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3 12, 2018

How does Australian Income Tax work for expats?

By |2019-08-08T07:34:36+00:00December 3rd, 2018|Australian Taxes, Taxes|1 Comment

How does Australian Income Tax work for expats?

How does Australian Income Tax work for expats?

It is quite possible that you have explored newer and better opportunities outside of Australia. Thus, it makes for you to take the leap of faith and explore them. But while you are admiring the new country or home or even job for that matter, there are a few things that you should not forget. Even though you have left the country and income tax are working in a different country, there are chances that you might have to pay taxes to the ATO.

The taxation for expats remains pretty much similar to that of Australian residents. For starters, the tax year remains the same, starting on the 1st of July and ending on the 30th of June. And the deadline for filing your Australian tax return is 31st of October. Before we get to the tax slabs that are applicable for expats, it is relevant to get through some of the other crucial points.

As is the case with other Australian residents, the calculation of taxes involves reduction of expenses or other loses from the assessable income. Any form of salary, allowance, wage or other forms of compensation is considered as a source of income and must be included in the assessable income. If you are the owner of a business or self-employed, the same is also taxable. If you are in a business partnership, each partner must pay taxes on his/her share.

The taxes are not limited to salary or business income only. If an expat earns money via dividends, the same is also taxable as per the rules and regulations set by the ATO. The tax rate differs a bit depending on whether the taxpayer is a non-resident Australian or Australian tax resident. Whether the dividends are franked or not also impacts the end taxes.

Another form of income that Expats would have to declare in their tax filing is that from royalties, bonuses, rental income and interest. As is the case with other forms of taxation, the resident status plays a crucial role in deciding the tax rates. If an expat has rental property in a different country and pays taxes over there, they can the income tax offset. This ensures that they do not end up paying double taxes on the same income.

Expats are also liable to pay taxes on any capital gains that they make. If a person holds on to a financial asset whose base price increases over time, it accounts as capital gains. Real estate, personal property or shares are the most prominent examples of capital assets.

While expats do need to pay taxes in Australia, they need not worry about double taxation. There are several tax treaties or DTA with most of the major countries across the globe. This is to ensure that Australians do not end up paying taxes twice.

If you are an Australian Tax Resident, you need not pay any taxes on income up to $18,200. For income above this, the following table is helpful to calculate taxes.

Income Tax Rates
Between $18,201 and $37,000 19 cents per $1 for amount exceeding $18,201
Between $37,001 and $87,000 $3572 + 32.5 cents per $1 for amount exceeding $37,001
Between $87,001 and $180,000 $19,822 + 37 cents per $1 for amount exceeding $87,001
Above $180,001 $52,232 + 45 cents per $1 for amount exceeding $180,001


The tax rates differ a bit for Foreign Australian residents.

Income Tax Rates
Up to $87,000 32.5 cents per $1
Between $87,001 and $180,000 $28,275 + 37 cents per $1 for amount exceeding $87,001
Above $180,001 $62,685 + 45 cents per $1 for amount exceeding $180,001

 

3 12, 2018

Who pays tax in Australia? All residents of Australian need to pay Australian tax on worldwide income

By |2019-08-08T07:30:01+00:00December 3rd, 2018|Australian Taxes, International|0 Comments

Who pays tax in Australia? All residents of Australian need to pay Australian tax on worldwide income

Who pays tax in Australia? All residents of Australian need to pay Australian tax on worldwide income 

There are a couple of simple rules, based on which you need to pay Australian tax. Any individual having an Australian bank account or earning in the county needs to have a tax file number of TFN. They then need to file their taxes with the ATO or the Australian Taxation Office. The normal tax year starts on the 1st of July and ends on the 30th of June. However, the deadline to submit your taxes is the 31st of October.

While there are various factors and parameters to taxation in Australia, there one factor that everyone must be aware of, the resident status. The amount of taxes that you are liable to pay largely depends on your resident status. You can either file your taxes as non-resident Australian or as an Australian tax resident. While the taxes are higher for non-residents, you need to qualify as Australian Tax Resident to pay lower taxes.

As per the rules and regulations set by the ATO, Australians must pay taxes on their income both in the country and other countries as well. In other words, Australians need to pay taxes on their global or worldwide income. It is not uncommon for a lot of Australians to invest in other countries or financial assets. This gross amount, which includes any taxes paid in the country of origin, must be included with the assessable income.

The most common query that Australians might have is, what if they have already paid taxes on the other incomes? Would they still have to pay taxes? Well, this is where double taxation norms come into the limelight. The ATO allows an offset in foreign income when the taxes paid in foreign countries is concerned. This offset ensures that you do not end up paying double taxes. Taxpayers can claim taxes paid for the assets in other countries against their tax liability in Australia. Of course, there is a cap up to which the offset is allowed.

The following is a list of some of the most forms of investments or incomes that one might have in a foreign country.

Royalties and Dividends

Any form of dividends, royalties or interest that you earn in a foreign country is taxable in Australia. It comes under the purview of income tax of Australia. The DTA or double taxation agreement between Australia and the country in question governs the taxes that an individual must pay at the source and in Australia. If due to the DTA, the foreign taxpayer doesn’t withhold any taxes from the income, the same will be added to the assessable income in Australia and taxed accordingly.

Capital Gains

If you hold any financial assets in foreign countries that attract capital gains, necessary taxes will be applicable. Capital gains come into the picture when the base price of an asset increases over a period of time before you finally decide to sell it. An ideal example of the same would be shares. Any capital gains made on foreign income is taxable in Australia as per the CGT. And of course, relevant DTA also comes into the picture. If you are not too sure about who has taxing rights over certain capital gains, you can reach out to the ATO and get your queries clarified.

The above is a couple of common example of incomes that an Australian can have overseas. In short, all Australian taxpayers need to pay taxes on their worldwide income. However, the presence of DTA ensures that you do not end up paying taxes twice on the same income.

3 12, 2018

Capital Gains Taxation for investments in India and Australia

By |2019-08-08T07:28:47+00:00December 3rd, 2018|Australian Taxes, International|0 Comments

Capital Gains Taxation for investments in India and Australia

Capital Gains Taxation for investments in India and Australia

Most of us strive to increase our financial prowess by investing in several avenues. Taxation in Australia and India lot of these investment options do not have a concrete return associated. And it is this unpredictable nature that can bring in handsome returns. While it is absolutely great to multiply your money, one must not forget about taxes in the meanwhile.

If you have bought an asset at a certain price and over time its value appreciates, you must pay taxes on the appreciated amount. It is this appreciation that everyone refers to as capital gain. But it must be noted, that these taxes only come into the picture when you sell off the assets or actually realize the gains. It is quite natural that different countries handle capital gains in different manners.

Australia

When an individual holds an asset for at least a year, the gains made on the asset is first discounted by 50% and then taxed. If it is a superannuation plan, the gain is discounted by 33.3%. It must be noted that CGT or capital gains tax is not applicable to personal items such as furniture, car, home etc.

It can be a bit tricky to understand CGT. Thus, it is recommended to have experts on your side if you are not too sure. You would have come across lots of individuals who pay CGT when they sell off their properties. But that should not bother you much and there is a good reason for the same.

CGT is calculated for an asset that is sold or disposed of in a particular fiscal year. If you are someone who is trying to build wealth over a long term horizon, you might not even have to pay CGT for years together. There are different ways to calculate CGT for an individual. If you are holding on to an asset for more than 12 months, the gains are reduced by 50% and then taxed accordingly.

If you had purchased an asset before 21st September 1999, you can use the consumer price index to adjust the base price till 1999. And if you hold on to an asset for less than 12 months, the day of purchase and selling is excluded, and taxes are applied accordingly.

India

The concept of capital gain remains the same in India as well. Where you are entitled to pay taxes on any gains made on capital assets. Some of the most prominent examples of capital assets include patents, trademarks, house, land, machinery etc. As important as it is to be aware of the assets that qualify as capital assets, being aware of the ones that are not is also crucial. Here is a quick list.

  • Agricultural land
  • Bearer bonds
  • Clothes or furniture
  • Gold deposit scheme based bonds etc.

The capital gain is usually decided based on the holding duration of an asset. Thus, you could either hold on to an asset for a short-term duration or a long-term duration and the taxation would vary accordingly. If you hold on to an asset for 36 months or less, it qualifies as a short term capital asset. And the duration is 24 months in the case of immovable properties. Thus, any assets that you hold for more than 36 months qualifies as a long-term capital asset.

There are a few assets that follow 12 months as the criteria for short-term or long-term assets. Based on these you can calculate whether an asset that you have falls into the short-term or long-term CGT or capital gain tax.

22 11, 2018

Do You Know These 6 ways to claim back your taxes in Australia?

By |2019-08-08T07:45:11+00:00November 22nd, 2018|Australian Taxes|0 Comments

6 ways to claim back your taxes in Australia1 (1)

Do You Know These 6 ways to claim back your taxes in Australia?

To claim back your taxes in Australia if due to some reason or the other, you end up paying more taxes to the ATO than what you should have, you are not alone. Every year,  several taxpayers do the same. This is one of the most important reasons for filing your taxes and returns on time. When you file your returns, the ATO will return any additional taxes that you have paid.

If you belong to the group of people who are expecting some tax refunds, here are some ways to boost the refund further.

Resident Status

One of the major factors that decide your tax liability is the resident status. If you are a non-resident the taxation and refund are a bit different from someone who is a tax resident. For the first six months that you work in Australia, you must pay taxes as non-resident. And the tax rates are higher for non-resident Australians. Thus, ensure that you are aware of your resident status so as to ensure that you are not paying higher taxes.

Superannuation

There are chances that you might not be eligible for income tax refunds, due to the length of your stay in Australia. However, this doesn’t mean that you cannot claim your superannuation back. A portion of your salary is dedicated for retirement plans as superannuation. However, if you are not going to retire in Australia, you can claim it back. As soon as you depart the country and your visa has expired, you can claim superannuation.

Refunds

As mentioned earlier, the taxes that non-resident Australians pay is higher than Australian Tax residents. However, if you become an Australian tax resident, you can claim for a refund of the higher taxes that you have paid initially. There are a number of factors that must work in your favor for you to become an Australian tax resident. It starts with the duration of the stay, your behavior during the stay, your ties with the local communities and so on. These would help you to qualify as an Australian tax resident and thus you can claim for refunds.

Work Expenses

A lot of non-resident taxpayers and even resident taxpayers forget to claim work related expenses. Work related expenses are a good way to reduce your tax liability and enhance the refunds that you are expecting from the ATO. Depending on what your job role was in Australia, you can benefit from certain tax deductibles. To claim such expenses, one must ensure that you are not claiming for reimbursements for the same elsewhere, that it is related to your job and that you have some proof of the same. Some of the most common expenses that you can claim arefor equipment, tools, travel to and fro, courses like white cards, RCG, RSA and so on.

Tax Return

Though it might sound a bit obvious, it is important not to forget this. During your stay in Australia, if you have paid any form of taxes to the Australian Taxation Office, you are eligible to file your taxes. The tax year stars from 1st of July and ends on 30th of June. Depending on the length of your stay, you might have to file more than once. Since tax returns are a yearly affair. The first step to getting refunds is filing your tax return.

Charity

If you are someone who does charity or wishes to start doing the same, it is a win-win situation. You not only can care for someone but also claim for deductions in your tax return.

These tips should help you with your tax returns in Australia.

19 11, 2018

Does an NRI in Australia need to file his IT in India?

By |2019-08-08T07:46:31+00:00November 19th, 2018|Taxes|0 Comments

Does an NRI in Australia need to file his IT in India

Does an NRI in Australia need to file his IT in India?

In recent times, emigrating to a foreign country for better job opportunities is something of a growing trend. More and more people are now moving out of the country in the search for better living or just to earn more money. Unless a person permanently leaves the country, the chances are high that some of their assets would be left behind. If you are an NRI who works in Australia, you are liable to pay taxes in India under a few circumstances. Firstly, one needs to be clear about their resident status. If a person is a resident of India, they will be taxed on global income. However, for non-resident Indians, things are a little different. Non-resident Indians who are categorized as Australian Tax Residents must pay taxes for their income in India.

There are chances that you have purchased a house before moving out to Australia or have purchased one while being in Australia. Just keeping the house empty for months or years together might not be the best idea. If you wish to rent your place out while you are an Australian Tax Resident, you must pay the applicable taxes to the Indian Government.

Let us assume that Sid is an Australian Tax Resident and has rented out his place for INR 15,000 per month. The annual Indian income for him would be INR 1,80,000 which is less than the minimum annual income that is taxable. Thus, he need not pay any taxes. However, if the house rent was INR 25,000 per month the annual income would be INR 3,00,000. Since it is more than the threshold of INR 2,50,000 Sid must pay taxes on the same. Similarly, if you receive any salary in India while still working in Australia, the same is taxable as per the tax slabs.

Investing your money for better returns either in the immediate future or from a long-term horizon is quite common. And the availability of various investment avenues makes things much easier for NRIs as well. However, one must be very careful with the investments as they attract taxes as well. And the strive to upsurge your capital shouldn’t blind you from the taxation involved.

Whether you invest in mutual funds or directly in the capital market via shares and stocks, you might be eligible for paying taxes on the same. The whole premise of taxation of mutual funds or stocks relies on the gains made. For example, if you bought the shares of a company YZ Technologies at INR 200 in 2017 and sold them for INR 300 in 2018, you made a capital gain of INR 100 per share. And you would be taxed accordingly.

The taxation would also come into the picture if you sell any other assets such as a property or house. If you earn interests on your fixed deposits or interest from a savings account, the same is also taxable. Thus, the first step is to verify and calculate the different income avenues that you have. Once you do, the next step would be to calculate the amount of taxes that you are liable to pay to the Indian Government. And lastly, you would need to file your IT returns before the due date.

There are several benefits of filing tax returns which includes, being a responsible citizen, if you are planning for a home loan in the future, tax returns can save the day for you. It can also help you with a lot of financial transactions in the future. Thus, depending on whether or not you have an income in India, you need to file Income Tax.

13 11, 2018

Tax Tip to Become An Australian Resident

By |2019-08-08T07:47:39+00:00November 13th, 2018|Tax tips|0 Comments

tax tip become an Australian resident

 

You can claim the taxes that you paid at a higher rate if you become a Tax Australian resident for tax purposes. To avail the benefits, you need to qualify based on some certain parameters. Parameters such as your behaviour during the stay in Australia, how long you have been in Australia. If you have stayed for more than 6 months in the same place and have been successful in establishing ties with the local people, you are more likely to qualify as an Australian resident for tax purposes. If you are not too sure about your resident status, you can take the help of a Tax Agent.

Contact AO Tax Team to know how you can use this tip to optimize your Tax Savings!

13 11, 2018

Tax Tips for Australia non-resident or resident people

By |2019-08-08T07:49:54+00:00November 13th, 2018|Tax tips|0 Comments

tax tips for non-resident or resident people

Whether you are an Australia non-resident or resident plays a major role in the amount of taxes that you have to pay as well as a tax refund. Individuals who are on a temporary visa, the non-resident category is what you should be using to file your taxes. As per the Australian laws, you must pay taxes for the first six months as non-resident. Though the tax rates are a bit higher for non-residents as compared to residents, you wouldn’t want to leave the country with tax liability. If you are an Australian resident, the standard taxation set by the ATO applies to you.

24 10, 2018

Tax Tip : Individuals Donations

By |2019-03-28T11:40:29+00:00October 24th, 2018|Tax tips|0 Comments

Individuals donations who like to donate their money to charitable organizations, there is more to it than just the mere satisfaction of helping people. Donations that you make to any charitable organizations that are registered, qualify you for a tax deduction during your return filing. You can claim any donations that exceed $2. You can either pay by cash or by providing gifts. If you wish to donate gifts and its monetary equivalent exceeds $2, you can claim the same. In the event that you want to gift a property, a different set of rules govern the transaction.

Contact AO Tax Team to know how you can use this tip to optimize your Tax Savings!

12 10, 2018

Tax Tip: Bank&Financial Institutions Transactions

By |2019-10-02T10:55:31+00:00October 12th, 2018|Tax tips|0 Comments

A lot of us get into the habit of not disclosing or discussing any interest earned from bank accounts. Any interest that you earn from banks or other financial institutions must get into your tax returns. The simple reason being, your bank declares the same to the ATO and any mismatch might lead to some surprises. Banks or financial institutions usually send out an annual statement or account summary. Either of this document contains the amount of interest that you have earned during the financial year. You can use the same to fill up the Gross Interest field of your Income in the tax return. Contact AO Tax Team to know how you can use this tip to optimize your Tax Savings!

Here are tax tips a lot of us get into the habit of not disclosing or discussing any interest earned from bank accounts. Any interest that you earn from banks or other financial institutions must get into your tax returns. The simple reason being, your bank declares the same to the ATO and any mismatch might lead to some surprises. Banks or financial institutions usually send out an annual statement or account summary. Either of this document contains the amount of interest that you have earned during the financial year. You can use the same to fill up the Gross Interest field of your Income in the tax return.

Contact AO Tax Team to know how you can use this tip to optimize your Tax Savings!

9 10, 2018

Super contributions

By |2019-10-02T11:01:34+00:00October 9th, 2018|Australian Taxes|0 Comments

Super contributions

 

Do you want to know how to Grow your nest egg? Know more about super Contributions.

If you want to retire comfortably your employer’s super contributions may not be enough to build your nest egg. By making extra contributions, you will boost the amount of super you have when you stop working. Start now so you can relax later.

  • Why grow your super?
  • Ways to boost your super
  • Super tax deductions
  • First home super saver scheme
  • Downsize your home and put money into super

Why grow your super?

There are lots of good reasons to grow your super:

  • You might live to be 100 so your money needs to last
  • The cost of living will increase over time
  • The age pension alone will not be enough for a comfortable lifestyle
  • Super gets special tax treatment
  • Low-income earners may be eligible for bonus government contributions

Before you start making extra super contributions, take a look at your finances as a whole. If you have high-interest credit card debt or personal loans, it may be better to pay these debts off first. If you have a home loan, read our super vs mortgage webpage to help you work out whether contributing extra to super or paying down your mortgage is the better option for you.

Ways to boost your super

Your employer puts an amount equal to 9.5% of your salary into your super. Employers must pay this money into your super at least once a quarter, see employer contributions for more information.

Your employer contributions alone are unlikely to be enough to maintain your current lifestyle when you stop work but you can do your bit to grow your super.

Changes to super in 2017

Super contribution limits and tax concessions changed on 1 July 2017. Details of the changes are available on the Australian Tax Office (ATO) website.

Make concessional super contributions

If you are employed you and your employer can agree to pay a portion of your pre-tax salary as an extra contribution to super. This is commonly known as a salary sacrifice. It can be tax-effective if you earn more than $37,000 per year.

Concessional contributions are capped at $25,000 per financial year. This means the total of your employer and salary sacrificed contributions must not be more than $25,000 each year, see salary sacrifice super for more information.

Make non-concessional super contributions

Simply deposit your personal money into your super. These are called after-tax super contributions because you have already paid tax on the money. This is different from salary sacrificing, which happens before your income is taxed.

Government co-contributions

If you earn less than $52,697 per year (before tax) and make after-tax super contributions, you are eligible for contributions from the government. This is called the government co-contribution.

If you earn less than $37,697 the maximum co-contribution is $500 based on 50c from the government for every $1 you contribute. The amount of the co-contribution reduces as your earnings increase.

To receive the co-contribution you will need to lodge a tax return for the year. The government will then work out how much you are entitled to. If you are eligible, the government will pay the co-contribution directly to your fund. See the ATO for more details on super co-contributions.

Low-income superannuation tax offset

If you earn $37,000 or less you may also get a ‘low-income superannuation tax offset’ from the government. The amount, up to $500 annually, will be 15% of the concessional contributions you or your employer made to your super account during the financial year.

You will get this payment whether or not you add extra money to your super. The ATO will automatically make these payments if you meet the criteria. Make sure your super fund has your tax file number so you don’t miss out.

Work out your best mix of super contributions

If you can afford to contribute more to your super, you’ll want to know the best way to grow your nest egg.

Super tax deductions

If you make personal after-tax super contributions you can claim them as a tax deduction, effectively making them concessional contributions. This system helps self-employed people or those with variable work patterns.

Spouse super contributions

If your spouse earns a low or no income, you may be able to claim a tax offset of up to $540 if you make contributions to your spouse’s complying super fund.

Go to the Australian Taxation Office (ATO) for the rules on the superannuation spouse contribution tax offset.

Spouse contribution splitting

You can also split your employer super contributions with your spouse. Contribution splitting can only be done after the end of a financial year. Your super fund will be able to guide you through the process. See the ATO’s fact sheet on contributions splitting.

First home super saver scheme

The first home super saver (FHSS) scheme allows first home buyers to save a home deposit within their super fund. From 1 July 2017, any personal voluntary contributions you make to your super can be withdrawn to help buy or build your first home.

Under the FHSS scheme, you can withdraw up to $15,000 of eligible contributions made over a financial year or up to $30,000 in total for all years, plus an amount that represents deemed earnings.

Voluntary contributions made to defined benefit super funds are not eligible for release under the FHSS scheme.

Withdrawals can be made from 1 July 2018. To be eligible to withdraw funds under the FHSS scheme you must:

  • not have owned property in Australia before
  • be at least 18 years old
  • not have withdrawn money under the scheme in the past.

Non-concessional contributions and earnings can be withdrawn tax-free. Concessional contributions and earnings will be taxed at marginal tax rates with a tax offset of 30%. You must enter into a contract to buy or build your first home within 12 months of making a withdrawal under the FHSS scheme or you will have to recontribute the amount back to super or pay additional tax on it.

For more information see the ATOs first home super saver scheme webpage.

Downsize your home and put money into super

If you have owned your home for more than 10 years and are considering downsizing you will soon have another option for investing the excess proceeds from the sale of your home.

From 1 July 2018, if you are aged 65 or older you are able to contribute your downsizing proceeds from the sale of your principal residence to super as a non-concessional contribution. The contribution can be up to $300,000 per person and is in addition to any other voluntary contributions you make under existing contribution caps.

For the best Taxation advise, please reach out to AO Tax Consulting.

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