Principal tax legislations
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Income Tax Assessment Act 1936
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Income Tax Assessment Act 1997
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Income Tax (Transitional Provisions) Act 1997
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Tax Administration Act 1953
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International Tax Agreements Act 1953
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Australian tax treaties
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Fringe benefits Tax assessment Act 1986
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Superannuation Contributions Tax (Assessment and Collection) Act 1997
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Superannuation Guarantee (Administration) Act 1992
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A New Tax System (Goods and Services Tax) Act 1999
Legal framework for Taxation in Australia
Australian tax law is a comprehensive and often complex system that impacts individuals, businesses, and various entities. It's primarily administered at the federal level by the Australian Taxation Office (ATO), with some taxes also levied by state and territory governments.
Types of Taxes
A. Income Tax
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Individuals: Taxed on worldwide income if resident; Australian-sourced income only if non-resident.
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Businesses (Companies): Standard corporate tax rate is 30%; 25% for base rate entities (aggregated turnover < $50 million and 80% or less of income is passive).
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Trusts and Partnerships: Generally do not pay tax; income is passed through to beneficiaries/partners who pay tax individually.
B. Goods and Services Tax (GST)
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Broad-based consumption tax of 10% on most goods and services.
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Registered businesses must collect GST and remit it to the ATO, usually quarterly.
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Businesses may claim input tax credits for GST paid on business-related expenses.
C. Capital Gains Tax (CGT)
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Applies to profit from selling capital assets (e.g., real estate, shares).
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Individuals may receive a 50% CGT discount if the asset is held for over 12 months.
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Applies to residents' worldwide assets and non-residents’ Australian assets.
D. Fringe Benefits Tax (FBT)
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Tax on non-cash benefits (e.g., car, housing) provided by employers to employees.
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Paid by employers, not employees.
E. Payroll Tax
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State-based tax on wages paid by employers over a threshold (varies by state).
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For example, in NSW, the threshold is $1.2 million (2024–25), and the rate is 5.45%.
F. Stamp Duty and Land Tax
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Levied by states on property transactions and land ownership.
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Rates and thresholds vary by state.
Tax Residency in Australia (Individuals)
The Australian Taxation Office (ATO) applies four statutory residency tests to determine if an individual is a resident for tax purposes. If any one of these tests is met, the person is considered a resident.
1. Resides Test (Ordinary Concepts Test)
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Primary test of residency.
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You are a resident if you reside in Australia according to ordinary concepts (i.e., where you "live").
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The ATO considers:
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Intentions or purpose of presence
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Family and business ties
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Maintenance of home in Australia
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Duration of physical presence
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Repetition and regularity of visits
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2. Domicile Test
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You are a resident if:
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Your domicile (legal permanent home) is in Australia; and
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You don’t have a permanent place of abode outside Australia.
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Even if you live overseas, you may still be a resident if your permanent ties are to Australia.
3. 183-Day Test
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You are a resident if:
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You are physically present in Australia for more than 183 days in a financial year (1 July – 30 June);
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Unless your usual place of abode is outside Australia and you do not intend to reside here.
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4. Commonwealth Superannuation Test
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Applies to Australian government employees working overseas.
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You are a resident if you or your spouse is:
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A Commonwealth superannuation scheme member (e.g., CSS or PSS);
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Working in a post outside Australia.
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🌏 Foreign Income Tax in Australia
If you are an Australian tax resident, you must declare all income earned globally, not just income from Australian sources. This includes:
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Foreign wages/salaries
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Interest and dividends from overseas banks or companies
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Rental income from overseas properties
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Pensions or superannuation from other countries
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Capital gains on disposal of foreign assets
The obligation to report this income applies even if:
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You do not bring the money into Australia,
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The income is taxed in the foreign country, or
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The income was earned before you became a resident (if received while you are a resident).
Foreign Tax Offset (FTO)
To avoid double taxation, the Foreign Income Tax Offset allows you to claim a credit for any foreign tax paid on the same income.
For example:
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If you paid tax on rental income in the US, and then declare the same income in Australia, you can claim a credit for the US tax paid.
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You must have paid the tax (not just assessed) to claim the offset.
Key conditions:
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You must have records of the foreign tax paid.
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If the foreign tax paid is under $1,000, you can generally claim it without extensive documentation.
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If it is more than $1,000, you must provide detailed evidence (foreign tax return, assessment, receipts).
Capital Gains on Foreign Assets
As an Australian tax resident, you are subject to Capital Gains Tax (CGT) on the sale of worldwide assets, including:
Overseas property,
Foreign shares or investments.
If the asset was acquired before becoming an Australian resident, the cost base may be the market value on the date you became a resident (step-up rule). This can significantly reduce your taxable gain.
CGT events must be reported in your annual return, and foreign tax paid on capital gains may also be eligible for a tax offset.
Double Tax Agreements (DTAs)
Australia has DTAs with over 40 countries, including the US, UK, Korea, Japan, and China.
These agreements: Avoid double taxation,
Allocate taxing rights between Australia and the other country,
May exempt certain types of income (e.g. government pensions or employment income under short-term assignments).
For example:
Income earned while working overseas for less than 183 days may be exempt under certain DTAs.
Some foreign pensions or superannuation may be tax-free or concessionally taxed.
Foreign Pensions and Annuities
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Foreign pensions (such as US Social Security, UK State Pension, Korean) may be taxable depending on their nature.
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Some may be partially exempt, depending on double tax agreements (DTAs).
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Lump sum payments may be treated differently from periodic pension payments.
Reporting Obligations
You must disclose foreign income and tax paid in your Australian tax return.
The ATO has data-sharing arrangements with many tax authorities (under the CRS and FATCA regimes).Failure to declare foreign income can result in penalties, even if you paid tax overseas.
key tax compliance requirements for businesses in Australia:
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Australian Business Number (ABN):
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All businesses operating in Australia need to register for an ABN.
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An ABN is a unique identifier that helps the Australian Taxation Office (ATO) identify your business.
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It is essential for various business transactions and interactions with government agencies.
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Goods and Services Tax (GST):
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If your business has an annual turnover above a certain threshold (currently $75,000), you must register for GST.
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GST is a 10% consumption tax on most goods and services.
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Businesses collect GST on sales and remit it to the ATO.
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Tax File Number (TFN):
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Businesses need a TFN for tax reporting purposes.
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It is used to lodge tax returns and other tax-related documents.
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Pay As You Go (PAYG) Withholding:
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If your business has employees, you must withhold tax from their wages and remit it to the ATO.
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PAYG ensures timely payment of income tax by employees.
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Record Keeping:
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Maintain accurate and complete records of financial transactions, income, expenses, and tax-related documents.
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Proper record-keeping is crucial for meeting compliance obligations and facilitating tax reporting.
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Tax dispute
Foreign Income tax
land tax
Income tax
Stamp duty exemptions
Tax dispute legal team for ADR
Address: Wynyard / Martin Place
Level 10, 20 Martin Place Sydney NSW 2000
T: 1300 140 291 / 1300 577 502 / admin@wentworthlaw.com.au
ATO Dispute resolutions options
Address: Wynyard / Martin Place
Level 10, 20 Martin Place Sydney NSW 2000
T: 1300 140 291 / 1300 577 502 / admin@wentworthlaw.com.au
Tax dispute legal team for ADR
