If you’re relocating to Australia, or considering making such a move, you’re going to want to know what the tax expectations are for you in the land down under. Knowing what you’re in for is a good way to ensure you avoid any nasty tax surprises in the future. Let’s take a look at the fundamentals of Australian income tax.
How does the Australian tax system work?
Personal income taxes are collected at a federal level and this is the most significant revenue source in Australia. The Australian tax system is a marginal income tax system. This means that the higher your income, the higher your tax rate. The more you earn, the more you pay. Their tax authority is known as the Australian Tax Office (ATO), and this entity is accountable for ensuring that companies, individuals and taxable organisations submit their tax returns properly and timeously.
The Australian tax system depends on a self-assessment program – much like South Africa’s eFiling system – which means that individuals are responsible for declaring their own tax each year. Individuals are also liable to pay tax on their share of any partnership or trust profits that they may benefit from in the financial year, which ends June 30.
What is tax money used for in Australia?
This revenue is used by the Australian Government to provide services to their people, including health, education, defense, roads and railways and social services. Australia is known for having an effective health system, quality education and for providing a multitude of community facilities like parks and libraries – all of which are funded by the Australian tax system.
How much tax will you pay in Australia?
Your tax liability can vary, depending on –
- Whether or not you are an Australian resident for tax purposes (non-residents are subject to a higher tax bracket).
- How much income you earn, and whether or not you have more than one job.
- Whether you have a tax file number (TFN) – which is information that needs to be supplied to your employer.
If you start work before you’ve been issued a TFN, you have 28 days to get one and give the details to your employer. Failure to do so means your employer must deduct tax from your salary at the highest rate.
Further reading: individual income tax rates in Australia.
What income will you be taxed on in Australia?
The Australian Tax Office wants to know about your taxable income. This is the income which you must pay tax on, once your tax deductions and offsets have been accounted for.
Income that is is taxable in Australia includes:
- Employment (i.e: your wages/salary)
- Pension and annuities (tax for retirees)
- Most government payouts/grants
- Investments and capital gains
- Passive income from trusts, partnerships or businesses
- Foreign income (income from outside of Australia)
Don’t forget: South Africa and Australia have a double tax agreement
To avoid double taxation on your income, South Africa and Australia have a legal agreement in place. This gives you the opportunity to request that the tax authorities back home reduce their withholdings tax or exempt you from paying tax in that country entirely. You can do this by applying for tax relief and providing a certificate of residency or status.
Read more: How Double Tax Agreements work.
FinGlobal: worldwide tax specialists
Expat tax is a tricky thing to navigate, and the last thing you want to do is find yourself with a nasty surprise and a tax liability in two countries. It can be helpful to consult with professional tax specialists, who can advise you on how to make the move to Australia in the most tax-efficient manner.
FinGlobal is ready to assist you with all of your expat tax questions, and handle all of your tax clearance and tax refunds matters. We’re also perfectly positioned to provide impartial expert advice that can help you make a decision on tax emigration and financial emigration. As a South African looking to relocate to Australia, you’re going to need a trusted financial services partner to smooth the way for you. We offer a full suite of financial services for South African expats around the world, including:
- Retirement annuity withdrawal
- Unclaimed policy search
- Foreign exchange transactions
- Tax compliance, consulting and refunds
- Inheritance transfers
- Financial emigration
- Blocked rand bank accounts
If you’d like us to conduct a confidential SARS assessment on your behalf, please leave your contact details and we’ll be in touch to discuss the next steps of your journey to financial peace of mind.