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Personal Taxation in Australia


An individual is subject to a residence test in determining if he/she is Australian resident for tax purposes. Generally, that entails having either always lived in Australia; having moved to Australia and now living there permanently; or having been in Australia continuously for 183 days or more in a fiscal year.

However, if the test is inconclusive, the intention or purpose of a person’s presence in Australia can be taken into account, as can family and business/employment ties, the maintenance and location of assets, and social and living arrangements.

Liability to tax is determined on a year-by-year basis. Events after the year of income may assist in determining an individual's residency status.

Resident individuals are taxed on their worldwide income.

Non-residents are taxed on their Australian income that would be taxable in Australia. This excludes any income from which non-resident withholding tax has already been deducted. Examples of income that may be subject to non-resident withholding tax are bank interest, royalties and dividends. Capital gains are not subject to a separate tax.

Income Tax Rates

An individual’s taxable income includes income from employment, interest received, rental income (less rental expenses), pensions and annuities (including most foreign pensions) and capital gains.

Dividends received are included in taxable income unless they have been “franked” under the Australian imputation system, under which companies that have paid Australian company tax pass on to their shareholders an equivalent 30% “franking” credit for the tax paid on profits when distributing those profits.

While capital gains (net of capital losses) form part an individual’s taxable income, special rules apply, for example, to a main residence and other property assets, distributions from unit trusts and other managed funds, and participations in an employee share scheme.

From July 1, 2010, each resident individual taxpayer has a personal allowance of A$6,000. For taxable incomes above that level, income tax rates then rise on a progressive scale: 15% on income from A$6,001 to A$37,000; 30% from A$37,001 to A$80,000; 37% from A$80,001 to A$180,000; and 45% from A$180,001 and over.

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