• Tax on income and capital gains

    To work out if your income is taxable in Australia, you first need to check whether your country has a tax treaty with Australia. We have tax treaties with more than 40 countries, including all our major trade and investment partners.

    Next step:

    This section is about income from Australian business activities. If you are earning income from passive investments in Australia (such as securities and rental properties) or interest and royalties, refer to Investing in Australia.

    Follow the links below to learn more about:

    If you are from a treaty country

    As a resident of a country that has a tax treaty with Australia, your income from business carried on through a permanent establishment in Australia is generally subject to tax in Australia. Any other business income is generally not taxable in Australia.

    You will be liable to pay Australian capital gains tax (CGT) only for assets that are taxable Australian assets.

    Even if you don't have Australian income tax obligations, you may have other tax obligations relating to:

    If you are exporting goods to Australia by selling to an Australian resident entity on a free on board (FOB) basis, this may be considered an importation by the Australian entity. This means you may not have Australian tax obligations, but your Australian customer will have tax obligations relating to the importation.

    Permanent establishments

    If you are from a treaty country and have a permanent establishment in Australia, the income from your business operations carried on through your Australian permanent establishment is subject to Australian income tax. Any assets you own as part of the permanent establishment will generally be subject to Australian CGT when you sell or otherwise dispose of them.

    You will need to lodge an Australian tax return.

    A permanent establishment includes a fixed place of business through which an enterprise either wholly or partially carries on its business. It also includes:

    • sales outlets
    • branches
    • places of management
    • factories
    • workshops
    • offices
    • the place of business of dependent agents who have authority to conclude contracts on behalf of the enterprise and habitually exercise that authority.

    Generally, a website that is hosted by an independent internet service provider is not regarded in itself as constituting a permanent establishment in Australia.

    If you provide services as an individual you will need to pay income tax on the earnings if the income is attributable to your fixed base or if you were present in Australia for more than 183 days.

    Depending on the types of services you provide, you may be subject to Australian foreign resident withholding tax.

    Next step:

    See also:

    If you are from a non-treaty country

    If you are from a country that does not have a tax treaty with Australia, income from an Australian source is generally taxable in Australia. This includes income from:

    • business operations in Australia
    • Australian contracts, such as export contracts made in Australia
    • services performed in Australia
    • personal activities exercised in Australia.

    You may need professional advice to work out whether the income you earn from an international transaction has an Australian source.

    If you earn income sourced in Australia, you must lodge an Australian tax return and pay tax on that income

    If you are exporting goods to Australia by selling to an Australian resident entity on a free on board (FOB) basis, this may be considered an importation by the Australian entity. This means you may not have Australian tax obligations, but your Australian customer will have tax obligations relating to the importation.

    Even if you don't have Australian income tax obligations, you may have other tax obligations relating to:

    • goods and services tax (GST)
    • Australian business number
    • employing staff.

    Lodging an Australian tax return

    If you are a foreign-resident entity that earns income with an Australian source, you must lodge an Australian tax return and pay tax on that income. However, you do not need to lodge a tax return if the only income you received consists of:

    • interest, unfranked dividends or royalties from which the withholding tax has been withheld by the payer
    • fully franked dividends.

    See also:

    Tax file number (TFN)

    To lodge an income tax return in Australia you will need a tax file number (TFN), a unique number issued by the ATO to individuals and organisations for identification and record-keeping purposes.

    Your business may also need an Australian business number (ABN).

    Companies, partnerships and trusts have their own TFN. You can apply for a business TFN when you register for an ABN.

    Individuals apply for an individual tax file number.

    Next step:

    Applying for a tax file number:

    Before you will be issued an Australian TFN or ABN, you will need to provide evidence of your identity.

    Everyone has a different TFN. Your TFN is yours for life. If you leave the country and later come back to Australia, you still use the same TFN. When you make enquiries about your tax records, we’ll ask you for your TFN – we’ll also ask for other information to check that you are who you say you are.

    Foreign residents should consider obtaining a TFN if they:

    • are authorised by the Department of Immigration to work in Australia
    • temporarily work in Australia
    • receive rental income from an Australian property
    • make a capital gain on the sale of an Australian asset (including real estate and shares) that is taxable Australian property
    • receive income from Australian business interests
    • are a beneficiary of an Australian trust
    • expect to receive payments from an Australian superannuation fund
    • need to lodge an Australian income tax return to claim a refund of tax that has been withheld from an Australian bank account or dividends from Australian shares
    • wish to apply for an Australian business number or other business accounts, such as goods and services tax
    • have an Australian resident spouse who is claiming a Family Assistance Office payment.

    International dealings schedule

    When lodging a company, trust or partnership return, you must complete an international dealings schedule and include it with your Australian tax return if you have:

    • transactions or dealings with international related parties greater than $2 million (including the value of property transferred or the balance outstanding on any loans), or
    • completed certain labels on your company, trust or partnership return, such as the interest expenses overseas label - the instructions to the tax return will tell you when you need to complete the schedule.

    Next steps:

    Limits to debt deductions under thin capitalisation rules

    For income years starting from 1 July 2014, if you have claimed interest or other debt deductions in Australia totalling more than $2 million in the income year, special rules may limit your debt deductions if you:

    • operate a foreign entity with investments in Australia
    • are an Australian entity with overseas branch operations or control an overseas company, or
    • are a foreign controlled Australian entity.

    For earlier income years, the special rules may apply if you have debt deductions totalling more than $250,000 in the income year.

    See also:

    Foreign owned subsidiaries

    A subsidiary that is incorporated in Australia is an Australian resident for tax purposes.

    Generally, a subsidiary will be taxable in Australia on its worldwide income and capital gains, subject to specific exceptions, such as the exemption of income from business operations carried on through an overseas branch in certain circumstances.

    Last modified: 16 Feb 2016QC 45543