In spite of the global economic slowdown, Australia's economy remains strong. If your company is opening an office or expanding operations down under, follow our guide to taxes, visas and more, by Elise Krentzel.

• Overview
• Starting a business
• Social Security
• Taxes
• Visas

Australia's national security and its economic interests are inextricably linked to the security and stability of the Asia-Pacific region. The key components of Australia's security strategy are maintaining a strong national defence capability, the security alliance with the United States, developing bilateral defence and security relationships with the countries throughout the Asia Pacific, and strengthening multilateral security links in the region, especially the ASEAN Regional Forum (ARF).

The Australian economy in GDP grew in every year throughout the 1990s. GDP growth in 2001-02 was 3.8 percent. Australia is a popular place to migrate as over 22 percent of the population consists of permanent residents who were born overseas.

Starting a business involves a range of dealings with Commonwealth, state, territory and local government organisations. You'll need to register your business for taxation purposes, register your business or company name and, in some instances, obtain business licences and permits.

You first need to apply for an ABN, Australian Business Number which is filed in the ABR, Australian Business Register.

The GST is a broad-based tax of 10 percent on most supplies of goods and services consumed in Australia. You must register for GST if you are an entity carrying on an enterprise and your annual turnover is at or above the registration turnover threshold of $50,000.

By registering for GST you are entitled to claim input tax credits for the GST included in the price paid for things you acquire and the GST paid on importations if they are for use in your enterprise. If you are not registered you cannot claim input tax credits and businesses won't be able to claim input tax credits for supplies from you.

Business structures

There are four types of company structures in Australia:

• Company
• Partnership
• Trust
• Sole trader

COMPANY

A company is a legal entity separate from its shareholders. For tax purposes, a company means a body or association, incorporated or unincorporated, but does not include a partnership or a non-entity venture.

A company needs to register for an ABN and for a tax file number. Companies are regulated by the Australian Securities and Investments Commission. If a company is used to operate your business it’s likely you’ll be an employee or a director of your own company. In that case, the company will need to withhold amounts from salary or wage payments it makes to you as an employee, and from any amounts it pays you as director’s fees, under the PAYG withholding system.

PARTNERSHIP

For tax purposes a partnership is an association of persons that carry on business as partners or receive income jointly. Partners may apply for an ABN for the partnership and use this number for all the partnership’s business dealings.

A partnership needs its own tax file number. This can be applied for on the ABN application form. The partnership’s tax file number is used when it lodges its annual income tax return.

TRUST

A trust is an obligation imposed on a person to hold property or income for the benefit of others (who are known as ‘beneficiaries’). The trust’s tax file number is used when the annual income tax return for the trust is lodged. The entity that is trustee will need to register for an ABN in its capacity as trustee of the trust.

SOLE TRAdER

A sole trader is an individual who is trading on their own. A sole trader may apply for an ABN for their business and use this number for all their business dealings. A sole trader uses their individual tax file number when they lodge their income tax return.

Australia’s social security system is based on residence and financial circumstances. Generally, social security payments are available to Australian residents who, when assessed against means tests on income and assets, are determined to be qualified for income support.

There are minimum residence requirements for some payments and this residential basis is modified under agreements.

International Social Security agreements

Australia presently has nine international social security ‘shared responsibility’ agreements, with several more under negotiation including Cyprus, Canada, Spain, Ireland, Malta, Denmark, The Netherlands, Portugal and Austria.

These agreements are bilateral treaties which close gaps in social security coverage for people who migrate between countries.

Partner countries under each agreement have made concessions against their social security qualification rules so that people covered by the agreement may access payments for which they might otherwise fail to qualify. They do this by overcoming barriers to pension payment in the domestic legislation, such as requirements on: citizenship; minimum contribution record; past residence record; current country of residence.

Responsibility for social security is shared between the countries where a person has lived during their productive years and the person is able to gain access to potential entitlements.

It is a fundamental principle of these agreements that there is free transmission of social security payments between the countries, although the paying country maintains some discretion in the currency and delivery mechanisms used.

Under these agreements, Australia equates social insurance periods in those countries with periods of Australian residence in order to meet the minimum qualifying periods for Australian pensions. The other countries count periods of Australian residence as periods of social insurance in order to meet their minimum qualifying periods for payment.

Usually, each country will pay a part pension to a person who has lived in both countries. In Australia’s case a person who has lived in Australia for 25 years during their working years will receive a full pension; for lesser periods the proportion of pension payable is the length of residence to 25 years.

Foreign residents pay tax on every dollar earned in Australia however they are not subject to pay taxes on foreign income or Medicare, unlike Australian residents. As working holiday makers they may have tax withheld from their pay during the year. At the end of the year, they will only receive a refund if the amount of any tax withheld exceeds their tax liability.

The decision to determine whether one is a foreign resident or an Australian resident is based on several factors such as type of visa, duration of stay, type and length of contract or employment, mobility within the country and family situation.

Most expats with and without spouses who relocate to Australia for a given time period on an employment contract will be considered Australian residents. In such cases they will be subject to the same taxes as Australian nationals.

Australian residents

• lodge annual income tax returns. The Australian income year commences on 1 July and ends on 30 June the following year.
• need to declare worldwide income that is earned, subject to the operation of any international tax treaties. That includes capital gains from the disposal of assets.
• will be subject to income tax at resident rates that includes a tax-free threshold.
• will be subject to Medicare levy. This does not mean they are automatically entitled to Medicare health benefits

Tax File Number

If a person is authorised by the Department of Immigration and Multicultural and Indigenous Affairs to work in Australia, they are required to have a tax file number (TFN).

To get a TFN form NAT1432 must be filled in and filed at the ATO (Australian Tax Office). Original documents that prove one’s identity-for example, a current passport with evidence of Australian immigration status (work rights) and a bank account statement issued by an Australian branch of a financial institution showing the name and Australian address of the expat is required. If someone starts work before obtaining a TFN, they have 28 days to provide the TFN to their employer.

Foreign residents may not have to declare their TFN to their employer. If they choose not to, their employer will withold taxes and they will be taxed the highest marginal rate of 47 percent. If they declare their TFN, the table is as follows:

When foreign residents stop working, they need in writing from their employer a payment summary showing the total income earned and how much tax was withheld from it. They need a payment summary to complete the tax return. Employers are required to give payment summarys if the employee is still working for them at the end of the Australian income year. If the foreign resident moves around Australia, it is important to give the new address to the employer.

Earning interest

You are not required to quote your TFN to a financial institution. However, if you are a foreign resident and you give them your overseas address, they can deduct 10 per cent withholding tax from any interest you earn. You will then not have to declare this interest on your tax return.

The Australian tax year ends on 30 June and tax returns should be filed before 31 October.

Superannuation

An employer may contribute to a superannuation fund or retirement savings account (RSA) on the employees behalf. In most cases, superannuation benefits are required to be 'preserved' in a superannuation fund or RSA until one reaches a specified age.

A person who entered Australia on an eligible temporary residents visa [which is specified in the Superannuation Industry (Supervision) Regulations 1994] and who has permanently departed Australia, may receive payment of superannuation accumulated during the time spent in Australia.

NOTE: Any payment made of accumulated superannuation benefits before one reaches the specified age is subject to specific Pay As You Go (PAYG) withholding consequences

Certificates of Payment for non-residents

A Certificate of Payment is a document issued by the ATO to non-residents (whose Australian sourced income is subject to Australian non-resident interest, dividend or royalty withholding tax) who require proof of payment to comply with their resident country’s taxation requirements.

Who is entitled to a Certificate of Payment?

A Certificate of Payment will only be verified for those payees whose country of residence has a comprehensive double taxation agreement with Australia. Double taxation agreements are special treaties that Australia has entered into with over 40 countries. The double taxation agreements prevent double taxation and foster cooperation between Australia and other international tax authorities in enforcing their respective tax laws.

Double-taxation agreements

These countries have a comprehensive double-taxatopm agreement with Australia: Argentina, Austria, Belgium, Canada, China, Czech Republic, Denmark, Fiji, Finland, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Kiribati, Malaysia, Malta, Netherlands, New Zealand, Norway, Papua New Guinea, Philippines, Poland, Romania, Singapore, Slovakia, South Africa, South Korea, Spain, Sweden, Switzerland, Taipei, Thailand, UK, USA and Vietnam.

How many Certificates of Payment will the ATO issue for each payee?

The ATO will issue one Certificate of Payment per payee, per year, for each type of withholding tax. That is, only one Certificate of Payment will be issued for each total annual amount withheld for interest, dividend or royalty withholding tax.

In very limited circumstances, the ATO may consider the issue of more than one Certificate of Payment per year, per payee. An example is an existing contractual arrangement between the payer and the payee, for the provision of more than one Certificate of Payment per year.

Should you require more than one Certificate of Payment per payee, you will need to provide the ATO with details of the contractual arrangements and the expiration date of the contract. Any new contracts are not to place an onus on the Commissioner to issue Certificates of Payment.

When should a payer request a Certificate of Payment?

Payers should request a Certificate of Payment for their payees at the end of the financial year of the country requiring the Certificate of Payment. Most of the countries that have a double tax agreement with Australia have a financial year ending 31 December.

How does a payer request a Certificate of Payment for a payee?

Before you can ask the ATO for a Certificate of Payment for your payee, you must first obtain a request for a Certificate of Payment from the payee for each year that a Certificate of Payment is required.

The next step is to gather the following information:

• the country of residence of the payee who requires a Certificate of Payment
• the start and end dates of the financial year of that country
• the name of the payee, and
• the type of withholding tax applied. That is, was the amount withheld for interest, dividend or royalty withholding tax?

• each amount subject to withholding tax by the payee
• the total annual amount subject to withholding taxby the payee
• each amount withheld and paid to the ATO
• the total amount paid to the ATO, and
• the date each amount was paid to the ATO

The Australian government makes the process of application quite easy with several online sites and crisp clear information. There many types of visas issued and to determine what sort of visa is necessary either for a business migrant or their families check the website http://www.immi.gov.au/ allforms/pdf. The form can be filled out online or filled in at the nearest Australian embassy.

Type of visas

Australia issues booklets to help one determine what type of visa they will need to migrate. Check out http://www.immi.gov.au/books_migrate.htm to determine exactly what category you fit into. The three most common categories are:

Employer Sponsored Migration - Employer Nomination Scheme, Regional Sponsored Migration Scheme, Labour Agreements or Regional Headquarters Agreements.

General Skilled Migration - independent migration, skill matching migration, or family sponsored migration

Business Skills Migration - business owners, senior executives, those with an ownership interest in an established business in Australia, or investment-linked migration

The category of visa 47ES Long Stay Temporary Business Visa is the most common to employer-sponsored expatriates.

Required documentation

1. An application form 47ES Long Stay Temporary Business Visa
2. Documentation showing both of your parents names – a birth certificate would suffice however if that is not available than a certified copy of at least one of the following documents: passport, family book showing both parents’ names, document issued by a court which shows your identity
3. 2 recent passport sized photos (45mm x 35mm) of each person included in the application (4 photos of each if health examinations have not been completed) with the name of each person on the back of the photo.
4. Certified copies of marriage certificates if anyone traveling has been or is married
5. Certified copies of a divorce decree or death certificate if anyone traveling has been divorced or widowed
6. Certified copies of any name changes due to marriage, divorce or other
7. Certified copies of birth certificates or the family book to include all children showing names of both parents for all children included in the application
8. Certified copies of documents to prove custody for children under 18 unless such children are included in the application
9. Completed medical and x-ray examinations for all persons applying for a visa
10. A police good conduct report for each child over 16 years of age who has lived outside of Australia for over 12 months in the past 10 years
11. If any child is adopted, adoption papers are required
12. If a person served in the armed forces of any country, documentation of their military record

Spouses and dependents of visa holders in this category 47ES Long Stay Temporary Business Visa are able to work and study while in Australia.

According to the Australian consulate in London and http://www.immi.gov.au/allforms/booklets/1154.pdf, the time frame is open ended.

Other documentation

If the migrating person has dependents 18 years of age or over, whether they are migrating or not, the form 47A must be completed and submitted.

News: Approved applicants of the 47ES form are now are required to pay a tuition fee to the Department of Education for their children to attend a public school in New South Wales.

Dependents studying at a tertiary level attract the same fees as overseas students. For more detailed information see http://www.hecs.gov.au/overseas.htm.

February 2003

Elise Krentzel is an Amsterdam-based freelance writer.