Australia

Tax residency – A company is tax resident in Australia if it is incorporated under Australian law, or it carries on business in Australia and its effective management is in Australia or has its voting power controlled by shareholders that are residents of Australia.

Basis – Tax resident entities are taxed on their worldwide income.

Tax rate – The general corporate income tax rate is 30%. Companies with an aggregate annual turnover of less than AUD 25M are taxed at 27%.

Capital gains – Capital gains are treated as ordinary income and subject to the standard rates.  Foreign capital gains or losses on the disposal of shares in a foreign company, at least 10% of which is held by an Australian resident company for a certain period, may be reduced by a percentage that reflects the degree to which the assets of the foreign company are used in an active business.

Dividends – Dividends received by resident entities which have been paid out of profits that have been subject to Australian corporate tax are entitled to a tax offset.

Dividends from resident entities paid out from profits not subject to Australian tax are taxed at standard rates.

Interests – Interests received are taxed at the standard rate.

Royalties – Royalties received are taxed at the standard rate.

Withholding Taxes – Dividends paid to non-residents are usually exempted from withholding tax, as long as profits have been taxed in Australia. If profits have been not taxed but dividends are declared to be from foreign income, they may be exempted. If dividends are not qualified for an exemption, they may be subject to a withholding tax of 30%.

Interests paid abroad are subject to a 10% withholding tax unless the rate is reduced under a tax treaty. Publicly offered debentures, limited non-debenture debt interests, and interest paid to unrelated foreign financial institutions and governments may be exempt.

Royalties paid to non-residents are subject to a 30% withholding tax unless reduced due to a tax treaty.

Foreign-source income – Foreign-source income is generally subject to corporate income tax. However, a total or partial tax relief in the form of tax credits or exemptions is available for foreign tax paid.

Losses – Losses may be carried forward indefinitely. Carryback of losses is not permitted.

Inventory – Inventory may be valued at cost, market selling value, or replacement price. Last in First Out (LIFO) is not allowed.

Anti Avoidance Rules –  Transfer Pricing legislation applies to any international transaction which must be conducted at arm's length. The accepted methods include the comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin methods. All transactions should be properly documented.

There are thin capitalization rules. There are restrictions on interest deductions claimed against assessable income if an entity's total debt exceeds a prescribed level. The prescribed level is generally determined by the safe harbor test (debt to equity ratio is 60% of total assets less non-debt liabilities) and the arm's length debt test (maximum amount of debt is the maximum amount of debt the entity reasonably could have borrowed from commercial banks). Entities may be exempt if they have interest deductions of less than AUD 2M per year or outward investing entities with 90% of their total average value of assets consisting of Australian assets.

There are also controlled foreign company rules, in which shareholders are subject to tax on their CFC income on an accrual basis. To be deemed as a CFC, 5 or fewer Australian residents must hold 50% of the foreign entity, or a single Australian must hold 40% or more of the shares of a foreign entity, or five or fewer Australian residents must effectively control the entity.

Tax Credits and Incentives – There are several tax incentives for capital investments In the exploration for and extraction of petroleum and minerals, investments in the venture capital sector, income derived from offshore banking transactions by an authorised offshore banking unit, among others.

There is a R&D tax credit of 43.5% for companies with annual turnover of less than AUD 20m and 38.5% for companies with annual turnover of AUD 20m or more.

Labor taxes – Employers' payroll is taxed at the state level at rates between 3.65% and 5.45%.

Employers must contribute to the superannuation guarantee at 9.5% on employees’ gross salaries. 

In addition, a 2% levy is payable on the taxable income of most Australian residents to fund Medicare and DisabilityCare.

Personal income tax – An individual is considered tax resident in Australia, if his or her permanent domicile is in the country or he or she has been in Australia more than half-year (unless his or her place of abode is outside Australia and he or she doesn’t intent to reside in the country), or an individual is an Australian employee.

Tax residents are subject to personal income tax on their worldwide income, whereas non-residents are taxed on their income derived from Australia.

Personal income tax rate is progressive up to 45% for annual income in excess of AUD 54,232 (AUD 62,685 for non-residents).

Capital gains are treated as ordinary income, if the asset is held by a tax resident (excluding temporary residents) more than one year, a 50% discount may apply. Non-residents are also subject to a non-final withholding tax of 10%.

Dividends received from resident companies are taxable income, but a tax offset is usually available to prevent double taxation. For dividends received from foreign source a foreign tax credit may be also available. Interests and rental income is subject to taxation at standard rates.

Other taxes – States and territories levies land taxes at rates up to 3.7%. Transfers of assets are subject to a stamp duty at rates up to 5.75%. There is no net worth tax, nor inheritance taxes in Australia.

Employers are required to pay fringe benefits tax on the value of fringe benefits provided to their employees at a rate of 47%.

There is a Good and Services tax, which applies to transactions of goods and services. The standard rate is 10%.

There are also insurance taxes levied by States at substantial amounts.