If you are or have moved to Australia to live and work, you will want to familiarize yourself with Australia’s income tax system and how it applies to you specifically.
The federal income tax system in Australia is divided into two classes. The class one system is applicable only to those that are self-employed and businesses. The class two system is for employees and is commonly referred to as Pay As You Go or PAYG.
Residents of the country are taxed on worldwide income, and non residents are only taxed on income earned in Australia. Are you unsure of your resident status for tax purposes? To know if you are considered an Australian resident for income tax purposes, you must be one of the following requirements: Australia must be your normal residence where you live most of the year. You are domiciled in the country and do not have a permanent place to live in any other country. Or you spend at least 183 days per financial year in Australia, unless you do not intend on taking up residence and have a home outside of the country.
If you are an employee, you do not have to worry about paying your income tax as it is taken out of your paycheck automatically like in the United States. If you are self-employed, you will pay your income tax in arrears. Currently, there is no state income tax in all of Australia. What you may not be accustomed to is the dates of the tax year in Australia. The income tax year in Australia runs from July 1st to June 30th of the following year.
Typically tax is calculated based upon taxable income earned during the aforementioned income tax year. If there are any changes to the taxation, you can expect it to be announced in May of each year. Partnerships, individuals, companies and trusts are recognized entities as taxpayers by the government. There are some specific provisions that apply to certain taxpayers, like insurance companies and minors. If you are preparing to file your income taxes you may want to consult a tax professional in Australia.
Australia does have some double taxation agreements in place with other countries to prevent you from paying taxes twice on the same income. If your income is taxed by Argentina, Austria, Belgium, Canada, China, Czech Republic, Denmark, Fiji, Finland, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, Malta, the Netherlands, New Zealand, Norway, Philippines, Poland, Romania, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, the United Kingdom, the United States or Vietnam then you are not required to pay tax in Australia on your income.
Additionally, if you are a resident of Australia and earn income overseas where you have been employed for at least 91 days, then you do not have to pay tax on that income in Australia if it has been taxed overseas.
