By Victor Tu, Ukee Ye
Australia is one of the largest and most developed financial service market in Asia-Pacific. It has attracted a lot of Chinese investors in recent years. According to the statistics provided by the Chinese Ministry of Commerce, the direct investment flows from China to Australia reached 3.4 billion USD in 2015. Main investing areas including mineral resources industry, real estate, transportation, trading, agriculture, manufacturing, telecommunications and services (Chinatax.gov.cn).
Before investing in or immigrating to Australia, one big concern is the high tax rate in Australia. Here we are going to take a look at the Aussie tax rules for both companies and individuals. Unless otherwise stated, all legislative provisions cited in this article are from the Income Tax Assessment Act 1997.
1. Tax for Companies
Australian resident companies are taxed worldwide for the income they earn, while non-resident companies are only taxed for the income earned from Australia. A general 30% flat rate is used for companies. But if a company meets the requirements of “small” company (turnover < 2 million AUD), the tax rate is adjusted to 28.5%.
When company incurred losses, tax loss can be carried forward indefinitely as long as it passes either Continuity of Ownership Test (COT) or Same Business Test (SBT) (s165).
If an Australian parent company wholly-owns some other resident companies, it can choose to use consolidation tax regime, ignoring all the inter-transactions and allowing offset profits and losses within the group. However, once the group chooses to join in the consolidation regime, it is not revocable (s703-50), once in, all in (head company and all subsidiary members must join consolidation): s703-5 and s703-10.
2. Tax for Individuals
Similar to companies, Australian residents are taxed for worldwide income and non-residents are only taxed for income that is from Australia. Like many other countries, Australia also uses progressive tax structure for individuals.
• 2016-17 rates for resident individuals (does not include Medicare Levy OR Temporary Budget Repair levy) (Sadiq et al., 2017):
Taxable income（AUD） | Tax on this income |
0 – $18,200 | Nil |
$18,201 – $37,000 | 19c for each $1 over $18,200 |
$37,001 – $87,000 | $3,572 plus 32.5c for each $1 over $37,000 |
$87,001 – $180,000 | $19,822 plus 37c for each $1 over $87,000 |
$180,001 and over | $54,232 plus 45c for each $1 over $180,000 |
• 2016-17 rates for non-resident individuals (Sadiq et al., 2017):
Taxable income（AUD） | Tax on this income |
0 – $87,000 | 32.5c for each $1 |
$87,001 – $180,000 | $28,275 plus 37c for each $1 over $87,000 |
$180,001 and over | $62,685 plus 45c for each $1 over $180,000 |
3. Goods and Services Tax (GST)
GST is another large revenue generating tax other than income tax. It is effectively charged on the “value added” at each stage. In Australia, GST is already included in the price of goods and services. GST is 10% on the ‘value’ of the supply or 1/11th of the ‘price’.
There are also some other taxes one might want to know such as payroll tax, fringe benefit tax, stamp duty, property tax and environment tax. As Australia has a complete and complex tax system, we only introduce the main ones here. Hopefully the information will help you get a taste of the Australian taxes.
For more details and questions regarding tax in Australia, please feel free to contact us on victor.tu@victortruman.com or cell phone on 139 5786 1900. Thanks!
Reference List
Australian Taxation Office 2017, Australian Taxation Office, viewed 28 December 2017, www.ato.gov.au/Business/Small-business-entity-concessions/What-s-new-for-small-business/.
Chinatax.gov.cn. (2016). [online] Available at: http://www.chinatax.gov.cn/n810219/n810744/n1671176/n1671206/c2580951/part/2580966.pdf [Accessed 29 Dec. 2017].
Income Tax Assessment ACT 1997 (Cth)
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., Teoh, J. and Ting, A. 2017, Principles of Taxation Law 2017, Thomson Reuters (Professional) Australia Limited, Sydney
