One of the first things new expats and international business owners think about when considering where to live and start a business is taxes. The good news about Australia’s tax laws is that they’re fairly straightforward, but the bad news is that there are still many details you need to know in order to stay on the right side of them, and the better move is only hiring the right tax accountant in Melbourne CBD.
If you’re an American entrepreneur moving to Australia, you’ve probably got questions about their tax laws. Although Australia has a similar tax system to the United States, there are some important differences in the way they administer it, particularly when it comes to international businesses. Read on to learn more about these four things to know about Australian tax laws and how they might affect you and your business ventures as an expat in Australia.
1) Learn about tax withholding
In order to ensure people, pay the right amount of tax, employers have an obligation to withhold a certain percentage of their employees’ wages. If you are in a country other than Australia, you should consult with a lawyer or accountant about your withholding obligations in your home country. It’s worth noting that some countries don’t have any obligations around withholding. As long as you provide your employer with the correct information, they can withhold the appropriate amount from what they owe you each week, fortnight or month. The withheld amount is included on their payment summary (aka payslip) and is paid over directly to the Australian Taxation Office.
2) Take Advantage of a Foreign Earned Income Exclusion
It is essential for an Australian citizen or resident earning income in a foreign country to become aware of the complicated rules that regulate your tax obligations in that country. The most important factor for you, as the taxpayer, is determining how much of your income will be taxable. For example, if you are currently residing in Australia and are earning a salary from a United States company, then all of your income would be taxable in both countries. To avoid double taxation, some exceptions can be made: one may reduce taxes by using what is called a foreign earned income exclusion to exclude up to $100,000 from Australian taxation.
3) Use tax treaties for Double Taxation Determination
Double taxation can occur when the same income is taxed by both foreign and domestic taxing authorities. Double taxation may be avoided or reduced by seeking a treaty with the country of residence, which provides for one or more of the following:
- exemption from taxes on income derived in that country;
- exemption from taxation in the other country on profits arising in that other country, but only insofar as those profits are subject to tax in the first-mentioned country;
- exemption from tax on capital gains arising in either of the countries
4) Use tax offsets for writing off tax in full
Australia’s tax law operates on a system of offsets and deductions. If the final figure (which is arrived at by calculating the aggregate figure from all of your forms) has an amount owing, then you will be required to pay this amount in a single lump sum. However, if you are owed a refund after your calculations are done, then you will receive this as either a cheque or through direct deposit into your bank account. However, please note that there is no way for you to claim partial offsets for anything other than the year in which the income was earned – if it is not calculated in this year, then it cannot be claimed at all.