Corporate Tax

Corporate tax issues the following summary provides a brief outline of the tax issues that may be applicable to a foreign entity doing business in Australia.

Income Tax

A company is a resident of Australia for income tax purposes if:

• The company is incorporated in Australia or
• The company carries on business in Australia and either:

• Its central management and control are in Australia (but also see the proposed amendment noted below) or
• voting power is controlled by shareholders who are residents of Australia

The corporate residency test, which determines whether a foreign-incorporated firm is subject to Australian taxes, has been proposed for revision by the Australian government. A foreign company will be regarded as an Australian tax resident under the new proposal if it has a significant economic relationship to the nation, which means that its central management and control as well as its main business operations are both situated there. Companies having Australian residents are expected to pay a general corporate tax rate of 30% on all of their international income. Smaller businesses may qualify for a tax rate of 25% if their yearly revenue is under AUD 50 million. These corporate tax rates would also apply to foreign businesses with a permanent presence in Australia.

Capital Gains Tax (CGT)

Capital gains tax (CGT) is typically due by Australian resident businesses on any profits generated from the sale of assets kept for investment purposes. Usually, the tax rate is same to the corporate tax rate. Contrarily, non-resident businesses are typically immune from CGT in Australia, except for sales of “Taxable Australian Property” assets. Australian real estate is included, as well as non-portfolio holdings (10% or greater ownership positions) in companies whose primary valuation is dependent on Australian real estate. There are a few exceptions to this regulation, such as where the property’s worth is under AUD 750,000.