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For individuals who are considered residents in Australia for tax purposes, several tax implications apply to their income and capital gains:
- Worldwide Income: Residents are subject to tax on their worldwide income and taxable capital gains. This means that income earned both within Australia and from foreign sources is taxable.
- Foreign Tax Credit: Residents may be eligible to claim a foreign tax credit as a tax offset for taxes paid on foreign income, up to certain limits.
- Marginal Tax Rates: The taxable income of resident individuals is subject to the following marginal tax rates for the year ending June 30, 2022:
- 0% on the first AUD 18,200 of taxable income.
- 19% on taxable income between AUD 18,201 and AUD 37,000.
- 5% on taxable income between AUD 37,001 and AUD 90,000.
- 37% on taxable income between AUD 90,001 and AUD 180,000.
- 45% on taxable income above AUD 180,000.
It’s important to note that temporary residents have different tax rules. They are generally only taxed on income sourced in Australia and certain foreign income received within Australia.
For low and middle-income earners, there are income tax offsets available that can help reduce the overall tax burden. However, these offsets are only applicable until the end of the financial year 2022.
Non-residents are taxed on their first AUD 1 of taxable income at a rate of 32.5%, and the rates mentioned above apply to the rest of their taxable income.
Special tax rates also apply to income earned by “working holiday makers,” regardless of their residency status for tax purposes.
Starting from July 2024, the top marginal tax rate will apply to incomes above AUD 200,000, and a 30% tax rate will apply to taxable incomes between AUD 45,001 and AUD 200,000