AUSTRALIA Law and Practice Contributed by: William Moore, Frank Hinoporos, Emma Woolley and Todd Bromwich, Hall & Wilcox
Hall & Wilcox Level 31, Queen & Collins Tower
376-390 Collins Street Melbourne VIC 3000 Australia
Tel: +61 396 033 555 Fax: +61 396 709 632 Email: william.moore@hallandwilcox.com.au Web: www.hallandwilcox.com.au
1. Tax 1.1 Tax Regimes Income Taxes
ture. Individuals and other non-corporate beneficiaries will receive non-refundable tax credits for the tax pay - able by the trustee for the trust. Companies are taxed at a flat rate of 25% for base rate entities and 30% for other companies. Capital gains tax (CGT) is not a separate tax but a set of rules forming part of the income tax regime. When a CGT event occurs (such as the sale, gifting or transfer of an asset), the disposing entity is taxed on any resulting capital gain. Capital losses may offset current and future year capital gains, but not other income. From 1 July 2027, capital gains will be subject to a minimum 30% tax, and the 50% CGT discount will be replaced with cost base indexation. There are no estate, inheritance or gift taxes at the federal level. However, specific tax rules apply the CGT regime to deceased estates, which can affect the timing and calculation of capital gains on assets held by the estate, particularly in cases involving non- resident or tax-exempt beneficiaries. Tax Administration The Australian Taxation Office (ATO) administers the tax system, which operates on a self-assessment basis. The ATO has power to review and audit returns, and the general limitation period for amending assess - ments is two or four years (depending on the entity), unless there has been fraud or evasion, in which case the amendment period is unlimited. Employers must withhold income tax from employees’ salaries and wages under the Pay As You Go With - holding (PAYGW) system. Remitting these amounts
In Australia, income tax and capital gains tax are imposed at the federal level. The Australian income year runs from July 1st to June 30th of the follow - ing year. Income tax is calculated on an individual’s assessable income, which generally includes all forms of income, such as salary, business income, returns on investments and capital gains, minus any allowable deductions. Australian residents are subject to income tax on their worldwide income, meaning income from both Australian and foreign sources is taxed. In con - trast, non-residents are only taxed on income that has an Australian source. Individuals are subject to progressive marginal tax rates, meaning higher levels of income are taxed at higher rates. The top marginal rate is currently 47%, which includes the Medicare levy (a form of public health insurance levy) of 2%. Australian tax residents benefit from a tax-free threshold, which for the finan - cial year ending 30 June 2026 was set at AUD18,200. Non-residents are taxed at higher marginal rates and do not benefit from the tax-free threshold. Currently, trusts are generally taxed on a flow-through basis, with income taxed in the hands of beneficiaries when distributed (either by conferral of an entitlement to the income, or by payments to the beneficiaries). However, the Australian government is introducing a 30% minimum tax on discretionary trusts from 1 July 2028, which will be subject to a transition period of three years to allow time for affected trusts to restruc -
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