Tax Law in NSW, Australia
Commonwealth is the federal or national government permitted to impose taxation on all Australian taxpayers. Australia’s tax system combines direct and indirect taxes levied by the Commonwealth and individual states, depending on the type. An overview of Australia’s tax system is provided in this article.
Most business taxes in Australia are collected by the Australian Tax Office (ATO), including income tax, payroll tax, and capital gains tax. State-based taxes are also applicable in some cases, such as the GST. Moreover, Australia has established various tax treaties with other nations to avoid double taxation of foreign entities operating there.
Below you will find additional information about taxes in Australia.
Jurisdiction to tax
According to Australian federal tax law, residents of Australia are liable to pay taxes on income from worldwide sources. Still, non-residents are responsible for paying only taxes on Australian sourced income.
The Australian tax law has specific rules regarding residency applicable to individuals and companies.
In Australia, an income amount is also examined to determine if it is sourced in Australia or another country. Generally, income is determined by where employment or a fixed business is located.
International transactions are generally sourced based on where the relevant contract was made, though there can also be exceptions to this general principle.
Australian business taxes
Several business taxes are imposed in Australia, such as Capital Gains Tax (CGT), Goods and Services Tax (GST), and others.
Personal income tax in Australia
Individuals generally pay their personal income tax through their employer. Their employer deducts the required amount of tax from their pay before they receive it and remits it to the Australian Taxation Office (ATO).
Temporary residents also pay taxes on income earned in Australia, but at different rates from those that apply to permanent residents.
Capital Gains Tax (CGT)
Capital gains tax is applied to gains from the sale of assets, with special rules for valuing capital gains. All kinds of investments are subject to capital gains tax for taxation purposes, including both tangible and intangible assets.
Capital gains are subject to taxation on a limited range of assets, such as real estate, for foreign residents, but not on motor vehicles, personal use assets and the principal residence of one’s home.
A taxpayer’s capital gains are included in their assessable income and therefore taxed at their individual income tax rate (see below, Taxation of Individuals). A resident of Australia is entitled to a 50% tax discount on capital assets held for more than 12 months.
Additionally, various tax incentives are available to foreign investors for capital investment and inbound investments into Australia, depending on the circumstances.
Australian tax treaties
Currently, Australia maintains tax agreements with over 40 countries. These tax agreements, or tax treaties, aim to prevent double taxation and enhance international cooperation between tax authorities.
The treaty conditions bind individuals who have legal residency in a treaty country. Other international tax arrangements are available beyond bilateral tax treaties related to specific industries or topics.
Governments receive the majority of their revenue from taxes. These funds are used to maintain and improve public infrastructure, including roads, and pay for public services, including schools and emergency services.
So it is necessary to know and pay your taxes. Our experienced lawyers are always here to support you if you need any assistance.