It is essential that taxpayers correctly determine whether they are residents for tax purposes or non-residents as the tax consequences are very different. The ATO has a Determination of Residency Tool on their web site that assists in determining a taxpayer’s residency status.
Taxpayers who are non-residents for tax purposes are only taxed on their Australian source income.
Non-residents are taxed on their different types of income in the following ways:
- Wages income – Taxed at non-resident tax rates.
- Rental property income – Taxed at non-resident tax rates.
- Business income – Taxed at non-resident tax rates.
- Interest income – Subject to a 10% withholding tax (final tax).
- Franked dividend income – Exempt.
- Unfranked dividends – Subject to either a 15% or 30% withholding tax (final tax).
- Property – Taxed at non-resident tax rates.
- Shares – Exempt.
Non-resident individuals are taxed at the rate of 33% on the first $80,000 of taxable income, and then 37% on the income between $80,001 and $180,000. The portion of the taxable income that exceeds $180,001 is taxed at 45%. Non-resident companies are taxed at a flat rate of 30%.