TAX SYSTEM

CENTRAL GOVERNMENTAL TAXES
 

COMPANY TAXATION

A company is a resident of Australia if it is incorporated in Australia or it carries on business in Australia and has either its central management and control in Australia or its voting power controlled by shareholders who are residents of Australia.

The rate of company taxation has increased from 33 to 36 percent. Australia's imputation system of company taxation means that distributed income is effectively taxed only once: by crediting the company tax paid on the underlying income against the income tax payable by domestic shareholders.Nonresident shareholders who receive franked dividends are exempt from dividend withholding tax.  A tax rebate is generally allowable  for all dividends paid between domestic public companies, and for franked dividends received by private domestic companies.

INCOME TAX

The two key elements which give rise to a liability to Australian income tax are residence and source.  Thus, the accessible income of a resident of Australia includes income derived from  all sources whether in or out of Australia whilst the assessable income of a nonresident includes income derived from all sources within Australia.

An individual is a resident of Australia for tax purposes if

(a) he or she ordinarily resides in Australia
(b) he or she is domiciled in Australia
(c) he or she has been earning in Australia for more than one and a half
    years of income.

CAPITAL GAINS TAX

Capital gains tax is levied on the realized gains made on assets acquired after 19 September 1985.  An allowance is made for inflation before such gains are taxed.  Separate rates apply to individuals and companies.