Australia legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants Group assists our Clients with timely compliance of their annual legal, accounting and tax obligations.
- An Australia-resident company is taxed on its worldwide income. Non-resident companies are taxable only on their Australia-sourced income. A company is considered resident in Australia i) if it is incorporated in Australia ii) if it conducts business in the country and is managed and controlled from Australia or iii) if it conducts business in the country and its voting power is controlled by Australian resident shareholders.
- Companies in Australia (including branches) pay corporate tax at i) 25% for SMEs and ii) 30% otherwise. See the Australia Taxation Office website for more details.
- Dividends received by Australia-resident shareholders are not taxable as they are sourced from profits that have already been subject to Australian tax at company level. Dividends received by non-residents are taxed at 30%.
- Dividends paid to both Australian and foreign parent companies are withholding tax-exempt, provided corporate tax has been paid on the subsidiary’s profits. If otherwise, withholding tax is levied at the standard corporate tax rate, unless reduced by a tax treaty.
- Interest paid to foreign entities from an Australia-resident company is subject to a 10% withholding tax, unless reduced by a tax treaty.
- Royalties paid to a non-resident by an Australian resident suffer a 30% withholding tax, unless it can be reduced under one of the tax treaties Australia has signed with countries around the world.
- Capital gains tax is 30% for Australia residents and 26% for non-residents.
- State, territory and local governments do not impose additional corporate taxes in Australia. However, they do impose some taxes which might impact foreign companies operating in the country, including i) payroll tax (more applicable to larger employers) ii) stamp duty and iii) land tax.
- Employers must contribute 9.5% of an employee’s gross salary to the Social Security and Unemployment Insurance Fund. Employers must also pay a 46% tax on all fringe benefits provided to their workforce.
- Employers are required to withhold payroll tax due on all employees’ wages and benefits. Averaging 5.5%, payroll tax rates are fixed by local authorities.
- The sale and transfer of real estate is subject to a property tax of up to 7%, which is levied by local authorities.
- Personal income tax in Australia is based on a progressive tax rate, which can be up to 47% (including a Medicare levy of 2%). The financial year for personal income tax runs from 1 July to 30 June.
- For the year 2019/2020, incomes below A$18,200 are free of income tax. For incomes exceeding AU$18,200, a fixed amount may be levied along with a progressive tax rate for excess income based on the income range.
- Until 30 June 2022, a new tax incentive called LAMITO (Low and Middle Income Offset) is available to those whose income is up to A$125,333.
- All Australian entities are required to prepare and lodge the financial statements with ASIC within 4 months from the financial year end.
- Companies will apply a full tax rate 30% if the aggregated turnover of the group is more than AU$ 50 million.
Goods & services tax (GST)
- The standard GST rate is 10%. Registration is mandatory for companies with GST turnover (gross income minus GST) of A$75,000. GST returns must be submitted quarterly, except for businesses whose turnover exceeds A$20 million, in which case returns must be filed monthly.
Filing due dates (corporate income tax)
Mode of Filing Filing Deadline e-Filing 31 October Paper Filing 15 January (companies with turnover exceeding A$10 million)
28 February (other companies)
Consequences of late / non-filing of tax returns
- For late filing of i) activity statements ii) tax returns iii) pay as you go (PAYG) withholding annual reports iv) fringe benefits tax returns v) single touch payroll reports vi) annual GST returns and information reports and vii) taxable payment annual reports, the Australian Taxation Office (ATO) may impose a Failure to Lodge (FTL) on time penalty.
- FTL penalties are levied in units per 28 days as follows i) a small entity will be charged one penalty unit ii) a medium sized company (assessable income or current GST turnover exceeding A$1 million and less than A$20 million) two penalty units and iii) a large entity (assessable income or current GST turnover exceeding A$20 million), five penalty units.
- For non-payment or late payments, the ATO will levy i) interest on unpaid amounts ii) use any future refunds or credits to repay the amounts owed iii) engage an external debt collection agency.
Tax exemptions and rebates
- Australia has a broad network of Income Tax Treaties with 46 countries around the world, including Canada, China, France, Malaysia, Singapore, the United Kingdom and the United States. These treaties help reduce withholding tax in Australia on overseas income.
- By the end of 2023, Australia will enter into 10 new or updated double taxation agreements which include a revised update to the Indian treaty and new taxation agreements with Luxembourg and Iceland.
A non-resident company pays tax only on Australia-sourced income. Global income is tax-exempt.
Australia tax relief and business grant schemes
As one of the world’s best places to start up a business, Australia offers several tax relief schemes and small business grants. Since 2003, Healy Consultants Group has been assisting our Clients to access government incentives and support programs in Australia. These include:
- Investor in a qualifying Early Stage Innovation company (ESIC) may be eligible for a Concessional Capital Gains Tax and Carry Forward tax offset equal to 20% of the amount paid for newly-issued shares in an ESIC;
- A company with a global group turnover of up to A$20 million can apply for up to a 43.5% refundable tax offset on research & development (R&D) spending in Australia. Other companies enjoy a 38.5% non-refundable tax offset on R&D spending up to A$100 million.
Tax reporting, accounting and auditing considerations
- Australia tax reporting is straight forward, all returns can be submitted online.
- The World Bank ranks Australia highly for the ease with which taxes can be paid, although not as highly as New Zealand, Canada and the UK. For example, it notes that i) paying taxes in Australia takes, on average, just 105 hours per year (compared with an average of 158 hours for other OECD high income countries and ii) 11 payments are required annually. As a result, meeting statutory obligations in Australia is largely stress-free and non-time consuming.
- In accordance with Australian tax law, every Australian company is obliged to register for tax. Unfortunately, it will take the Australian Taxation Office (ATO) approximately four weeks to issue the Tax File Number (TFN) and the Australian Business Number (ABN) for your firm. Only then can our Client issue invoices to customers.
- Should our Client expect turnover to reach A$75,000, Healy Consultants Group will additionally assist our Client to register for Goods and Services Tax (GST).
- Tax returns must be filed annually with the ATO. Occasionally, the tax return must be accompanied by an International Dealings Schedule (IDS), which will include information on the taxpayer’s dealing with, for example, parties in low tax countries.
- Companies that are members of a group with annual revenue exceeding A$1 billion are required to submit additional information to the ATO in keeping with the country’s country-by-country transfer pricing reporting requirements.
- To increase corporate tax transparency, the Australian government releases an annual report containing i) company name ii) business number iii) total income iv) taxable income and v) tax payable for a) Australian public and foreign-owned corporate tax entities with total income of A$100 million or more and b) Australian-owned resident private companies with total income of A$200 million or more. The reports are available on the Australian government website.
- Australian companies may carry forward their business losses indefinitely. However, the carry forward of capital losses can only be offset against capital gains. Carry back of losses is also partially allowed.
- Healy Consultants Group’s Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budget and sensitivity analysis.
- At financial year-end, an Australian employer must prepare Pay As You Go (PAYG) Payment Summaries for the ATO and staff. Healy Consultants Group can assist with the preparation of a PAYG Payment Summary, which will be based on total wages and PAYG Withholding accumulated during the year.
- An Australia GST-registered business must submit an annual Business Activity Statement (BAS) to the ATO. The ATO will automatically notify a business, if it also has an Australian Business Number (ABN), about when to submit the BAS.
Healy Consultants Group fees for accounting & tax support
Australia accounting & tax task US$ Registration for TFN, GST and ABN 1,910 Annual accounting & tax 3,640 Quarterly BAS filing fee 850 per quarter or 3,400 per annum Assistance with annual audit relief application (form 384) 900 per annum
For an active trading company, Healy Consultants Group will efficiently and effectively discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group will more accurately advise accounting and tax fees.
Monthly book-keeping service
Healy Consultants Group will be happy to provide a monthly book-keeping service for your Australian company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.
For further details of our book keeping service and our fees, visit this page.
Maintaining accounting, secretarial and corporate structure data
- An Australian entity should maintain proper books of accounts, and also record all invoices and receipts for their company expenses and income. The ATO can (and does) review company records from time to time. Examples of receipts include those related to business purchases, for example i) assets ii) general business and iii) travel expenses.
- Australian entities should also maintain the secretarial records such as board resolutions and meeting minutes of all the important management decisions taken by the Directors.
- Under Australia’s legal system for business, the information related to the corporate structure, such as shareholders, directors, shares and secretaries, is centralised by the Australian Securities & Investments Commission (ASIC). Any change in the corporate structure of the entity must immediately be notified to the company secretary, to update ASIC records.
Director Identification NumbersAs of November 2021, the Australia Business Registry Services (ABRS) has made it mandatory for all directors of Australian companies (resident in Australia or not) to obtain a Director Identification Number (DIN).
- Companies registered before October 2021, must comply with this requirement before 30 November 2022;
- Companies registered between 1 November 2021 and 4 April 2022, will have 28 days from the incorporation date to ensure all directors have obtained a DIN;
- For all companies to be registered on or after 5 April 2022, all individuals must obtain their DIN prior to being appointed as a director.
Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfil these obligations annually. Let us know if you need Healy Consultants Group’s help to clarify your annual reporting obligations.