Everyone who works in Australia, whether they are citizens, residents or on a working holiday visa, pays tax. Remember, that you not only pay tax on your Australian income, you will also be liable to pay tax on any income you receive worldwide. This could include your pension, rental income or interest on investments.
Taxes in Australia are levied at three levels – federal, state and local. The system is complex with each state having its own rules. The Tax Act has almost 4,000 pages, so it’s advisable to consult a tax expert to get to grips with system.
The first thing you need to do is apply for a Tax File Number (TFN). You can do this online before you arrive in Australia. Your TFN number will remain the same for the whole of your life, just like the UK’s National Insurance Number.
The Australian tax year runs from 1st July until the 30th June. Federal tax is levied under a two-tier system. The First-Class System is for self-employed people and companies and the Second-Class system (PAYG – Pay As You Go) is for employees.
Self-employed people pay their tax in arrears and employees’ salaries are taxed at source by their employers.
Annual Taxable Income – Tax on this Income
0 – $18,200 – Nil Tax
$18,201 – $37,000 – 19c for each dollar over $18,200
$37,001 – $80,000 – $3,572 plus 32.5c for each dollar over $37,000
$80,001 – $180,000 – $17,547 plus 37c for each dollar over $80,000
$180,001 and over – $54,547 plus 45c for each dollar over $180,000
On top of this tax payers pay a 2% Medicare levy and those earning over $180,000 per annum, pay a 2% Temporary Budget Repair Levy.
Fringe Benefit Tax (FBT)
Fringe Benefit Tax is paid by employers, not employees. Tax is levied on the following fringe benefits: –
• Car fringe benefits
• Car parking fringe benefits
• Entertainment and fringe benefits
• Expense payment fringe benefits
• Loan fringe benefits
• Debt waiver fringe benefits
• Housing fringe benefits
• Board fringe benefits
• Living away from home allowance fringe benefits
GST – Government Sales Tax
Government Sales Tax stands at 10% in Australia and is levied on a variety of goods and services. From 1st July 2017, there are some changes in GST: –
• All goods imported by consumers will be subject to 10% GST.
• “Netflix” tax – music and digital streaming services bought online will now be subject to GST.