GLOBAL MOBILITY SERVICES - TAXATION OF INTERNATIONAL ASSIGNEES - AUSTRALIA PEOPLE AND ORGANISATION - PWC
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Global Mobility Services
Taxation of International
Assignees – Australia
People and
Organisation
Global Mobility
Country Guide
(Folio)
Last Updated: October 2018 This document was not intended or written to be used and it cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer.
Country:
Australia
Introduction: International assignees working in Australia 4
Step 1: Understanding basic principles 5
Step 2: Understanding the Australian tax system 13
Step 3: What to do before you arrive in Australia 21
Step 4: What to do when you arrive in Australia 32
Step 5: What to do at the end of the year 34
Step 6 What to do when you leave Australia 36
Step 7 Taxation of non-residents 40
Step 8 Other matters requiring consideration 44
Appendix A: Personal tax rates 46
Appendix B: Double-taxation agreements 49
Appendix C: Elements of remuneration packages (1) 50
Appendix D Typical tax computation 53
Appendix E Australia contacts and offices 54
Additional Country Folios can be located at the following website:
Global Mobility Country Guides
Global Mobility Country Guide (Folio) 3
Introduction:
International assignees working
in Australia
Australia's taxation laws are complex. all the potential issues that an one of the world's largest
Expatriates and business migrants individual might face. Rather, it is a accounting firms with offices
alike need to be aware of the specific guide to the tax system designed to in over 100 countries, we
concessions and pitfalls for those provide readers with an overview of know the tax issues facing our
whose employment arrangements and the areas where issues may arise. international clients. Our
financial interests bring them to Accordingly, readers should seek personal tax specialists will be
Australia's shores. professional advice, particularly happy to give you a 'guided
where unusual or complex tour' through the range of
This folio is designed to help those situations are involved, before any services we provide.
individuals understand and comply action is undertaken.
with their tax obligations before they Additional information can be
arrive in Australia, as well as Specific details of tax rates have been obtained from any PwC office
afterwards. In addition, the folio included in this folio as Appendix A. or from your local PwC Tax
provides an insight into the structuring Partner. Please see Appendix
of remuneration packages in respect of The theme running through this E for further information.
various tax concessions available publication is the importance of
where individuals are required to work planning one's tax affairs before,
away from their home country. during and at the end of the work
assignment in Australia. At PwC, we
The folio is not intended to be a specialise in tax advice for business
comprehensive handbook dealing with and individual clients. As a member of
4 People and Organisation
Step 1:
Understanding basic principles
The scope of taxation in treaties which have been France, Japan, New Zealand,
Australia entered into between Chile, Switzerland and
Australia and other countries. Germany.
1. Australia has both Federal Former residents who are
and State Governments now non-residents should be The tax year
which impose taxes of various aware that Australian tax
kinds. Federal revenues are 4. The Australian income year
may still apply to trailing for tax purposes covers the
raised through income tax, payments (e.g. bonuses) and
fringe benefits tax (FBT), 12-month period from 1 July
certain benefits from to 30 June.
customs and excise duties, employee share plans where
and goods and services tax the benefits are in respect of Methods of calculating tax
(GST). Although the Federal Australian employment.
Government imposes GST of 5. An Australian resident's
10%, the revenue goes to the 3. A former resident might also taxable income is calculated
States. The States also obtain be subject to capital gains tax as follows:
revenue from payroll tax, (CGT) on unrealised gains
land tax, stamp duty on which relate to CGT assets Gross income from all X
various documents and that are not “Taxable sources (but excluding
transactions, motor vehicle Australian Property” (TAP). any exempt income)
taxes and gambling taxes. Individuals are taken to have Add: Net capital gains Y
There are currently no death disposed of non-TAP assets
Assessable income X+Y
or gift duties in Australia and for their market value on the
it should also be noted that date they become a non- Less: Allowable Z
the States do not impose a resident, unless they choose deductions
separate income tax. to defer CGT until the actual Taxable income X+Y-
disposal of the asset. This Z
2. Income tax is imposed on all choice must be made at the
companies and individuals time the individual lodges
who are tax residents of their Australian tax return for 6. An individual is required to
Australia (subject to certain the year in which they cease lodge an annual income tax
exemptions) and tax is being a tax resident. It should return in Australia to disclose
applied on their worldwide be noted that there are CGT their taxable income.
income. Non-residents of articles dealing with the
Australia are subject to tax on 7. Tax payable on taxable income
“choice rule” in Double Tax
Australian sourced income, is calculated using a graduated
Agreements (DTAs) between rate scale (for individuals) or a
although their tax liability Australia and the following specified single tax rate (for
may be reduced by the countries: the UK, USA, companies and certain other
provisions of double taxation
Global Mobility Country Guide (Folio) 5
taxpayers). Details of these force personnel serving Net capital gains
scales and tax rates are overseas) which is
contained in Appendix A. Tax earned overseas and 10. Capital gains that are derived
offsets, rebates and foreign subject to tax in the on the disposal of CGT assets
income tax offsets (i.e. foreign country of derivation which were acquired after 19
tax credits) are deducted from September 1985 are generally
(refer to paragraph
tax payable. included in assessable
40);
income (refer to paragraphs
Gross income – Non-cash fringe 70 to 76). Where an asset is
8. Gross income includes benefits provided by an held for at least 12 months, a
income from personal employer to an 50% discount concession is
employee (such as use available to reduce the
services (employment or
business), bonuses, interest, of a car, assessable gain (refer to
dividends, rent, royalties, accommodation and paragraph 72). From 8 May
low interest loans). 2012, the 50% capital gains
trust distributions, various
other receipts and certain net These benefits are discount has been removed
capital gains. generally exempt from for foreign and temporary
income tax in the residents (discussed in
Exempt income (and employee's hands, but further detail below).
non-assessable, the value of the benefit
non-exempt income) is taxed to the Allowable deductions
employer under the 11. Allowable deductions include
9. Exempt income rules interact FBT regime (refer to
with other rules so that losses expenditure incurred in the
paragraph 46); production of assessable
are offset against exempt
income. In some very limited – Certain government income or in carrying on a
cases the exempt income is pensions, scholarships business for the purpose of
aggregated with taxable income and bursaries; and producing assessable income
to determine the rate of tax on (not being of a private,
taxable income. The issue with – Foreign employment capital, or domestic nature),
“exempt income” is that it does income which is depreciation, donations,
not equate to “tax-free” treated as exempt various special allowances
income. The rules on non-
income due to a double and carry forward losses.
assessable, non-exempt income
(which is tax-free) specifically tax agreement Personal home loan interest
do not interact with the loss removing the is not an allowable deduction.
offset rules. Exempt income Australian
Government’s right to 12. Entitlement to tax deductions
that is not subject to Australian
tax includes: tax foreign usually depends on
employment income of compliance with evidentiary
– Certain salary and a resident of Australia rules as well as the technical
wages directly who is also a resident provisions of the tax law.
attributable to a of the host country
limited class of (under the “tiebreaker”
activities (usually residence Article).
government aid
programs and defence
6 People and Organisation
Rebates of tax or – Low and Middle income tax offset system
tax offsets Income Tax Offset applies to allow offsets for
(from 1 July 2018); and foreign taxes paid by a
13. The amount of income tax taxpayer on an amount which
payable may be reduced by – Remote area and is included in assessable
certain rebates or tax offsets overseas forces tax income for that year. The
available to resident offsets. offset which is allowed for
individual taxpayers foreign taxes paid is the
(provided certain conditions Family Tax Benefit (FTB)
greater of $1,000 and the
are met). Rebates and tax 14. FTB is a payment provided to foreign income tax offset cap.
offsets include: families by the Department of In broad terms, the cap is the
– Dependant (invalid Human Services (DHS) to difference between the
and carer) tax offset; help raise dependent Australian tax payable on
children. FTB has 2 parts, taxable income and the
– Superannuation Part A and Part B. From 1 Australian tax payable on
related tax offsets, July 2009, FTB can only be taxable income after
including an Australian claimed through the DHS as a excluding foreign income
superannuation direct fortnightly payment, or (and certain deductions). Any
income stream tax a lump sum payment after excess foreign taxes are
offset, a tax offset for year end. FTB can only be unable to be carried forward.
superannuation claimed by individuals who
contributions on behalf are considered to be residents
Record keeping
of a spouse and a low of Australia for social security 16. Taxpayers are required to
income purposes (i.e. Australian self-assess taxable income.
superannuation tax citizens, Permanent Although details of the
offset (from 1 July Residents and New Zealand calculation of taxable income
2017); citizens), all of whom must be are generally not required to
residing in Australia. An be lodged with the taxpayer's
– Seniors and pensioners individual’s entitlement to
tax offset; return, certain record-
FTB is subject to various keeping requirements are
income tests. It should be imposed. In general terms,
– Private health
noted that temporary records are required to be
insurance tax offset;
residents of Australia who are maintained for a minimum of
– Medical expenses on 457 visas are not able to five years from the service of
rebate (only available claim FTB. the relevant notice of
in limited assessment. Please also refer
circumstances and is
Foreign income tax offsets
to comments regarding
being completely 15. Except for certain salary and substantiation in
phased out by 1 wage income earned paragraph 49.
July 2019); overseas, income and capital
– Low income earner gains derived by a resident
tax offset; taxpayer from sources
outside Australia are subject
to Australian tax. A foreign
Global Mobility Country Guide (Folio) 7
Spouses resident or non-resident. The relating to the
most fundamental distinction superannuation
17. In Australia there is no is that a resident is subject to entitlements of Federal
provision for a joint return to tax on worldwide income. In public servants.
be lodged (i.e. each spouse is contrast, a non-resident is The application of the above
individually assessed). only taxed on Australian tests will depend on the facts
Despite this, taxpayers are sourced income. of each case.
required to report their
spouse’s total taxable income Tests for determining 20. In general, an individual
(spouse includes both resident status entering Australia will be
married and de-facto couples treated as resident from their
and both opposite-sex and 19. Leaving aside the possible
date of arrival.
same-sex couples). The application of a tax treaty
spouse’s total taxable income (see below), an individual will 21. The primary consideration in
includes certain trust income, be considered a 'resident' of determining whether an
reportable fringe benefits, Australia where the individual is a resident is
Government pensions individual: whether they may be
(including exempt pension considered to ‘reside’ in
– Resides in Australia;
income), other exempt Australia during the year of
payments, target foreign – Is domiciled in income. According to a ruling
income, voluntary Australia (unless the issued by the Australian
superannuation contributions Commissioner of Taxation Office (ATO), the
and net investment losses. Taxation is satisfied Commissioner of Taxation
Both incomes are then that the individual’s will look at whether an
aggregated to assess their permanent place of individual's behaviour is
eligibility for a range of abode is outside consistent with residing in
benefits which are only Australia); Australia in determining
available to lower income whether the individual is an
earners (singles or couples). – Has been present in Australian tax resident.
In normal circumstances, Australia, continuously Broadly, the Commissioner
or intermittently, for at considers that individuals
income-producing assets held
least 183 days in the who are present in Australia
in joint names will be income year, unless the
assumed to be held 50/50 for at least six months will
Commissioner is
and income is apportioned satisfied that the exhibit behaviour which is
accordingly. individual’s usual place consistent with residing here
of abode is outside and will therefore be
Resident status Australia, and the considered residents of
individual does not Australia for tax purposes.
18. Foreign individuals living and
intend to take up
working in Australia are residence in Australia; 22. An individual who is present
categorised as either a or in Australia for less than six
'resident' or 'non-resident' for months may also be
Australian tax purposes. The – Is an 'eligible employee
considered a resident,
imposition of tax on an or spouse or child
thereof' for the however this will depend on
individual differs depending their intention and behavior
purposes of legislation
on whether an individual is a while they are in Australia.
8 People and Organisation
This may be relevant where tax resident solely of their Australian tax implications
an individual enters Australia home country. This will alter of resident status
for an extended employment the tax consequences arising
contract, but decides to leave in Australia. 27. The tax implications of an
after spending only a short individual being considered a
time in Australia. Similarly, The impact of tax treaties resident of Australia are
an individual entering summarised below:
25. Australia's tax treaty
Australia for less than six
arrangements with certain – Residents are subject
months who later extends other countries contain to tax on worldwide
their stay beyond six months special rules for determining income and taxable
may be regarded as a resident
the jurisdiction to tax capital gains (although
of Australia for tax purposes specified types of income. a foreign income tax
from their date of arrival (as Most treaties contain 'tie- offset is generally
long as their behaviour has
breaker' rules which seek to available to take into
been consistent with residing overcome situations where an account tax paid on
here during the entire individual is treated as taxable income and
period). resident of both Australia and gains from
23. To determine whether an the other tax treaty country. foreign sources);
individual exhibits behaviour The determination of resident
– Tax payable by
which is consistent with status under these tie-breaker
residents is calculated
residing in Australia, the rules overrides the operation
by reference to a more
following factors may of the general residency tests concessionary tax rate
be considered: referred to earlier. scale than the tax rates
which are applicable to
– Intention or purpose 26. A list of countries with which
non-residents. The
of visit; Australia has signed relevant tax rates are
comprehensive double set out in Appendix A;
– Family and business/ taxation treaties is set out in
employment ties; Appendix B. – The various tax offsets
or rebates mentioned
– Maintenance and in paragraph 13 are
location of assets; only available
– Social and to residents;
living arrangements; – Medicare levy is only
– Period of physical payable by residents.
presence in Australia. The levy is currently
2.0% of taxable
24. Even if the Commissioner of income;
Taxation considers an
individual to be a resident of – Resident individuals
Australia for tax purposes, a who are high-income
tie-breaker provision in a earners and do not
double taxation agreement have private patient
may override this conclusion hospital insurance with
and treat the individual as a a registered Australian
fund are required to
Global Mobility Country Guide (Folio) 9
contribute a further $140,000 or non-resident of Australia for
surcharge (in addition married with tax purposes are summarised
to the 2% levy). Since 1 adjusted taxable in Step 7.
April 2015 the income over
Medicare levy $280,000 are Temporary residents
surcharge thresholds liable for 30. A concession applies for
have been as follows: 1.5% Medicare ‘temporary residents’ in
levy surcharge
o Single with respect of all personal income
on their (ordinary and statutory)
adjusted taxable taxable income
income between which is sourced outside of
and reportable
$90,001 and Australia. However,
fringe benefits. worldwide employment
$105,000 or
married with – An exemption from the income is assessable to the
adjusted taxable Medicare levy is extent it relates to the period
income between available to expatriates of the visa. Temporary
$180,001 and meeting certain residents may disregard all
$210,000 are requirements CGT events in respect of CGT
liable for 1% (refer to paragraphs 78 assets which are not ‘Taxable
Medicare levy - 79 for further Australian Property’. In
surcharge on information); addition, the accruals
taxable income taxation rules under the
and reportable Controlled Foreign
fringe benefits. – Residents may be Corporations (CFC) rules and
subject to an accruals the Transferor Trusts
o Single with taxation system in measures do not apply.
adjusted taxable respect of investments
income between in certain foreign 31. In general, a temporary
trusts and controlled resident is a person who
$105,001 and
offshore companies holds a temporary visa and
$140,000 or (refer to paragraphs
married with does not have an ‘Australian
218 - 220). spouse’ (where spouse is
adjusted taxable
income between 28. The following chapters defined as married or de facto
$210,001 and dealing with the taxation of a and includes both opposite-
$280,000 are resident's employment and sex and same-sex couples).
liable for investment income will An ‘Australian spouse’ is a
1.25% Medicare further illustrate some of the spouse (defined above) who
levy surcharge tax implications of resident is either an Australian citizen
on their status under Australian or a permanent resident. A
taxable income tax law. temporary resident includes
and reportable New Zealand citizens who are
Australian tax implications Special Category Visa (SCV)
fringe benefits.
of non-resident status holders. New Zealand citizens
o Single with who are Protected SCV
29. The tax implications of an
adjusted taxable holders do not qualify as
individual being considered a
income over temporary residents. All New
10 People and OrganisationZealand citizens should seek pension fund (refer to superannuation fund, no tax
advice to determine which paragraphs 123 - 129). is payable provided the
category they are in. recipient was a “dependant”
Taxes arising from death at the date of death of the
32. A person can be a temporary superannuant. Tax of 17.0%
resident indefinitely and also 35. Australia abolished both
Estate Duty and Gift Duty in (including the Medicare levy)
on multiple occasions. A is applied to the taxed
temporary resident will cease 1979. For CGT purposes,
element of death benefits
to be a temporary resident death is (with one exception)
not a “CGT event” and any paid to non-dependant
where they fail the tests (e.g. recipients. The untaxed
their spouse becomes an CGT assets passing to a
element of death benefits
Australian citizen or beneficiary are deemed to be
acquired on the date of death paid to non-dependant
Permanent Resident, or they recipients is taxed at a rate of
become an Australian citizen for the deceased person’s cost
32.0% (including the
or Permanent Resident). base. Special rules apply
where the CGT asset was Medicare levy). Where the
33. Temporary resident status acquired by the deceased entitlements are from a non-
resident pension fund, the
will typically cease when a person prior to the
foreign national receives introduction of CGT on 19 rate of tax payable by a
Permanent Residency. Upon September 1985 and where a resident recipient can be as
high as 47%. Because of the
ceasing to be a temporary CGT asset (which is not an
resident, all CGT assets which interest in Australian real nature of foreign pension
are not Taxable Australian property) is acquired by an funds and their treatment
Property are deemed to be Australian resident from a under Australian tax rules,
acquired at their market foreign estate trust. In both there may be exposure to tax
value. When a temporary cases, the CGT asset is on the entire amount. Advice
resident departs Australia, deemed to be acquired at should always be sought
the CGT deemed disposal market value on the deceased where foreign
rule does not apply. person’s date of death. Where superannuation (pension)
entitlements may pass to
a CGT asset (which is not
34. It should be noted that Australian real property) is an Australian
contributions by employers to inherited by a non-resident resident individual.
foreign superannuation funds beneficiary, CGT will apply 37. Trusts created on death
(i.e. pension funds) are on the date of death and the
ordinarily subject to FBT present their own special
gain or loss will be reported taxation issues, particularly
(refer to paragraph 46) and in the deceased person’s final in cross-border situations for
are a non-deductible expense. tax return.
Where the employee is a individuals who either reside
temporary resident, a specific 36. Inheritances can often in, or have assets in countries
which have death duties.
exemption from FBT applies involve the transfer of
to foreign pension superannuation entitlements Advice should be sought
contributions. Foreign to beneficiaries either directly before coming to Australia in
nationals should seek advice or indirectly (through an
on “salary sacrificing” estate distribution). Where
remuneration into a foreign the entitlements are from a
“complying” Australian
Global Mobility Country Guide (Folio) 11respect of wills, inheritances
and the appointment of
executors PRIOR to arrival.
Contact points are:
Norah Seddon, Partner (Tel:
[61] (2) 8266 5864, Email:
norah.seddon@
pwc.com)
Kevin Lung, Director (Tel:
[61] (2) 8266 7318, Email:
kevin.lung@pwc.com)
38. Estate planning is becoming
more important for
Australians with foreign
assets, or who may inherit
such assets from overseas
estates. Specialist advice
should be sought.
12 People and OrganisationStep 2:
Understanding the Australian tax system
Taxation of employment allowances), commissions, Australia is subject to tax. In
income director's fees and other cash these circumstances, the
remuneration such as individual may be required to
39. A resident individual's bonuses and profit sharing lodge a tax return with the
worldwide employment payments. Employee share Australian revenue
income is generally subject to schemes are discussed at authorities and also the
Australian tax, regardless of paragraph 122. revenue authorities in their
whether or not the income is home country (depending on
remitted to Australia. 43. A living-away-from-home the country's tax laws and
allowance which meets applicability of a double
40. Employment income includes certain criteria, paid by an taxation agreement).
foreign earnings except employer to an employee to
where the earnings are compensate the employee for Fringe benefits
directly attributable to a the additional costs of living
specific class of activities and away from home, is generally 46. Fringe benefits are not
satisfy other conditions in treated as a fringe benefit and taxable in the employee's
s23AG of the Income Tax not taxable in the employee's hands. Instead, a separate tax
Assessment Act 1936. These hands. Instead, the FBT rules collection procedure applies
activities are generally will apply (refer to paragraph to fringe benefits. The tax is
Government supported 46). known as FBT and is levied
activities. on the employer. FBT is
44. An exact reimbursement of payable with respect to
41. Generally salary and wages expenses by an employer is benefits provided in relation
are taxed on a cash basis (i.e. not an allowance and is not to an Australian assignment.
in the year in which it is assessable. A reimbursement This is the case whether the
received by the employee). of this type will be subject to benefits are provided by
However, special care is the FBT rules (refer to either the Australian or
required in structuring paragraph 46). overseas company. To
deferred compensation plans encourage the movement of
to ensure that the same Services performed in and individuals posted to work in
amount is not subject to out of Australia Australia, there are FBT
double taxation. exemptions and concessions
45. Where an individual first
for benefits which relate to
42. Employment income which is arrives in Australia part way
through an income year, employment relocations.
subject to tax in Australia
employment income which is These exemptions are
includes base salary, wages,
discussed in Step 3.
allowances (other than living- attributable to services
away-from-home performed after arrival in
Global Mobility Country Guide (Folio) 13Tax deductions – Car expenses incurred is deducted by the employer
for employees by an employee from the employee's
relating to a vehicle remuneration and the
47. An employee is entitled to supplied by their amounts deducted are
claim tax deductions against employer for private remitted to the ATO. The rate
employment income for most use. at which PAYG tax is
expenses incurred in deriving withheld by the employer will
that income. Common Substantiation rules depend on whether the
deductions include employee has complied with
membership fees for a 49. Eligibility for tax deductions
depends on the employee's various procedural
professional or trade union requirements. In particular,
body, Australian charitable compliance with the
'substantiation rules'. an employee is required to
donations, subscriptions for provide their employer with a
technical or work-related Broadly, these rules require
Tax File Number (TFN) in
publications, on-the-job that written evidence of
expenditure is maintained by order to avoid tax being
travel expenses (excluding withheld at the highest
home to work travel) and the employee to verify their
personal tax rate. Details on
self-education expenses. entitlement to a deduction.
Special substantiation rules the TFN system are provided
Deductions are also available in Step 4.
for depreciation of equipment apply to expenses associated
used in employment activities with the use of an employee's 51. FBT is payable by an
(e.g. a computer). An outright own car for work purposes employer with respect to
deduction is available for and also apply to expenses benefits provided and these
equipment that costs up to incurred whilst travelling on benefits are not assessable to
$300. business overseas or the employee. However, an
travelling within Australia for employee is issued with a
48. Employees are not entitled to more than five nights in a PAYG payment summary at
tax deductions for most types row. A detailed outline of the year end which discloses
of entertainment substantiation rules is not salary and wage details,
expenditure, even where the provided in this folio. PAYG deductions which have
employee is provided with an However, our PwC personal been remitted to the ATO and
entertainment allowance. tax specialists are able to the value of reportable fringe
Other expenses that an provide information on this benefits received from their
employee is unable to claim topic, including details of the employer. Whilst fringe
as a tax deduction include: type of information which benefits are not assessable to
should appear on receipts in the employee, they are taken
– Travel costs of an order to satisfy the
accompanying spouse into account in calculating
tax authorities. the following:
or family member
whilst on a business Payment of tax on – Medicare levy
trip (subject to very employment income surcharge;
limited exceptions);
50. A 'Pay-As-You-Go' (PAYG) – Private health
– Recreational Club system operates to collect tax insurance rebate;
subscriptions; and on employment income.
Under the PAYG regime, tax
14 People and Organisation– Deduction or rebates Australian tax year from 1 Word of warning
for personal July to 30 June summarising
superannuation the income paid from the 54. The Australian tax law
contributions; and foreign payroll. The employee contains quite complex rules
may still also receive a PAYG on the way in which residents
– Higher Education Loan Payment Summary with are taxed on offshore
Programme (HELP) respect to reportable fringe investments. A summary of
repayments. benefits, however, the salary the rules relating to offshore
and wages income paid off investments is provided in
52. The PAYG system is easily Step 8. It is essential that up-
applied where an employee is the overseas payroll would
only be reported on the to-date and detailed advice is
paid from an Australian obtained on the tax treatment
payroll, however there are statement of earnings.
of Australian and offshore
practical difficulties for both Investment income investments prior to an
the Commissioner of individual arriving in
Taxation and the employer 53. For many individuals who are Australia.
where the employee remains transferred to work in
on an overseas payroll. In Australia, the most complex Interest
practice, where there is an tax issues which require
agreement by the non- attention are tax issues 55. Resident individuals are
resident employer to meet the related to investments subject to Australian tax on
tax liability of the employee maintained in their home worldwide interest income.
in relation to their salary and country, or acquired in Australian sourced interest is
wage income (e.g. under a tax Australia. Careful planning included in the individual's
equalisation agreement) and and advice prior to an Australian tax return as
to pay any FBT that may individual being transferred assessable income. Financial
result from this agreement, to Australia can usually institutions and certain other
the non-resident employer resolve these issues. It should investment bodies will
can lodge an application also be noted that since 1 July withhold tax from Australian
(quoting the employee’s 2006, most foreign sourced interest payments
name and TFN) for PAYG individuals fall within the where the investor fails to
withholding to be varied to temporary resident rules and quote their TFN. Under this
nil. If the variation to nil is their foreign sourced system, tax is withheld on
accepted by the ATO, the investment income is free interest income at the highest
non-resident employer is not from Australian tax. personal tax rate (plus
required to make PAYG Medicare levy). For further
withholding in respect of the details on TFNs, see Step 4. It
employee working in should be noted that all
Australia. Any tax due is Australian financial
instead paid via the tax institutions are required to
return. The non-resident report (via the TFN system)
employer is required to interest, dividends and trust
provide the employee with a distributions to the ATO. The
statement of earnings in information provided by
Australian dollars for the financial institutions is then
matched electronically
Global Mobility Country Guide (Folio) 15against personal tax returns. the actual rent-producing has been paid on the
Any discrepancies are likely building itself). Where these company profits, the
to result in the ATO issuing deductions exceed the rental imputation credit for
the individual with audit income, the loss may be offset individual shareholders is
assessments and against the individual's other designed to remove an
interest/penalty charges. worldwide income. element of double taxation by
reducing the shareholder's
56. Foreign sourced interest 59. An Australian withholding tax liability by the amount of
income is also included in the tax liability of 10% may arise company tax attributable to
assessable income of a in respect of interest paid by the dividend.
resident individual, however an Australian tax resident to
a credit (foreign income tax a non-resident lender 61. Conversely, where a resident
offset) is granted for foreign (subject to any DTA individual receives an
taxes imposed by the country exemption – see Australia's 'unfranked' dividend (i.e. a
of source (e.g. interest DTAs with the United dividend from company
withholding tax). Kingdom, France, New profits which have not been
Zealand, Chile, the United subject to Australian tax), the
Rental income States, Japan and Germany). dividend is assessable in the
57. Rental income commonly This includes interest paid to shareholder's hands and no
arises because an individual an overseas lending imputation credit is available.
institution for payment of a
rents out their offshore 62. Generally, foreign sourced
residence whilst working in mortgage on an overseas
home. Where an individual dividends received by a
Australia. Alternatively, an resident individual
qualifies for the temporary
individual may acquire an shareholder are included in
investment property upon or resident exemption, any
foreign sourced net rental assessable income. If
after their arrival in expenses are incurred in
Australia. A resident gain/loss is not
assessable/deductible. earning these dividends (e.g.
individual is subject to interest on funds borrowed to
Australian tax on worldwide Dividends acquire the shares, etc.) and
rental income. the expenses do not exceed
60. The source of a dividend the amount of the dividend,
58. For Australian sourced rental determines how it is treated
income, no tax is deducted at Australian tax is payable on
when it is received by a the net. A credit is allowed for
source and the gross rental shareholder. A resident
receipts are included as any foreign withholding tax
individual shareholder is paid on the dividend (refer to
assessable income in the entitled to an imputed credit paragraph 15). Where the
individual's tax return. A by way of a tax offset for
deduction is allowed for relevant deductions exceed
'franked' dividends received the foreign sourced dividend
expenses incurred in deriving from an Australian company. income, the loss may be offset
rental income (e.g. interest Put simply, a resident
on funds borrowed to acquire against other worldwide
company will be able to pay a income.
the property, depreciation of franked dividend if it has
certain assets, cleaning costs, paid Australian tax on the 63. Foreign dividends which are
local council rates and, in profits from which the paid from income which was
some cases, amortisation of dividend arose. Because tax previously attributed to a
16 People and Organisationtaxpayer under the special Partnerships PAYG instalments on
rules relating to controlled investment and business
foreign companies (refer to 66. Australian tax law adopts a income
paragraphs 218 - 220) are 'look through' approach in
exempt from tax. determining the income that 69. Tax may be payable on
a partner derives from certain types of investment
64. Special rules apply where partnership activities. This and business income in
foreign sourced dividends are means that a resident partner advance of an individual’s
received by a resident will be taxed on their relevant final tax liability being
corporate shareholder. PwC share of partnership income, determined. Tax is paid in
can assist with advice on regardless of whether the advance when an individual’s
these special rules. partnership operates in 'instalment income' exceeds a
Australia or overseas certain threshold (i.e. income
Self-employment income (however, the partner will be from which PAYG
allowed a tax credit for withholding has not been
65. Profits from a trade,
business, profession, or foreign tax paid in respect of deducted). Tax is collected
vocation which are derived by assessable income which is via PAYG instalments, which
“double-taxed”). are calculated by the
an individual are assessable.
The individual will be able to Commissioner of Taxation
67. A resident partner is treated and usually payable in
claim a deduction for as owning a proportionate quarterly instalments
expenses incurred in gaining interest in each asset owned
or producing the income (however certain taxpayers
by the partnership, are eligible to make a single
which is incurred in carrying irrespective of the location of annual PAYG instalment of
on a business for the purpose the asset. On disposal of a
of gaining or producing the tax). A credit is allowed in the
partnership asset acquired individual’s Australian
income (not being after 19 September 1985, the
expenditure of a private, income tax return for PAYG
resident partner will be instalments paid throughout
capital, or domestic nature). treated as having disposed of
To be entitled to a deduction the year.
their proportionate interest
for certain motor vehicle or in the asset and will be Capital gains
travel expenses, the required to pay CGT on any
individual must satisfy record resulting gain (conversely, a 70. Some capital gains are
keeping requirements. capital loss may be available). treated as ordinary income
and subject to income tax at
68. Where the partnership makes normal rates. Other kinds of
a loss, the resident partner capital gains or losses are
will be entitled to claim a tax taxable under the CGT
deduction for their system.
proportionate share of the
loss. 71. Under the CGT system,
capital gains are recognised
on disposal (by sale, gift, or
otherwise) of CGT assets
acquired after 19 September
1985. Assets which were
Global Mobility Country Guide (Folio) 17acquired on or before this months, 100% of the advice before making
date are not subject to the gain is included as the investment.
CGT regime. Where a CGT assessable income; 73. All kinds of assets fall within
asset is gifted, it is taken as the CGT system. For
being disposed of for its fair – Where the asset was
acquired and sold after example, plant and
market value. equipment used in carrying
11.45am AEST on 21
September 1999 and on a business (albeit specific
72. The following rules apply in
calculating capital gains held for at least 12 rules apply to tax gains or
months, 50% of the allow deductions before any
which arise on the disposal of
gain (without net sales proceeds fall within
a CGT asset: allowance for the CGT rules), foreign
– Where the asset was inflation) is included currency, land, shares,
as assessable income; personal-use items such as
acquired prior to 11:45
a.m. AEST on 21 – No tax rate averaging furniture and collectables and
September 1999, relief applies to capital rights under an employment
disposed of after 11:45 gains derived from 21 contract. Assets held outside
a.m. AEST on 21 September 1999; of Australia also fall within
September 1999 and – For capital gains tax the CGT rules.
held for at least 12 events occurring on or
after 8 May 2012, 74. Exemptions or concessional
months, the individual
has a choice of how to taxpayers who were tax treatment apply (subject
include the gain in non-resident or to certain requirements) to
assessable income. The temporary resident gains from the disposal of a
individual can choose taxpayers during any taxpayer's main residence,
part of the holding superannuation and life
to either:
period are not entitled assurance policies, motor
1. Include the full to some/all of the 50% vehicles and low-value
amount of the discount on the capital personal-use items (but not
gain where the asset is antiques, jewellery, etc.).
gain, with
Taxable Australian
allowance for Gambling and lottery
Property.
inflation to 30 winnings are also exempt.
September – The discount may be
pro-rated for any 75. Capital losses on the disposal
1999, or
ownership period up to of an asset are offset against
2. Include 50% of 8 May 2012 (subject to capital gains arising in the
the amount of a valuation at that same year, or carried forward
the gain, date), but the CGT indefinitely to be offset
without discount percentage against future capital gains.
available will depend Capital losses are not
allowance for
on the circumstance of
inflation; deductible from
each individual. It
would be wise for assessable income.
– Where the asset was
acquired and sold after foreign nationals 76. Special rules apply where a
11.45a.m. AEST on 21 investing in Australian
person becomes a resident or
September 1999 and real estate to seek
ceases to be a resident of
held for less than 12
18 People and OrganisationAustralia. These rules should Australia on employment- – New Zealand (limited
be carefully considered by related visas (depending on application for
individuals who are the class of visa), refugees, visitors only);
transferred to work in participants of the Skilled
Australia because of deeming Transfer Scheme etc., are – The Republic of
provisions, which seek to entitled to Medicare as a Ireland
bring certain assets which result of their visa. (limited application to
were acquired prior to Irish citizens);
becoming a tax resident of 79. Citizens from countries with
which Australia has a – Norway;
Australia into the CGT
regime. For further details, reciprocal health care – Slovenia;
refer to paragraphs 115 - 119 agreement may also be
and 179 - 183. eligible. Citizens of these – Sweden; and
countries need advice upon
Medicare levy arrival in Australia regarding – The United Kingdom.
enrolment in Medicare and
77. A health insurance scheme, 80. Medicare is funded through
selecting the correct health
known as Medicare, currently the tax system and is imposed
insurance for the duration of
operates in Australia. The as an additional levy on
their stay. Citizens of other
Medicare health scheme taxable income. The current
countries who were
generally entitles all eligible rate of Medicare levy is set
“ordinarily resident” prior to
persons to: out in Appendix A. Certain
arrival in any of these
low-income earners and
– Free or subsidised countries will also need
social security recipients are
advice on arrival to ensure
treatment as a public exempt from the levy. In
patient in a they select the correct health
addition, an exemption from
public hospital; insurance and are required to
the levy is granted where a
either enrol/not enrol in
taxpayer is deemed to not be
– Free or subsidised Medicare. Australia currently
eligible for Medicare benefits.
treatment by a general has reciprocal health care
As noted at paragraph 27,
practitioner (GP), agreements with:
certain high-income earners
medical specialist, who are subject to the
or optometrist; – Belgium;
Medicare levy may also be
– Subsidised prescription – Finland; required to pay an additional
medicines through the surcharge depending on their
– Italy (limited
Pharmaceutical level of income. The Medicare
application to Italian levy surcharge is payable
Benefits Scheme (PBS). citizens); where a high income-earner
78. Generally, only individuals – Malta (limited does not hold private patient
residing in Australia who are application to Maltese hospital insurance with a
citizens and permanent citizens); health fund registered in
residents of Australia or New Australia.
Zealand citizens are eligible – The Netherlands;
to enrol in Medicare.
However, some temporary
residents, such as those in
Global Mobility Country Guide (Folio) 19Lifetime Health Cover
81. The “Lifetime Health Cover”
scheme rewards early and
long-term health fund
membership. Under the
scheme, registered health
funds are required to set
different premiums based on
the age of a member when
they first take out hospital
cover. Individuals who take
out hospital cover at an early
age will pay a lower premium
throughout their lives relative
to people who join later in
life. An individual must join a
registered health fund prior
to the age of 30 in order to
lock in the lowest premium
rate. After the age of 30, an
individual’s premium will be
subject to a 2% loading for
each year they are over 30 at
the time of joining. Special
rules apply to expatriate
individuals who turned 30
prior to arriving in Australia.
Detailed information can be
obtained from your PwC
representative.
20 People and OrganisationStep 3:
What to do before you arrive in Australia
General Australia for temporary be provided to the
residence. The first step immigration authorities,
82. A wide range of taxation involves the company including a job description,
matters need to be obtaining business employment contract or
considered before an sponsorship status with the secondment agreement,
individual moves to Department of Home Affairs salary details, and the
Australia. The matters which in Australia. Sponsorship proposed length of the
require consideration depend status is the accreditation employment of the nominee
on the particular required for a business to in Australia (periods of
circumstances of the sponsor foreign staff to work approval are up to 1, 2, 3 or 4
individual, the tax regime of in the business as years, depending on the
the individual’s home country temporary residents. occupation). The salary must
and the existence of a double be above a minimum income
taxation treaty (see Appendix 85. Business sponsorships threshold set by the
B). granted to an Australian Australian immigration
Some of the issues which business entity remain valid authorities and must also be
should be considered are for five years from the date of in accordance with the
discussed below. approval, or six years for market salary rate for the
accredited sponsors. occupation – if the market
Visa application Thereafter, both a salary for the occupation is
83. Current migration nomination and visa below the minimum
regulations provide for the application must be approved threshold then the
each time an assignee is nomination would not be
sponsorship of expatriate
employees on either a required. There are various approved. The nomination
temporary or permanent requirements a business must application must also include
meet for approval including evidence that the business
basis to work in a business in
Australia. There is also providing evidence of active has conducted adequate
provision for an overseas and lawful business labour market testing to
operation, financial capacity confirm that it cannot locate
company to send an
employee to Australia to and also an overall relevant skills in the local
establish an Australian commitment to non- market. The final step
discriminatory employment involves the expatriate
branch or subsidiary of
practices. lodging an application for a
that company.
86. The nomination application subclass 482 Temporary
Temporary residence Skills Shortage (TSS) visa.
relates to the position to be
84. There are three steps for a filled. Details of the
business sponsoring staff to nominated position need to
Global Mobility Country Guide (Folio) 2187. It is possible to stay longer rate requirements and that all occupation as noted must be
than first planned and those 457 visa holders are being on the MLTSSL.
requiring a new visa go employed under terms and
through the same process - conditions of employment 91. All applicants must be under
there is no other way to which are equivalent to those 45 years of age and possess
obtain an "extension". provided to their Australian vocational English language
Nominations and visa counterparts. It can also be skills (exemptions do apply in
applications may only be an opportunity to check the case of age, skill, and
processed if the company's employers against English). For certain
sponsorship status is still compliance with employment applicants, this may require
valid. All applications law and with the Australian formal English language
relating to 482 visa compulsory superannuation testing. Transitional
sponsorship are lodged regime. Significant penalties arrangements are available to
online and subsequently for non-compliance individuals who held a 457
processed in Australia, exist, including visa prior to 18 April 2017,
regardless of the location of non-fault civil penalties. including a higher age limit of
the sponsoring employer and under 50 years.
the visa applicant. The Permanent residence
92. An additional criterion of the
length of stay permitted 89. Companies may also sponsor nomination application is for
under the 482 visa will be
an expatriate for permanent the employer to attest that
determined by the occupation residence in Australia under the position will be available
itself and whether it is the Employer Nomination to the nominee for a fixed
included on the Short Term Scheme. The application is period of at least two years
Skills Occupation List divided into two parts - the after the permanent visa is
(STSOL) or the Medium- employer nomination and the granted and that there is
Long Term Strategic Sklls personal visa application. To nothing expressed in the
List (MLTSSL). STSOL be eligible for the Employer employment agreement
occupations provide an initial Nomination Scheme, the excluding the possibility of
stay of up to two years and
expatriate must be renewal beyond this time.
the option for one onshore nominated into an The visa holder must also
renewal for a further two occupation included on the declare that they intend to
years. MLTSSL occupations
MLTSSL at the time of stay employed for at least
provide an initial stay of up to lodgement of the permanent this period.
four years and indefinite application.
renewals. Personal application
The nomination
88. Businesses sponsoring 482 93. The second stage of the
visa holders are subject to 90. The Department of Home process relates to the
monitoring by Immigration Affairs must be satisfied that personal permanent
officials to ensure compliance the company is lawfully residence application. The
with the various sponsorship operating as a business entity personal application deals
obligations agreed to as part in Australia and is of good with the individual's
of the initial approval corporate standing. There qualifications and work
process. The checking will must also be a genuine need experience as it relates to the
include such things as for a paid employee in the "skilled" nature of the
ensuring the sponsor is position nominated and the nominated position, as well
meeting the relevant market
22 People and Organisationas health and lodgement or grant of the officials in Australian
character screening. visa. diplomatic missions abroad.
94. It is also a requirement that 96. Unlike the sponsored Structuring the
the applicant meet any one of temporary residence, which remuneration package
the following requires the visa holder to
threshold criteria: work only for the sponsor, 98. Some companies will offer
once the application is employees a complete
– Earn a base salary of approved the permanent visa 'expatriate' remuneration
A$180,001 or more authorises the holder to package for working in
(exclusive of remain in Australia Australia. In addition to
superannuation, indefinitely and regular salary, commissions,
benefits and unconditionally. It should be bonuses, etc., the employer
bonuses); or noted however a failure to may compensate the
remain in the nominated employee with a number of
– Hold a subclass 457 overseas allowances and
visa, and have worked employment for the agreed
two year period may lead to benefits for the additional
full-time in the costs of living away from
visa cancellation, if the
occupation to which their home location. From 1
the appointment Department of Home Affairs
formed the view that the October 2012, the living-
relates, as a direct away-from-home concessions
Declaration made in the
employee of the are not meant to extend to
sponsor in Australia application to this effect was
not genuine. foreign nationals working in
for at least the period Australia, however some
of 3 years immediately Other visa options generous concessions
before making the continue to apply to “Fly-in
application (a lesser 97. Apart from employer-based and Fly-out” employees.
period of at least 2 sponsorships, there are other Advice should be sought in
years is available to temporary and permanent advance regarding these
individuals who held a residence visa categories, concessions. Alternatively,
457 visa prior to 18 which permit work in the employer may provide the
April 2017); or Australia. As the legal and employee with a gross
policy requirements and remuneration package and
– Have their skills procedures for applications
assessed by the the components of the
regularly change, interested package (up to an agreed
relevant authorities in individuals should seek
Australia and possess amount) are left to the
advice from visa and employee's discretion.
at least 3 years relevant immigration specialists
work experience before deciding which visa 99. Companies should also
immediately category would suit their consider whether to pay an
before applying (which circumstances. The right sort employee’s remuneration in
can include experience of application, which is also Australian currency, or the
gained outside well prepared, may make all currency of the home
Australia). the difference between country. Alternatively, an
95. Any applicant applying for approval and rejection by the employee’s remuneration
this visa can be in or outside Department of Home Affairs could be paid in both
or the relevant immigration currencies (i.e. host country
of Australia at the time of
Global Mobility Country Guide (Folio) 23living allowances paid in of residency and putting in 104. On the other hand, a tax
AUD, while home country place appropriate equalisation plan ensures
“savings” etc. are paid in the remuneration packages. If the that the employee's tax
currency of the home employee requires 482 visa burden will be the same as if
country). This is important sponsorship, it should also be they had remained in the
where there are significant noted that for Immigration home country. If the tax in
fluctuations in exchange purposes, the contract or the overseas country is
rates. These fluctuations may secondment/assignment greater than that which
also impact whether the letter must evidence a direct would have been incurred in
employee’s base employment relationship the home country (usually
remuneration continues to between the employee and referred to as the
satisfy the market rate the Australian business 'hypothetical tax liability'),
requirements for 482 visa sponsor, regardless of which the employer reimburses the
approval (once converted into payroll the employee is paid excess. If the tax in the
AUD). It should be noted that from. overseas country is less than
where and how the the hypothetical tax liability,
remuneration is paid does Tax reimbursement (“tax the employer retains
not affect the liability to tax. equalisation”) plans the benefit.
100. It is essential that companies 102. A tax reimbursement 105. Both plans require the
consider all relevant taxation program may be provided by employee’s hypothetical
issues prior to finalising the employers to their employees home country tax to be
structure of an employee’s to compensate them for the calculated. The hypothetical
remuneration package. In increased tax burden which tax is generally calculated on
particular, the Australian may be incurred on an an employee’s base salary and
FBT law contains numerous overseas assignment. The tax other base remuneration, as
concessions and exemptions reimbursement program may if the employee had remained
which, if kept in mind at the consist of either 'a tax in their home country.
time of negotiating a protection plan' or a 'tax
remuneration package, may equalisation plan'. 106. Some companies will offer
provide the employee with their employees tax
103. A tax protection plan reimbursements on total
concessionally taxed benefits guarantees that an
without increasing the overall income including investment
employee's total tax liability income, while others will only
costs to the employer. Some will not be greater than the
examples of the components offer reimbursement to the
tax liability that would have extent that the tax relates to
of an expatriate package and
been incurred if the overseas employment income. The
an overview of the Australian assignment had not been
tax treatment of each liability, therefore, of the
accepted. If the employee's employee and the employer
component, are set out in
actual tax liability is will depend upon the
Appendix C. subsequently less than what particular company's tax
101. Any contract of employment would have been the case if reimbursement policy.
should be reviewed by an the employee had remained
Australian taxation adviser in the home country, the 107. FBT (refer to paragraph 46)
prior to finalization. This is employee retains the is payable by an employer on
important for the purposes of tax 'windfall'. the amount of any tax
identifying possible questions reimbursement arising under
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