IT Contracting in Australia - Money & Tax
Australia – the land of opportunity! With great transport links - aeroplanes, trains, buses, trams and ferries – Australia is a very popular destination for contract work. Whilst the taxes are relatively high the lifestyle more than makes up for it!
I - Registration
1. Before arrival : Australia
You must ensure that you have the correct work rights before you start a contract in Australia. To check out how to obtain them, or whether you have the right visa, go to the Department of Immigration website (DIAC) www.diac.gov.au If you have residency status then you need not worry, failing that however, even for short term business contracts you will need to obtain a business 457 visa which can give you up to 4 years' worth of work rights.
2. Upon arrival
The first thing you will need to do when you arrive in Australia is open up an Australian bank account and contact the ATO (Australian Tax Office) to obtain a TFN (Tax File Number). If you haven’t got a TFN number within 28 days of starting work your employer will tax you at the highest rate of tax! (not good I can tell you)...
II. Taxation in Australia
The Australian tax year runs from the 1st July until 30th June each year. The highest rate of tax can be as much as 45%. Each person and company must lodge a tax return at the end of each year. If you are working direct for a company and not working through an agency you’ll also have to take into consideration state payroll tax – this can vary dependent on the state that you work in!
If you are working direct for a company and not working through an agency you’ll also have to take into consideration state payroll tax – this can vary dependent on the state that you work in!
III - Australia tax allowances and deductions
There are various tax allowances that individuals can claim – the most common is Living Away From Home Allowance – otherwise known as LAFHA. LAFHA is primarily made up of two components covering food and accommodation whilst you are living away from your normal place of residence. There are a number of umbrella companies (including Lester Associates) who are proficient in the usage and calculation of this allowance - be careful however to partner with a firm that offer you a compliant solution rather than a ticking bomb tax liability.
Superannuation – this is basically your pension fund and is paid at 9% of your rate/salary into a chosen fund. If you are only working in Australia on a short term basis, you are entitled to withdraw an accrued superannuation amount upon departure. Be warned however that your superannuation contributions are taxed both on the way in to and the way out of your fund.
Medicare Levy – 1.5% of your salary will be deducted and paid into Australia’s Medicare system. If you are the citizen of a country that hasn’t got a reciprocal health agreement with Australia then you would be exempt from paying the Medicare Levy, however this exemption would need to be claimed back through your tax return at year end.
3. Work visas
Mortgage rates are currently sitting at approx 7% for variable rates. If you are looking at purchasing you maybe eligible for the government 1st Home buyers grant which is $7000
4. Work permits
To work in Australia you need to have the correct visa. Some countries have a 417 Working Holiday Visa arrangement with Australia, which allows you to work in Australia for up to 12 months although certain restrictions do apply..
The most common work visa is a business temporary long stay 457 visa. A lot of companies hold SBS licences allowing them to sponsor permanent staff for internal positions however there are only a handful of companies that can sponsor and ‘on-hire’ employees (Lester Associates hold a Labour Hire agreement for this purpose). A business 457 visa gives the applicant the chance to work in Australia for up to 4 years should they hold down regular employment for at least 38 hours a week / 44 weeks of the year.