Expatriate tax ebook - Australia

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes 
Social security taxes  
Stock options 
Wealth taxes 
Other specific taxes

Capital gains tax
Australia imposes a tax on net capital gains at the taxpayer’s marginal rate of tax. Residents, other than temporary residents, are taxed on gains from worldwide sources, whereas non-residents and temporary residents are taxed on gains realised on assets that are considered to be ‘taxable Australian property’ (which is largely limited to Australian real property).

Australian residents, other than temporary residents, are deemed to have disposed of their non-taxable Australian property for market value upon ceasing Australian residency, potentially crystallising a capital gain in Australia.

Inheritance, estate & gift taxes
There are no inheritance or gift taxes in Australia.

Investment income
Interest, dividends and other investment income from Australian sources are included in assessable income of a temporary resident and subject to tax

Local taxes
There are no local state income taxes in Australia. However, states impose stamp duty on the acquisition of certain assets, securities or interests.

Real estate tax
There are restrictions on ownership of residential property by temporary residents.

All income derived from Australian real estate is included in assessable income and subject to tax. Rental income derived outside of Australia will only be assessable for Australian residents who are not temporary residents.

Non-capital outgoings related to deriving rental income are allowable as tax deductions, as is depreciation.

Australia’s States and Territories impose stamp duty on the transfer of real estate, while levying an annual land tax on real estate holdings.

Social security taxes
There are no social security taxes in Australia. However, employers must pay 9% of an employee's salary and wages into an Australian superannuation fund (ie retirement fund). For temporary residents the superannuation balance can be accessed on departing Australia, subject to an overall tax of 44.75% applies at that time

Stock options
Stocks and stock options are taxed based upon the 'discount' received, that is, the difference between the market value of the stock/stock option and any amount paid by an employee to acquire the stock/option (if any). Where stocks/stock options partially relate to services performed outside of Australia by a non-resident, any discount received is pro-rated accordingly.

Stocks/stock options will be taxed either at the time of issue (with the discount calculated by reference to the market value of the stocks/options at that time) or, where certain conditions in relation to the stock/option scheme are satisfied, at a later date, (the ‘deferred taxing point’). The deferred taxing point is the earliest of the date at which there is no longer deemed to be any ‘real risk of forfeiture’ of the stocks/options, the date of cessation of employment or seven years. When the taxing point is deferred the discount is calculated by reference to the market value of the stocks/options at the taxing point.

For capital gains tax purposes, any amounts included in assessable income in relation to stocks/options are added to the cost-base of the stocks/options

Wealth tax
There are no wealth taxes in Australia.

Other specific taxes
Australian resident taxpayers are required to pay a Medicare Levy of 1.5% of their taxable income. There are some exemptions from the Medicare Levy for those in Australia on a temporary visa, regardless of residency. Those taxpayers who are liable for the Medicare Levy may be liable for an additional 1% Medicare Levy Surcharge, where their incomes exceed certain thresholds and they lack private health insurance.

For the financial year 1 July 2011 to 30 June 2012, a natural disaster flood levy also applies (refer to the ‘facts and figures’ section)

Information about Australia:

• introduction 
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities