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Australia

Proprietary Company

Taxes

Tax residency – A company is tax resident in Australia if it is incorporated under Australian law, or it carries on business in Australia and its effective management is in Australia or has its voting power controlled by shareholders that are residents of Australia.

Basis – Tax resident entities are taxed on their worldwide income.

Tax rate – The general corporate income tax rate is 30%. Companies with an aggregate annual turnover of less than AUD 25M are taxed at 27%.

Capital gains – Capital gains are treated as ordinary income and subject to the standard rates.  Foreign capital gains or losses on the disposal of shares in a foreign company, at least 10% of which is held by an Australian resident company for a certain period, may be reduced by a percentage that reflects the degree to which the assets of the foreign company are used in an active business.

Dividends – Dividends received by resident entities which have been paid out of profits that have been subject to Australian corporate tax are entitled to a tax offset.

Dividends from resident entities paid out from profits not subject to Australian tax are taxed at standard rates.

Interests – Interests received are taxed at the standard rate.

Royalties – Royalties received are taxed at the standard rate.

Withholding Taxes – Dividends paid to non-residents are usually exempted from withholding tax, as long as profits have been taxed in Australia. If profits have been not taxed but dividends are declared to be from foreign income, they may be exempted. If dividends are not qualified for any exemption, they may be subject to a withholding tax of 30%.

Interests paid abroad are subject to a 10% withholding tax unless rate is reduced under a tax treaty. Publicly offered debentures, limited non-debenture debt interests, and and interest paid to unrelated foreign financial institutions and governments may be exempt.

Royalties paid to non-residents are subject to a 30% withholding tax, unless reduced due to a tax treaty.

Foreign-source income – Foreign-source income is generally subject to corporate income tax. However, a total or partial tax relief in the form of tax credits or exemptions is available for foreign tax paid.

Losses – Losses may be carried forward indefinitely. Carry back of losses is not permitted.

Inventory – Inventory may be valued at cost, market selling value, or replacement price. Last in First Out (LIFO) is not allowed.

Anti Avoidance Rules –  Transfer Pricing legislation applies to any international transaction which must be conducted at arm's length. The accepted methods includes the comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin methods. All transactions should be properly documented.

There are thin capitalization rules. There are restrictions on interest deductions claimed against assessable income if an entity's total debt exceeds a prescribed level. The prescribed level is generally determined by the safe harbor test (debt to equity ratio is 60% of total assets less non-debt liabilities) and the arm's length debt test (maximum amount of debt is the maximum amount of debt the entity reasonably could have borrowed from commercial banks). Entities may be exempt if they have interest deductions of less than AUD 2M per year or outward investing entities with 90% of their total average value of assets consisting of Australian assets.

There are also controlled foreign company rules, in which shareholders are subject to tax on their CFC income on an accrual basis. To be deemed as a CFC, 5 or fewer Australian residents must hold 50% of the foreign entity, or a single Australian must hold 40% or more of the shares of a foreign entity, or five or fewer Australian residents must effectively control the entity.

Tax Credits and Incentives – There are several tax incentives for capital investments In the exploration for and extraction of petroleum and minerals, investments in the venture capital sector, income derived from offshore banking transactions by an authorised offshore banking unit, among others.

There is a R&D tax credit of 43.5% for companies with annual turnover of less than AUD 20m and 38.5% for companies with annual turnover of AUD 20m or more.

Labor taxes – Employers' payroll is taxed at the state level at rates between 3.65% and 5.45%.

Employers must contribute to the superannuation guarantee at 9.5% on employees’ gross salaries. 

In addition, a 2% levy is payable on the taxable income of most Australian residents to fund Medicare and DisabilityCare.

Personal income tax – An individual is considered tax resident in Australia, if his or her permanent domicile is in the country or he or she has been in Australia more than half-year (unless his or her place of abode is outside Australia and he or she doesn’t intent to reside in the country), or an individual is an Australian employee.

Tax residents are subject to personal income tax on their worldwide income, whereas non-residents are taxed on their income derived from Australia.

Personal income tax rate is progressive up to 45% for annual income in excess of AUD 54,232 (AUD 62,685 for non-residents).

Capital gains are treated as ordinary income, if the asset is held by a tax resident (excluding temporary residents) more than one year, a 50% discount may apply. Non-residents are also subject to a non-final withholding tax of 10%.

Dividends received from resident companies are taxable income, but a tax offset is usually available to prevent double taxation. For dividends received from foreign source a foreign tax credit may be also available. Interests and rental income is subject to taxation at standard rates.

Other taxes – States and territories levies land taxes at rates up to 3.7%. Transfers of assets are subject to a stamp duty at rates up to 5.75%. There is no net worth tax, nor inheritance taxes in Australia.

Employers are required to pay fringe benefits tax on the value of fringe benefits provided to their employees at a rate of 47%.

There is a Good and Services tax, which applies to transactions of goods and services. The standard rate is 10%.

There are also insurance taxes levied by States at substantial amounts.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 30% Offshore Income Tax Rate
  • 30% Corporate Tax Rate
  • 30% Capital Gains Tax Rate
  • 30% Dividends Received
  • 0% Dividends Withholding Tax Rate
  • 10% Interests Withholding Tax Rate
  • 30% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • Indefinitely Losses carryforward (years)
  • FIFO Inventory methods permitted
  • 105 Tax time (hours)
  • 11 Tax payments per year
  • 2% Social Security Employee
  • 14.95% Social Security Employer
  • 45% Personal Income Tax Rate
  • 10% VAT Rate
  • 80 Tax Treaties

Country details

Australia
AUD
Canberra
Oceania
e n - A U
21515754

The Commonwealth of Australia is the sixth largest continent worldwide. Located in Oceania, the country occupies the main continental mass of the Sahul Shelf, in addition to some islands in the Pacific, Indian and Antarctic Oceans. The closest countries to Australia are Indonesia, East Timor and Papua New Guinea to the north, Solomon Islands, Vanuatu and the French dependency of New Caledonia to the northeast, and New Zealand to the southeast. Its population barely exceeds 20 million inhabitants, and are mostly concentrated in the coastal cities of Sydney, Melbourne, Brisbane, Perth, Adelaide and the capital Canberra.

Australia ranks second in the UN’s Human Development Index, only surpassed by Norway, and the fourth freest economy according to the Heritage Foundation’s Index of Economic Freedom. It has one of the highest income per capita worldwide, slightly higher than the United States, United Kingdom, Germany and France in terms of purchasing power parity. Australia has a solid and stable economy, with reduced unemployment, controlled inflation, relatively small public debt, and a strong and stable financial system. Its currency is the Australian Dollar (AUD).

Its main economic activity are services, including tourism, education and financial services, accounting for 69 per cent of its GDP. The industry accounts approx. one third of its GDP and its mainly comprised by mining, industry and transportation equipment, food processing, chemicals, steel. The agriculture and the exploitation of natural resources, which comprise 3 and 5 per cent of the GDP, respectively, contributes substantially to its exports, mainly to Japan, China, the United States, South Korea and New Zealand.

Tax treaties

Country Type Date Signed
Viet nam DTC  1992-04-13
Switzerland DTC  2013-07-30
Fiji DTC  1990-10-15
Mauritius TIEA 2015-03-10
Indonesia DTC  1992-04-22
Uruguay TIEA 2012-12-10
Romania DTC  2000-02-02
Philippines DTC  1979-05-11
Sint Maarten TIEA 2007-03-01
Timor-Leste DTC  2002-05-20
Bahrain TIEA 2011-12-15
Mexico DTC  2002-09-09
Guatemala TIEA 2013-09-26
Finland DTC  2006-11-20
Turkey DTC  2010-04-29
Belgium DTC  1977-10-13
Ireland DTC  1983-05-31
Montserrat TIEA 2010-11-22
Costa Rica TIEA 2011-07-01
Andorra TIEA 2011-09-24
Germany DTC  1972-11-24
Sri Lanka DTC  1989-12-18
Papua New Guinea DTC  1989-05-24
Liechtenstein TIEA 2011-06-21
Slovakia DTC  1999-08-24
Hungary DTC  1990-11-20
Czech Republic DTC  1995-03-28
Thailand DTC  1989-08-31
Sweden DTC  1981-01-14
Kiribati DTC  1991-03-23
Denmark DTC  1981-04-01
Canada DTC  1980-05-21
Russian Federation DTC  2000-09-07
Curaçao TIEA 2007-03-01
Liberia TIEA 2011-08-11
Korea, Republic of DTC  1982-07-12
Bahamas, The TIEA 2010-03-30
New Zealand DTC  2009-06-26
Bermuda TIEA 2005-11-10
Isle of Man TIEA 2009-01-29
Anguilla TIEA 2010-03-19
Norway DTC  2006-08-08
United States DTC  1982-08-06
Netherlands DTC  1976-03-17
Antigua and Barbuda TIEA 2007-01-30
Poland DTC  1991-05-07
Grenada TIEA 2010-03-30
India DTC  1991-07-25
Spain DTC  1992-03-24
Jersey TIEA 2009-06-10
Chile DTC  2010-03-10
Aruba TIEA 2009-12-16
Marshall Islands TIEA 2010-05-12
South Africa DTC  1999-07-01
Singapore DTC  1969-02-11
Vanuatu TIEA 2010-04-21
China DTC  1988-11-17
Gibraltar TIEA 2009-08-26
Saint Vincent and the Grenadines TIEA 2010-03-05
United Kingdom DTC  2003-08-21
Dominica TIEA 2010-03-31
Saint Kitts and Nevis TIEA 2010-03-05
Malaysia DTC  1980-08-20
France DTC  2006-06-20
Saint Lucia TIEA 2010-03-30
Monaco TIEA 2010-04-01
Argentina DTC  1999-08-27
Italy DTC  1982-12-14
Japan DTC  2008-01-31
Belize TIEA 2010-03-31
Samoa TIEA 2010-03-20
Austria DTC  1986-07-08
San Marino TIEA 2010-03-04
Cook Islands TIEA 2009-10-27
Cayman Islands TIEA 2010-03-30
Turks and Caicos Islands TIEA 2010-03-30
Guernsey TIEA 2009-10-07
Malta DTC  1984-05-09
Brunei Darussalam TIEA 2013-08-06
Macao, China TIEA 2011-07-12

Tax treaties Map

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