Australia taxes its resident
individuals on a worldwide basis (except for certain foreign income and gains
of temporary residents - see “Capital gains and investment income” under
"Gross Income"). Resident individuals are liable to Australian tax on
income derived from all foreign sources, except for salary and wages derived in
performing duties overseas for a continuous period of at least 91 days,
provided these earnings are not exempt from tax in the foreign country in which
they are earned. A tax credit is allowed for foreign taxes paid on taxable
income derived from foreign sources (see “Tax credits”).
Certain income is taxed as it accumulates in the case of investments in certain
foreign entities (see “Tax credits”).
Individuals are residents of Australia
if they reside in Australia,
and this includes the following.
1. Individuals whose domicile is in Australia,
unless they have a permanent place of abode outside Australia.
2. Individuals who have actually been in Australia
during more than one-half of the income year, unless the individual’s usual
place of abode is outside Australia
and the individual does not intend to reside in Australia.
Persons coming to Australia
to take up a contract of employment may be regarded as residents if they are to
be in the country for more than six months. Citizenship and nationality do not
determine liability to Australian income tax. A temporary resident, being a
holder of a certain temporary visa, will still be considered a resident of
Australia however from July 1, 2006 will be exempt from Australian tax on
foreign source income,
A non-resident individual is liable to Australian income tax only on income
(other than interest, royalties and dividends) derived from sources in
Australia, and, certain statutory income which is taxable on a basis other than
source (for example, benefits arising from employee share plans or a
termination of employment where part of that benefit relates to a period of
Australian employment and certain capital gains). From July 1, 2004 a new PAYG withholding
regime applies to require the deduction and remittance of taxes on behalf of
foreign resident individuals and entities that are in receipt certain types of
payments from an Australian source. See “Payments of tax” under "Tax
administration".
Under the Australian dividend imputation system, dividends paid out of Australian-taxed
corporate income (franked dividends) entitle resident individuals to a rebate
(and in some cases a refund) of the corporate tax and non-residents to an
exemption from dividend withholding tax (see “Capital gains and investment
income” under "Gross Income").
Alfonso Garrido Picon