The Government has announced changes to the tax rates and threshold that will result in non-resident individuals who derive Australian source income paying higher average rates of income tax. In addition, non-residents will also be denied access to the capital gains tax discount. Further, the current 7.5% withholding tax rate applicable to payments by managed investment trusts (MITs) to residents of countries with effective exchange of information arrangements with Australia will be increased to 15%.
Rate changes
From 1 July 2012, the first two marginal tax rate thresholds for non-resident individuals will merge into one threshold, causing the first $80,000 of taxable income to be derived by such non-residents to be taxed at a marginal tax rate of 32.5%.
From 1 July 2015, the marginal tax rate will increase to 22 per cent (from 32.5%).
The tax rates for non-residents will apply as follows:
2012-2013 and 2013-2014 income years
| Taxable income ($) | Tax payable |
| 0-80,000 | 32.5 % |
| 80,001 – 180,000 | 26,000 +37% of excess over 80,000 |
| 180,000+ | 63,000 + 45% of excess over 180,000 |
2014-2015 income years
| Taxable income ($) | Tax payable |
| 0-80,000 | 33 % |
| 80,001 – 180,000 | 26,400 +37% of excess over 80,000 |
| 180,000+ | 63,400 + 45% of excess over 180,000 |
CGT
The 50 per cent CGT discount will no longer be available to non-resident individuals and trusts with capital gains that accrue after 7.30pm (AEST) on 8 May 2012. The CGT discount will remain in respect of gains accruing prior to this time where non-residents choose to obtain a market valuation of assets as at 8 May 2012.
MIT withholding rate
Currently, as an incentive to foreign investment in Australian collective investment vehicles, distributions by MITs to non-residents who reside in a country that has an information exchange treaty with Australia- to the extent that they do not represent dividends, interest, royalties or capital gains-will attract a final withholding tax at a rate of 7.5%. Under the Budget announcement, the rate of such withholding will be increased to 15%.
If you’re a non-resident and require more information on how these changes may affect you, the accountants at The Quinn Group can provide the advice you’re after. Contact us on 02 9223 9166 or submit an online enquiry.
