Migration Agent Sydney

Australia's tax system

“In this world, nothing can be said to be certain, except death and taxes.”

While Benjamin Franklin’s words have been immortalised over the years, most people don’t like thinking about either death or taxes.

But even if your interest in taxation is lacking, if you’re considering immigration to Australia, you will need to understand the basics of the income tax system.

Here is a basic guide.

Income tax and GST

Australian residents pay income tax, meaning that money is deducted from their pay by their employer and given to the Australian Government.

The other tax is GST, or Goods and Services Tax, which as the name suggests, is paid on most items or services you buy.

All taxes are used to build infrastructure, run government offices, fund schools, hospitals and military services, and many other things.

Paying income tax

The Australian Taxation Office (ATO) will only require you to pay income tax if:

  1. You are an Australian resident for tax purposes.
  2. Your earnings exceed the tax-free threshold.

People with permanent residency in Australia are considered to be residents for tax purposes. Temporary residents, for example 457 visa holders, must pay income tax if it is determined that they “reside” in Australia. But this question can be complicated.

The ATO determines this question by looking at many factors, including:

  • Whether they have set up bank accounts in Australia.
  • Whether they have brought family to Australia.
  • Where assets are located.
  • Whether they have taken out a long-term lease on a rental property.
  • Whether they have enrolled children in an Australian school.

Tax-free threshold

The Australian Government allows residents to earn a certain amount before having to pay income tax. This is known as the tax-free threshold.

Currently, residents can earn up to $18,200 before having to pay income tax.

Once residents reach the threshold, there are different taxation rates depending how much is earned. The ATO publishes information about the various taxation rates.

Tax File Number

Residents should have a Tax File Number (TFN).

The Australian Government uses the TFN as a type of reference number to identify taxpayers in the taxation system. It is not necessary to have a TFN, but not providing one means that tax is deducted at a much higher rate.


Australian law requires that employers make superannuation contributions on behalf of their employees. Superannuation is Australia’s compulsory retirement savings scheme.

Tax returns

Taxpayers need to lodge a tax return with the ATO after the end of every financial year (June 30).

A tax return is a statement of how much money is earned from income and investments, as well as how much tax has been paid. Deductions can be claimed to reduce the tax liability, for example expenses incurred in the course of employment.

The government will then work out whether enough tax has been paid. There may be a requirement to pay more, or if too much tax has been paid, the government will issue a refund.

Tax returns can be fairly simple to prepare if there are no income-earning assets, or if the tax-free threshold has not been exceeded. The ATO can provide information and forms for preparing and lodging a tax return.

Many people use an accountant or registered tax agent to lodge a tax return. The benefits are that complicated tax matters can be accurately calculated and an accountant may find many more deductions to reduce tax liability.

Further information

For further information, the ATO website has comprehensive guides on every aspect of the Australian taxation system.

While paying tax is not really something that most people look forward to, if you want to maximise your income in Australia, it helps to spend a little time getting to know the fundamentals of the tax system.

Move Migration is experienced in assisting migrants to understand the taxation system, and can also refer you to experienced tax agents or accountants.

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