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FAQ |
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Individual
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Am I an Australian Resident for tax purpose? |
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To understand your tax situation, the first thing you need to do is to work out whether you are an Australian resident for tax purposes. ATO use several tests to determine residency. They are “The Resides Test”, “The Domicile Test”, “The 183 Day Test”, and “The Superannuation Test”.
More information can be found from the ATO Website
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What is the difference between “Australian Resident” and “Non Resident” for tax purpose? |
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Non-residents pay tax on Australian source of income. They pay tax on every dollar of taxable income as declared on their tax return but do not pay Medicare levy.
Residents have to declare all income earned in and out of Australia. A tax free threshold of $6000 is available to them and a resident may be entitled to claim some tax offsets (rebates) that are not available to non-residents. Depending on their income, a resident may also have to pay the Medicare levy and Medicare levy surcharge. |
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What is the tax rate for “Australian Resident” and “Non Resident”? |
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For 2011FY and 2012FY, the individual income tax rates are as follows:
A: Residents
| Taxable income |
Tax on this income |
| 0 – $6,000 |
Nil |
| $6,001 – $37,000 |
15c for each $1 over $6,000 |
| $37,001 – $80,000 |
$4,650 plus 30c for each $1 over $37,000 |
| $80,001 – $180,000 |
$17,550 plus 37c for each $1 over $80,000 |
| $180,001 and over |
$54,550 plus 45c for each $1 over $180,000 |
B: Non Residents
| Taxable income |
Tax on this income |
| 0 – $37,000 |
29c for each $1 |
| $37,001 – $80,000 |
$10,730 plus 30c for each $1 over $37,000 |
| $80,001 – $180,000 |
$23,630 plus 37c for each $1 over $80,000 |
| $180,001 and over |
$60,630 plus 45c for each $1 over $180,000 |
C: Minor
If you are under the age of 18, and receive ‘unearned’ income (for example, investment income), special rates apply. |
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What is income? |
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You can receive income as a result of your personal exertion (that is, by working) or from an investment. Income may not always be in the form of money – in some situations goods and services may be treated as income. The most common forms of income includes: Wages and salary income, Allowances and Pensions, Interest Income, Dividends and other income from investments, Bonuses and overtime payment an employee receives, Commission a salesperson receives, Rental income, etc. |
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What are deductions? |
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If you spend money on something to help you earn your income, you may be entitled to claim that cost as a tax deduction. Tax deductions reduce the amount of income you have to pay tax on. Because we all earn our money in different ways, it depends on your particular circumstances whether a cost is an allowable deduction or not.
The important thing to remember about deductions is that you apply them to reduce the amount of income you pay tax on; you do not deduct them directly from your tax withheld amount. Nor does the Tax Office simply reimburse you for your expenses.
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I have an ABN, am I carrying on a business? |
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ABN stands for Australian Business Number. Having an ABN does not necessary mean you are carrying on a business. The decision will be made upon your specific situation.
Please refer to the Miscellaneous Taxation Ruling for details. |
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What is PAYG payment summary? |
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You will need to have all copies of PAYG (Pay-As-You-Go) Payment Summaries for the financial year. The PAYG Payment Summary is a statement that details both the Gross Earnings and PAYG Tax that was paid for the financial year. You should be issued the PAYG Payment Summary at the end of the financial year generally by the 14th July. If, however, you are leaving prior to the end of a financial year, you may request a statement of earnings or similar statement from your employer upon termination, where it should usually be sent to you within 14 days. |
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What is Personal Service Income? |
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PSI (Personal Service Income) is income that is mainly a reward for an individual's personal efforts or skills. ATO have several tests to determine if your income is PSI.
Please refer to the link below for further details:
Personal Income Tax
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What is CGT? |
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CGT stands for Capital Gain Tax. It is the tax you pay on a capital gain. It is not a separate tax, just part of your income tax. The most common way you make a capital gain (or capital loss) is by selling assets such as real estate, shares or managed fund investments. Managed funds also distribute capital gains you must report.
For further details about CGT, please refer the link below:
Capital Gain Tax
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What is Education Tax Refund? |
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The education tax refund can help you with your primary and secondary school costs. It allows you to claim a 50 per cent refund for eligible education expenses up to the maximum claimable amounts.
You need to claim the refund in the year you made the purchases but, if your expenses exceed the maximum claimable amount, you can carry it forward to the next year. However, any expenses not claimed within two financial years cannot be claimed in later years.
For more information for this topic, please use the link below:
Education Tax Refund
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When can I receive my tax refund? |
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ATO will process your tax return ASAP. However, you may need to wait for 14 to 56 days until you get the Notice of Assessment and tax refund from ATO. |
Business
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What are most commonly used structures of carrying on a business? |
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The most commonly used business structures are: Sole Trader, Partnership, Company, and Trust. Different forms of the structures have their own advantages and disadvantages. |
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What is a TFN? What is an ACN? What is an ABN?
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TFN stands for Tax File Number. A TFN is a unique number ATO issue to people and organizations. Each entity (individual, partnership, company, or trust) need to apply for a unique TFN.
ACN stands for Australian Company Number. Only companies will receive an ACN when it is registered at ASIC.
ABN stands for Australian Business Number. An ABN is a unique number issued through the Australian Business Register (ABR). Each entity (individual, partnership, company, or trust) need to apply for a unique ABN (if applicable).
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What is GST? |
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GST stands for Goods and services tax. GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
Generally, businesses and other organizations registered for GST will:
- include GST in the price of sales to their customers, and
- claim credits for the GST included in the price of their business purchases.
So while GST is paid at each step in the supply chain, businesses do not actually bear the economic cost of the tax. The cost of GST is borne by the final consumer, who can’t claim GST credits.
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Do I need to register GST? |
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Businesses with an annual turnover of $75,000 or more are required to register for GST. If your business has a lower turnover you are not required to register but you may if you wish to. You will only be required to charge your customers GST if you are registered. |
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What are the obligations for me as an employer? |
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If you operate a small business you need to know all about your obligations to employees and other people who perform work for you. Under common law employers and employees have certain obligations or duties to each other. Please refer to the following page for a detailed list of your obligations.
Employer Obligations (business.gov.au)
For a brief guide, as an employer, your obligations include but not limit to:
TFN Declaration Form: Every time you employ an employee, you must ask the employee to fill in the Tax File Number Declaration form, and mail it to ATO as required.
Choice of Fund Form: Every time you employ an employee, you must ask the employee to fill in the Choice of Fund form, and keep it as a record. If the employee does not have a super fund, the employer should nominate one for him.
Pay as you go (PAYG) withholding: You need to register for PAYG withholding once you employ staffs. You need to work out the withholding amount according to the tax table issued by ATO.
Superannuation: According to the super fund information provided by the employees in the Choice of Fund form, you have to pay superannuation for your employees who:
- are aged between 18 and 69 inclusive
- are paid $450 (before tax) or more in a calendar month
- work full-time, part-time or on a casual basis.
The minimum superannuation amount you have to pay is 9% of each eligible employee’s earnings base.
Workcover: As an employer, by law you must Take out a WorkCover insurance policy with a WorkCover agent of your choice – if your annual ‘rateable remuneration’ is expected to be more than $7,500, or if you employ apprentices. If your annual rateable remuneration (wages, salaries, etc.) is expected to be less than $7500, your employee/s will be covered by WorkCover (no premium is required). However, if an employee is injured, a WorkCover claiclaim will still need to be lodged, and a registration fee will be charged.
PAYG Summary (group certificate): As an employer, you must provide a PAYG Payment Summary (Group Certificate) to each employee before 14th July of the following financial year. You also need to provide the PAYG Payment Summary Statement to ATO before 14th August of the following financial year.
Income tax return: You must lodge a tax return for the company for each financial year. Record keeping: By law, you must keep business records:
- for five years after they are prepared, obtained or the transactions completed, whichever occurs latest
- in English or in a form that we can access and understand in order to work out the amount of tax you are liable to pay.
Fringe benefits tax (FBT): Please refer to the FAQ below. There could be other statutory requirements such as payroll tax, employment relationship requirements. |
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What is FBT? |
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FBT stands for Fringe benefits tax. FBT is paid on certain benefits employers provide to their employees or their employees' associates in place of salary or wages. The most common forms of benefits includes Car Benefit, Employee Loan Benefits, Schools fee paid for employees’ associates, expenses payment for employees, and entertainment provided for employees. The tax rate is 46.5% on FBT taxable value.
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ML Tax Solution |
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Address: Suite 2 & 3, 321 Chapel St,
Prahran VIC 3181
Telephone: 03 9533 8980
Facsimile: 03 9525 0038
Mobile: 0402 388 530
Website: www.mltaxsolution.com.au
Email: info@mltaxsolution.com.au |
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