Australian taxes can be confusing even for Australians. The Australian taxation system is one of the most complex in the world. Coming from Singapore where the tax system is easy to navigate and most Singaporeans file their own tax returns without assistance, it’s understandable that you may be confounded by Australian tax laws.
Here are some basic tax matters to help you through your initial months.
Apply for Tax File Number (TFN)
First things first, apply for a tax file number (TFN). Unlike Singapore, Australia does not have a national ID system. Therefore, you don’t automatically have a tax file number. This is unlike Singapore where a Singaporean’s NRIC number also doubles up as their tax file number with IRAS.
It takes a while to get yout TFN, so it will be great to have it handy for when you land a job. You will also benefit from providing your TFN to your bank, otherwise the bank will apply withholding taxes on interest income earned.
Australian Tax Year is 1 July to 30 June
The Australian tax year runs from 1 July to 30 June. This is unlike Singapore where the tax year is the calendar year, ie. 1 January to 31 December. This can add some complexity to your life if you have income in Singapore which must be declared in Australia (more on this below).
No Reminders to Lodge Tax Returns
If you are used to receiving annual reminders from IRAS to lodge your tax returns by the due date, be aware that ATO doesn’t do the same for taxpayers. You will not receive any reminders or paper tax returns. The due date for lodgement of tax returns is 31 October every year. However, if you engage a tax agent, you can have an extension up to 15 May. Be aware that penalties and interest may apply for late lodgements of tax returns, although a good tax agent may be able to apply for these to be waived or reduced.
The Australian equivalent of Singapore’s IR8A is the ‘Income Summary’. To confuse you further, you may hear some Australians refer to this as ‘Payment Summary’ or ‘Group Certificate’, depending on how old they are.
Australian Tax Rates
Coming from a country known for its low tax rates, you may be in for a shock. Australian tax rates are relatively high. Fret not as a good tax agent will be able to guide you through the process of claiming a plethora of deductions that can help you reduce your tax bill. Compared to Singapore where the tax deductions are low and pretty standard, there is a very long list of possible deductions which can reduce your tax bill.
Tax on Worldwide Income
Here’s the stinker: If you have migrated to Australia on a permanent resident visa, you must declare income you have earned from anywhere in the world in your tax return. There are some exceptions for those on temporary visa but they do not apply to those on a permanent visa.
What does this mean? It means you will have to pay taxes on the rental income for your HDB/private property (but you can claim foreign tax credits on the taxes paid in Singapore) or other income such as interest income, share dividends, etc.
Useful Link: ATO – Moving to Australia Permanently
That’s Australian Tax 101 in a nutshell. This article has not touched on other important matters like capital gains, dividend franking credits, fringe benefit taxes, payroll taxes and so on. We’ll save that for another day.
However, here are the most important pieces of financial advice we have for new migrants that will save you the hassle of a tax audit later on:
- Get a good tax accountant familiar with matters/taxes in both Singapore and Australia.
- Don’t attempt to hide your overseas income and assets from the ATO. Both Singapore and Australia share financial data.
Disclaimer: This basic article on taxes was written by ‘Life in Melbourne’ in consultation with a registered tax agent. We suggest that you seek the advice & services of a tax agent instead of relying solely on any material you may find online, including this article.