According to the latest statistics released this year, the number of new immigrants born in mainland China across Australia in 2016 was 526,000, compared with 206000 in 2006. The 10-year net increase in population was 320000, or 155 percent. Over the same period, Australia's total population grew from 19.8 million to 23.4 million, a net increase of 3.6 million, or 18%.
The mainland immigrants who came to Australia before 2006 were mostly skilled immigrants. When they came to Australia, they had nothing to do with them, and their parents and friends had just begun to buy homes and cars, and there was no money left to support new immigrants to invest in and start a business in other countries. So when most new immigrants landed, working became the only way to earn a living. But after 2006, things changed. On the one hand, the number of investment immigrants is increasing, and they are beginning to invest in Australia with their own funds or funds raised from overseas. On the other hand, even skilled immigrants benefit from the rapid development of China's economy. Wealthy parents and friends have been able to lend them money to invest in Australia and even invest directly in their business projects.
Another important change since 2006 is that many Chinese who do not have Australian immigration status are also starting to jump into the Australian real estate market, buying pre-term homes for rent or selling at a later stage to profit.
As a result of these changes, immigrant friends in Australia often encounter questions from relatives and friends at home about how foreigners should pay taxes on their income in Australia.
Before answering this question, make it clear that there is no distinction between Australians and foreigners in the Australian tax Code. It distinguishes only Australian tax residents from non-tax residents, and determines how to tax your income based on your tax resident status.
For example, in 2016 / 17, the individual income tax rate for Australian tax residents was:
Note: the above tax rate does not include a 2% taxable public health insurance premium.
Australian tax residents are generally required to pay taxes to the Australian goverment for all their income from the world in that year, while non-Australian tax residents are generally required to pay taxes only on their income earned in Australia and the applicable tax rates are different from those of Australian tax residents. Australian passport holders may be considered not to be Australian tax residents by the IRD because they are not in Australia all the year round, and foreigners with permanent Australian resident status in Australia are of course regarded as Australian tax residents. So to understand a person's tax obligations in Australia, first determine whether he or she is an Australian tax resident.
The Australian Inland Revenue Authority uses four methods to test whether a natural person is a tax resident. The first is the residence test method. If you live in Australia, you are an Australian tax resident (for example, a Chinese student who holds a student visa for more than a year). If you do not meet the conditions of the residence test, but you meet one of the other three test methods, you may still be considered an Australian tax resident:
01 permanent Family Housing Test Act
If your permanent home is in Australia, you are an Australian tax resident unless you can prove that your permanent home is outside Australia. The IRS gives an example if you plan to live abroad for several years and have rented out your own home in Australia, even if it proves that your permanent home is no longer in Australia.
02 183 day test
If you live continuously or intermittently in Australia for 183 days in a tax year, you will be considered an Australian tax resident unless you can prove that your regular residence is outside Australia and that you do not intend to settle in Australia.
03 pension test method
If you are a perennially overseas employee of the Australian goverment system and contribute a pension to an Australian goverment-managed pension fund in the tax year, you will be considered an Australian tax resident.
If a person's habitual residence is not in Australia and does not match any of the three tests, he will not be considered an Australian tax resident.
The income earned by non-tax residents in Australia is divided into two categories according to the nature of their income, each of which is subject to different tax rates and different tax methods.
I. income from intellectual property licensing fees such as interest, dividends and patent rights
Non-tax residents who earn such income in Australia are not required to report to the Australian Inland Revenue Department. In making such payments, Australian payers are legally obliged to determine whether the payee is an Australian tax resident or not. When the payee is determined to be a non-tax resident, it is obligated to deduct the tax due from the payee on behalf of the goverment and return it to the Treasury.
Recipients should provide Australian payers with their current overseas addresses. Because the address determines the applicable withholding tax rate. When the address is unknown, the payer shall withhold the tax at the highest tax rate of 49%.
In accordance with the tax treaty between the people's Republic of China and Australia, which entered into force on 1 July 1991, the following tax rates are applied to the following income earned in Australia by recipients of addresses in mainland China:
Note: pre-tax dividend (Unfranked Dividend), refers to dividends paid to shareholders from profits that have never been paid corporate income tax.
Under the Australian tax Code, even if interest, dividends and licence fees are not actually paid to the payee, the payment payable shall be deemed to have been paid as long as it is used for reinvestment, retention or equity, etc., in accordance with the instructions of the overseas payee, Australian payers must calculate the tax deductible based on the amount payable and pay the Inland Revenue Department.
II. Income other than interest, dividends and patent licensing fees
When non-tax residents earn income other than interest, dividends and licence fees in Australia, they are required to file tax returns to Australia's goverment on their own initiative.
The following is the personal income tax rate for non-tax residents of Australia in 2016 / 17:
Usually, the payee who receives this kind of income is the tax payer, and the payer who pays this kind of money has no duty to withhold tax. But there are exceptions, such as the tax law, which obliges the payer to withhold taxes on behalf of non-tax residents (foreigners) who pay specific expenses such as performing arts, sports games, gambling revenues, and so on. In addition, the revised tax law since last year requires buyers whose prices in real estate sales contracts reach a specified amount to withhold the seller's value added tax on overseas resident capital on behalf of the Inland Revenue Bureau. Unless the seller provides a tax clearance or exemption certificate issued by the Inland Revenue Authority.
The second most common category of income for non-tax residents includes rental income or return on investment derived from rental or sale of homes in Australia.
It can be seen from the tax table that the tax threshold for non-tax residents is zero yuan. In theory, as long as you earn more than 1 Australian dollar in Australia in that year, you are obligated to make a tax return. For the purposes of tax returns, non-tax residents who receive such income should apply to the Australian Inland Revenue Department for a tax file number (TaxFile Number), so that any such income obtained in Australia can be reported on an annual basis and the tax payable shall be paid.
According to the above analysis, if you invest in Australian business projects in part or all from domestic parents, relatives and friends of the loan or direct investment, then you can each fiscal year, before the tax returns, Use the proceeds of your business to pay interest on overseas loans or dividends on overseas investments, and the rest is your taxable income. Even if the interest dividend that you should return to the country is not actually paid, but remains in your hands, you must withhold the tax payable by the domestic lender / investor as requested above and return it to the Australian Inland Revenue Authority.
Since you have reduced overseas interest or dividends from your taxable income, your income may be significantly reduced, and therefore the amount of personal income tax payable will be reduced accordingly, and the Inland Revenue Department may ask you to show it. Evidence of the real existence of overseas loans or investments that you accept. So you must keep evidence, such as a written loan agreement or shareholder agreement, proof of receipt and proof of the lender's or shareholder's residence in mainland China, for tax inspection.
Solicitor: Legend
Lawyer's qualification in China and Australia, Public member of Australian Accountants
Australian Doctor of Law, Master of Accounting and Bachelor of Law in China
Covering the fields of property law, contract law, company law and inheritance law
