Foreign residents, like all Australian residents, are likely to be subject to tax on any income earned in Australia. If you receive an income sourced in Australia you may need to:
- pay tax on that income
- lodge a tax return.
However, you will not need to lodge a tax return if the only income you received consists of:
- interest, unfranked dividends or royalties from which withholding tax has been withheld by the payer
- fully franked dividends.
You also may be eligible for tax exemptions should your country have tax treaty with Australia.
- Selling goods into Australia
- Providing services in Australia
- Investing in Australia
- Residency requirements for companies, corporate limited partnerships and trusts
- Work out your tax residency
- Starting your own business
- Business.gov.auExternal Link offers convenient access to government information, transactions and services. It is a whole-of-government service providing essential information about planning, starting and running your business.
To work out how tax applies to income you receive from international transactions involving Australia, you must first work out if that income has an Australian or foreign source. This may depend on whether your country has a tax treaty with Australia.
Generally, if you are from a treaty country, your business income is not subject to tax in Australia unless you carry on your business through a permanent establishment in Australia.
If you are from a country that does not have a treaty with Australia you will need to determine the place (country) the income is from as this will determine what income tax you will need to pay (if any).
Income you receive from goods or services you supply to Australia is generally income from one of the following:
- the place of the contract, if you are exporting goods or information (such as technical knowledge)
- the place where the services are performed, if you are exporting services – however, it can also be the place of the contract.
You may need professional advice to work out the source of the income you receive from an international transaction.
- What are tax treaties?
- See the list of countries that have tax treaties with AustraliaExternal Link
- Permanent establishments
- Taxation Ruling TR 2002/5 – Income tax: Permanent establishment
Employing people in Australia
If you employ people in Australia, you will have tax obligations relating to them.
Withholding tax on payments to foreign residents
If you make payments, including interest, dividends and royalties, to someone who is not an Australian resident, you will have tax obligations relating to them.
Capital gains on disposal of Australian assets
If you are a foreign resident and you make a capital gain on the disposal of an asset that is taxable Australian property, then the capital gain may be taxed.
Goods and services tax (GST)
Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
- Employing people in Australia
- Making payments to foreign residents
- Capital gains in Australia
- Australian GST registration for non-residents
- GST overview
Special rules limiting debt deductions apply to both foreign investments in Australia and Australian investments overseas. These special rules apply if a thinly capitalised (or highly geared) entity is involved. A thinly capitalised entity's assets are funded by a high level of debt and relatively little equity.
You may be required to lodge an Australian tax return to ensure you pay the right amount of tax.
To lodge a tax return in Australia, you:
- will need a tax file number (TFN)
- may also need an Australian business number (ABN)
International dealings with a related party or an interest in an overseas entity
When lodging a company, trust or partnership return for the 2011-12 income year and later income years, you must complete an International dealings schedule 2016 and include it with your tax return if you have either of the following:
- international transactions or dealings with a related party, on either capital or revenue account, where the total amount of the transactions or dealings (including the value of property transferred or the balance outstanding on any loans) was more than $2 million
- a direct or indirect interest in a foreign trust, foreign company, controlled foreign company or transferor trust.
- Work out which registrations you need
- Australian Business RegisterExternal Link
- International dealings schedule 2016
- Attributed foreign income
- International transfer pricing – introduction to concepts and risk assessment.