Australia tax planning
Compared to other jurisdictions, tax planning in Australia is acknowledged to be a complicated task. An important point to note, when undertaking tax planning in Australia, resident companies are taxed on worldwide income and capital gains. Healy Consultants however has a range of support services to ensure the best tax planning strategy for our Clients. The following information may be useful in relation to tax planning strategy in Australia.
Tax planning in Australia
- Non-resident companies are taxed only on Australian-sourced income and capital gains on the disposal of certain taxable Australian assets if acquired on or after 20th September 1985. (Read more about tax in Australia.) Capital gains on assets acquired before that date by non-resident entities usually receive free of Capital Gains Tax;
- There are many different ways in which investors can conduct business in Australia, including corporations, branch offices, subsidiaries, joint ventures, partnerships, and trusts. However, for international investors the most appropriate vehicles are usually Australian subsidiary company or Australian branch office. Although there is not a great deal to choose between the two (both are subject to the standard corporate tax rate), in practice most foreign companies choose to operate through a locally-established subsidiary company, as this has the added benefits of limited liability and separate legal status;
- A company is deemed to be Australia-resident if it has been formed in Australia; if the company’s central management and administration is in Australia, even if it was formed in another jurisdiction; and if the company conducts business in Australia and its voting control is in the hands of resident Australian shareholders, even though it was incorporated in another jurisdiction or its central management is in another jurisdiction;
- It must be considered that franked dividends from an Australian subsidiary are not subject to withholding tax when paid to the foreign parent company;
- At a rate of 28.5%, Australia-resident companies are taxed on worldwide income from all sources;
- Companies with Australia-residence, pay income and capital gains tax on worldwide-sourced income;
- Exemptions however are available if income and capital gains have already been taxed in a foreign jurisdiction;
- State, territory and local governments do not impose additional corporate tax, which comes into consideration when tax planning in Australia. However, they do impose some taxes which might impact foreign companies operating in the country, including payroll tax (more applicable to larger employers), stamp duty and land tax;
- An Australian company is required to register for goods and sales tax (GST) if annual sales exceed $50,000. If the company is not registered for GST, it cannot issue tax invoices;
- Australia has signed Double Tax Agreements with more than 40 countries. A Certificate of Payment, as proof for non-residents of taxes paid, will only be verified for those payees whose country of residence has a comprehensive double taxation agreement with Australia. For a list of Australia’s Double Tax treaties, please refer to the Australian Taxation Office (ATO) website;
- Many strategic advantages are offered to international business people by Australia. A successful strategy requires taking advantages of Australia tax regulations. Healy Consultants’ tax experts deliver a comprehensive tax planning strategy to our Clients. A successful tax planning strategy should address some of the following issues:
- Can the Australia company receive foreign-sourced income without being subject to local corporation tax? A properly-structured Australia company is exempt from further tax payment on such income if it is from a “listed” jurisdiction, subject however to Controlled Foreign Corporation (CFC) rules. A listed jurisdiction is a jurisdiction which has a similar tax system to Australia;
- Are any tax exemptions or tax incentives available in Australia? A successful tax planning strategy should identify both tax exemptions and restrictions. Resident companies pay tax on their worldwide income and capital gains (with certain categories of income and capital gains being exempted and with tax credits being granted where income and capital gains have already been taxed in a foreign jurisdiction);
- Does the company have to register for value added tax (VAT) or goods and sales tax (GST)? It is important to note that in accordance with GST Law, an Australia company is obliged to pay a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
- When incorporating a company in Australia, the entity is liable for corporation tax for income generated in Australia and internationally;
- Personal income tax in Australia is based on a progressive tax rate system. The financial year for personal income tax spans from 1st of July to the 30th of June. There are a number of tax deductibles that can help to reduce the final tax payable but following are the various Australian tax rate brackets from 1st July 2012:
- AU$1 – AU$18,200 is not required to pay tax;
- AU$18,201 – AU$37,000 is liable for 19c for each $1 over $18,200;
- AU$37,001 – AU$80,000 is liable for $3,572 plus 32.5c for each $1 over $37,000;
- AU$80,001 – AU$180,000 is liable for $17,547 plus 37c for each $1 over $80,000;
- Over AU$180,000 is liable for $54,547 plus 45c for each $1 over $180,000;
- Healy Consultants has a range of tax planning services which are designed to meet an individuals needs. Our firm takes a global approach to our tax planning, thinking ‘outside the box’ to create the most effective strategies. Our international tax professionals provide the best tax planning services to organisations of all sizes. These services include but are not limited to:
- Offshore companies – In certain circumstances, a properly-structured offshore company results in a tax-efficient corporate vehicle through which international business can be conducted;
- Offshore trusts & foundations – offshore Trusts and Foundations are ideal for entrepreneurs and high net worth investors who need to legally minimise their international tax exposure and optimise asset protection;
- Australia corporate bank account – offering a reputable and reliable corporate bank account is fundamental to Healy Consultants’ tax planning services portfolio. With tax advantages in mind, we are able to assist you in penning an Australian or an international corporate bank account with leading international banks in the jurisdiction of your choice. Refer to the Australia corporate bank account webpage for more information;
- Mergers and Acquisitions (M&A) – some Clients approach us for assistance with their merger and acquisition plans, to assist in drawing up an M&A roadmap and developing a tax-efficient structure in going forward;
- Australia and international tax legislation – at the heart of our successful tax planning strategy is the need to keep abreast of international tax legislation. A key aspect of Healy Consultants’ tax planning services lies within keeping our Clients informed of regulatory changes before they may have any negative impact;
- Double Taxation Treaties – Australia has signed double taxation agreements with more than 40 countries. Making our Clients aware of the availability of such tax relief tools is a core element of our tax planning strategy and one of our tax planning services;
- Australia corporate and personal income tax advice – Healy Consultants’ services include advising Clients on the latest corporate and personal income tax rates in Australia, as well as assist our Client to prepare and submit Australia corporation tax computations and Australia tax returns to the relevant tax authorities, including the ATO;
- GST and VAT registration – through this tax planning service, Healy Consultants can assist our Clients through this important step.
- If your company requires accounting and tax services, please contact us and we will be glad to provide you with a tailored quote for such services. Our indicative annual fee for a small LLC is AU$2,300.
Frequently asked questions
What type of Australia tax planning services may Healy Consultants provide me with?Our Firm offers for free tax planning tips and checklists in the engagement strategy document provided to all our Clients incorporating a company in Australia. We may also provide them for an annual fee book keeping and Australia tax returns filings services after their company is incorporated.
Where can I find more information on different corporate tax rates in Australia?You can find more information regarding Australian company tax on the Australian Taxation Office’s website.
I am setting up companies in a few different countries, including Australia. Can Healy Consultants help me with tax planning strategies?Yes, Healy Consultants provides tax planning services in Australia as well as for other countries to assist our Clients to legally minimize global tax.