid by an expatriate to acquire the option (if any). Where stock options partially relate to services performed outside of Australia by a non-resident, any discount received is pro-rated accordingly.

Stock options may be taxed at the time of issue with the discount calculated by reference to the market value of the options at that time. Alternatively the taxing point of “qualifying” stock options may be deferred (at the option of the expatriate) until the sooner of exercise, cessation of employment or for ten years. When the taxing point is deferred the discount is calculated by reference to the market value of the options at the taxing point.

For capital gains tax purposes, any amounts included in assessable income in relation to stock options are added to the cost-base of the options and any shares subsequently acquired. Where an option lapses without exercise, a expatriate is taken to never have received a “discount” and they are able to amend their income tax returns to remove any discount that may been included as assessable income.

Wealth tax
There are no wealth taxes in Australia.

Other specific taxes
Australian resident taxpayers are required to pay a Medicare Levy of 1.5% of their taxable income. There are some exemptions from the Medicare Levy for those in Australia on a temporary visa, regardless of residency. Those taxpayers who are liable for the Medicare Levy may be liable for an additional 1% Medicare Levy Surcharge, where their incomes exceed certain thresholds and they lack private health insurance.

Information about Australia:

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