SIGNIFICANT DEVELOPMENTS
The proposal for a Defence-East Timor levy, to apply to individual taxpayers at rates of 0.5% or 1% on certain levels of taxable income, has been dropped.On February 22,2001, the federal government announced measures to simplify the payment of installments of income tax by individuals under the
pay-as-you-go (PAYG) system. In particular, individuals registered under the Goods and Services Tax (GST) legislation, with an annual turnover of less than A$1 million, may have their quarterly installments calculated for them by the Australian Taxation Office, rather than file quarterly
statements regarding their income.
TERRITORIALITY AND RESIDENCE
Australia taxes its resident individuals on a worldwide basis. Resident individuals are liable to Australia tax on income derived from all foreign sources, except for salary and wages derived in performing duties overseas for a continuous period of at least 91 days, provided these earnings are
not exempt from tax in the foreign country in which they are earned. A tax credit is allowed for foreign taxes paid on taxable income derived from foreign sources (See “Tax credits” below)Certain income is taxed as it accumulates in the case of investments in certain foreign entities (see Tax credits” below).
Individuals are residents of Australia if they reside in Australia, and this includes the following.
1.Individuals whose domicile and permanent place of abode is in Australia.
2.Individuals who have actually been in Australia during more than one-half of the income year, unless the individual’s usual place of abode is outside Australia and the individual does not intend to reside in Australia.
Persons coming to Australia to take up a contract of employment may be regarded as residents even if they are to be in the country for a short term of, say, two or four years. Citizenship and nationality do not determine liability to Australian income tax.
A nonresident individual is liable to Australian income tax only on income (other than interest and dividends) derived from sources in Australia.
Nonresidents are subject to withholding tax on (1) interest income paid to them by a resident, (2) dividend income from resident corporations, and (3) Australian-source royalties.
Under the Australian dividend imputation system, dividends paid out of Australian-taxed corporate income (franked dividends) entitle resident individuals to a rebate (and in some cases a refund ) of the corporate tax and nonresidents to an exemption from dividend withholding tax (see “Capital gains and investment income “ below).
GROSS INCOME
Employee gross income /Gross income of an employee includes cash remuneration arising from employment. Cash remuneration includes salaries, wages, commissions bonuses, and allowances paid to employees. Employers are liable for a fringe benefits tax levied at 48.5% of the taxable value multiplied by a gross-up factor of the fringe benefits granted to employees. The gross-up factor is 2.1292 for “type 1 aggregate fringe benefits”-broadly, those where, subject to certain exceptions, the employer was entitled to an input tax credit for GST. The gross-up factor for other fringe benefits (“type 2 aggregate fringe benefits”) is 1.9417. Fringe benefits tax is deductible by the employer for income tax purposes. Benefits subject to fringe benefits tax are excluded from the employee’s taxable income but may be taken into account (reportable fringe benefits) when determining the employee’s liability for tax surcharges such as the Medicare levy surcharge and the
superannuation contributions surcharge and income related obligations such as child support.
Foreign nationals are generally taxable on salary and allowances relating to services performed in Australia, regardless of where payment is made and whether the income is remitted to Australia. Nonemployee resident taxpayers are subject to tax on noncash business benefits.
Resident individuals are subject to Australian tax on their overseas employment income, unless special exemption requirements are met (see “Tax credits” below). However, tax treaties are in force with various countries, and provisions in those treaties may require a different tax treatment of certain employment income.
Capital gains and investment income/ Capital gains tax applies to assets acquired on or after September 20, 1985. Capital gains made upon the realization of such asse
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