If you’re immigrating to Australia to live there permanently, or even work on a temporary basis, you’ll encounter the Australian Tax Office (ATO). Australian tax can be fairly complicated, so it’s important you do your research before you start working. In this blog post, we’ll give you a quick overview of what you can expect and what to do.
What expats should know about tax in Australia
Make obtaining your Tax File Number a priority
The amount of tax you pay depends on how much you earn. A Tax File Number ensures that tax can be removed from your pay at the right rate, irrespective of whether you are a temporary or permanent resident. If you are working for someone, your employer is responsible for ensuring the right amount of tax is removed from your salary.
Your tax implications as a permanent resident
As a permanent resident in Australia, you’ll be obliged to pay tax on your worldwide income, and your foreign assets could become subject to capital gains tax. As a permanent resident however, you receive many benefits including access to the free Australian healthcare system and access to any Australian social security benefits you may be eligible for. As a permanent resident you’ll be obliged to pay a Medicare levy as part of your income tax, but if you opt to take out private medical insurance, you will avoid an additional Medicare levy surcharge.
If you are working in Australia, your employer is required to make a minimum contribution of 9.25% of your income to a superannuation fund. This is similar to a pension and is called the Superannuation Guarantee. If you are a temporary visa holder and are returning to your home, you can request to withdraw your superannuation, however you may be subject to a departing tax, so check into this before you do so.
The Living Away From Home Allowance
A living-away-from-home allowance (LAFHA) is an allowance employers pay to their employee to compensate for additional expenses incurred and any disadvantages suffered because the employee’s duties of employment require them to live away from their normal residence.
Your LAFHA will help reimburse you for domestic expenses including food and rent while living away from home. It can ensure other costs are packaged at a tax-free rate including utility connection fees and the leasing of household goods. You may even get a tax reduction to go on holiday with your family.
You are entitled to a tax concession on your LAFHA but this is limited to a period of 12 months (other than employees working on a fly-in fly-out or drive-in drive-out basis) at a particular work location. You must also be able to prove that you maintain a home in Australia and that this is available for your immediate occupation – and not being rented out. You also need to be able to substantiate all expenses incurred during your time away from home.
If you’re planning on immigrating to Australia and need financial advice, contact us today. We’re here to help put you on the path to financial freedom in your new home.
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