Australia is a great place to do business as an international brand. Compared to other OECD members, Australia has one of the lowest total tax rates of any high income country in the world, with tax income only amounting to 29% of its GDP.
That said, business tax obligations will differ depending on whether you're a resident or non-resident of Australia.
In this guide, we'll outline some key information on taxes, how you can simplify your processes and how you can navigate Australia's 17 free trade agreements with 29 countries as a non-resident
But before we start, please note this guide is for informational purposes only and should not be taken as financial advice. It is always best to seek guidance from a qualified Australian tax agent on your individual taxation needs, especially if you are an international brand looking to make the most of this lucrative market.
Good and services tax (GST) in Australia - imported services & digital products
Goods and Services Tax (GST) is a vital consideration for overseas businesses selling products and services to Australian customers. GST is currently charged at a flat rate of 10%, and applies to most retail sales of imported products and services, This includes digital products such as movie downloads, apps, games, and e-books.
However, if you're an Australian business registered for GST, you may not be charged GST in Australia on purchases made for use in your business. Overseas companies with a GST turnover of AUD $75,000 or more from sales in Australia, or made in the course of your business in Australia must register for GST.
There may be exceptions to this rule if the only sales made are through an electronic distribution platform such as Amazon and eBay. It's always best to check whether or not you need to register for GST on the Australian Taxation Office (ATO) website.
"As online marketplaces continue to explode, it's important that new businesses understand how to stay on top of their obligations," says Adrien Barthel, cofounder of Sleek, a cutting-edge business services platform. "Paying your taxes and filing your BAS may not be the most exciting part of running a business, but it's essential to avoid fines that can kill your business, especially when operatingon overseas marketplaces. My advice is to work with a partner to address yourtax questions early on - what taxes you have to pay when operating overseas and when to file them."
GST and cross border supplies
The introduction of GST to low-value goods in 2018 had far-reaching implications for Australian consumers, GST-registered retailers, and drop-ship business owners. The change meant that previously exempt brands had to register for GST and start collecting on most – if not all – their product catalogue.
Low value imported goods and GST
As mentioned, GST will apply in most retail sales, including low-value physical goods imported by Australian consumers. This means everyday items (like clothing, books or homeware) valued at AUD $1,000 or less will be subject to GST.
The AUD $1,000 or less threshold is based on the customs values of the item, not including the cost of fulfilment and insurance costs. Please note that imported goods valued above AUD $1,000, tobacco, and alcohol products are also charged GST.
In addition, online marketplace sellers now need to provide additional documentation to marketplace platforms to ensure compliance with theregulations. International brands also need to apply for an Australian Business Number (ABN) and comply with the Australian Taxation Office's reporting requirements in the event of an audit.
However, as mentioned previously, some international brands that make supplies for Australian businesses may not need to register for GST as the obligation can sometimes be transferred to the recipient.
Moreover, you may not need to pay GST if you sell intangible supplies such as digital products to an Australia-based business or a non-resident buying these intangible products or services for their overseas enterprise.
Finally, if you lease goods in Australia and transfer ownership to another nonresident with no registered business in Australia, you may be exempt from paying GST. For example, say a company that leases equipment to an Australian-based company transfers ownership to another non-resident company. In this case, GST may not apply.
Additionally, GST exemptions may apply to companies that install or assemble goods in Australia but do not import goods into the country.
Income tax in Australia is assessed on individuals, companies and trusts, and nonresidents are only taxed on the income derived from Australian sources.
Businesses are typically responsible for determining their own tax obligations and submitting their self-assessment records to the Australian Taxation Office, so seeking the help of a qualified agent will help you understand your compliance needs based on your organisation's structure, what deductibles you may be eligible to claim for in your tax bill etc.
Open a World Account for free
- Open up to 10 local currency accounts, with local account numbers
- Collect secure payments from 100+ marketplaces, overseas buyers and payment processing gateways
- Pay suppliers, partners and staff in 40 currencies without hidden fees
- Pay and get paid easily with local bank details on your invoices
- Lock in conversion rates to manage your currency risk
Adrien Barthel, co-founder of Sleek, knows all too well the challenges that entrepreneurs face. "As a small business owner, you have a lot on your plate. Managing your finances and staying on top of your accounting can be time consuming and stressful.
"That's why we recommend outsourcing your accounting and leveraging a digital platform. Not only does it save you time and reduce your stress, but it also reduces business risk and saves you money in the long run."
The ATO reserves the right to conduct random audits on your business to verify your assets. Larger companies may also choose to participate in voluntary compliance programmes to help them improve their admin processes.
What is the general income tax rate for companies for 2023?
The general income tax rate for companies is 30% (in some cases, small businesses can apply for a reduced rate).
Most businesses must pay quarterly via Pay-as-you-go (PAYG) installments based on their estimated liability. They will also need to file an annual tax return to calculate their annual income liability, but the PAYG method can help with business cash flow.To find out when the key dates are for filing your tax return.
How about capital gains?
Capital gains tax is payable on most capital asset disposals, but overseas residents are generally only taxed on Australian real property transactions.
Net capital gains are included in a taxpayer's total assembled income. Specific structures and resident individuals may be eligible for a 50% discount in capital gains tax if they have held an asset for at least 12 months.
Non-residents, in contrast, are typically only taxed on capital gains from taxable Australian property such as land.
Indirect taxes in Australia include customs and excise duties on specific imported goods. Please check these charges under Australia's Free Trade Agreements with your resident country, as some may be exempt based on specific agreement terms.
Employers may also be liable to pay Fringe Benefits Tax (FBT) on benefits provided to employees and associate.
Recent avoidance measures
It's necessary to be aware of recent specific avoidance measures for global organisations. This includes the Multinational anti-avoidance law (MAAL), which aims to prevent multinationals from using structured arrangements to avoid the consequence of permanent establishment in Australia.
An example of a breach of MAAL would be a foreign supplier that makes supplies for Australian customers with the involvement of an Australian entity that is associated with, or commercially dependent on, that supplier. In 2019, Google paid an AUD $481 million tax bill to the ATO after a long-standing dispute under the MAAL, following the footsteps of Microsoft, Apple and Facebook.
OECD/G20 Base Erosion and Profit Shifting (BEPS) project
In 2019, OCED/G20 introduced the Base Erosion and Profit Shifting (BEPS) project, which includes a Multilateral Instrument (MLI) designed to swiftly modify tax treaties to better address multinational tax avoidance and disputes.
The extent to which it changes treaties depends on adoption positions taken by each treaty partner, and while approximately 35 treaties will be modified, some counties are excluded. These include Australia's treaties with the US, Germany, Austria, Switzerland, Taiwan, Kiribati, the Philippines, Sri Lanka, Sweden, and Vietnam. For the complete list of treaties affected, click here.
Withholding tax is a tax that is deducted from the source of income. In the case of Australia, non-residents are liable for tax on all Australian-sourced income, but the withholding tax rate is modified for interest, dividends, and royalties.
For instance, if a non-resident business gets interest income from an Australian company, it may be required to withhold a specific amount of the interest as tax and submit it to the ATO on the non-resident business's behalf.
Do business like a local with WorldFirst
WorldFirst are experts in borderless business and can help you with all your international transactions, whether collecting funds from online marketplace customers or paying an overseas manufacturing firm to assemble your goods.
We also offer hedging options, such as Forward Exchange Contracts that enable you to secure your FX rate for up to 24 months, helping you control your business cash flow.
With a World Account from us, you can get instant access to 10+ local currencies (including AUD, USD, GBP, CNH and NZD) from one account without applying for separate IBANs in each country. You can also connect your account to 100+ global marketplaces and your Xero accounting tools to help streamline tax returns processes.
So, if you want to learn more about opening a free World Account, click here. Or, call us on +61 2 8298 4990.
Disclaimer: These comments are the views and opinions of the author and should not be construed as advice. You should act using your own information and judgement. Whilst information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Please consider FX derivatives are high risk, provide volatile returns and do not guarantee profits.
Businesses trust WorldFirst
- Almost 1,000,000 businesses have sent $150B around the world with WorldFirst and its partner brands since 2004
- Your money is safeguarded with leading financial institutions