Australia Tax

The Australian tax system is based on a worldwide basis. It means that all the incomes are taxable in Australia no matter where they are coming from. Income tax is payable by Australian resident individuals to the Australia Tax Office (ATO). The taxable income is derived from the assessable income, which is your ordinary income from work and investments, plus capital gains.

In addition to the income tax, the Medicare levy needs to be considered - this is used to fund the health care system in Australia. There is no separate capital gains tax, but capital gains are included in taxable income and classified as statutory income. The extent of your tax liability will depend on your residence status.

Australia does not currently levy inheritance tax on the estate of the deceased and death does not constitute a disposal of the assets for CGT tax purposes. When the existing assets are transferred to the beneficiaries, there is no immediate tax to be paid. However, if the assets are sold during the administration of the estate, the normal CGT will apply, and tax may be payable on the profit generated.

There exist certain eligible investment-linked life insurance policies that allow assets to be tax-free after a specified accumulation of policy years. This means that any gains realised from the investments, known as bonuses, are no longer assessable for tax. Therefore, when considering the implications of Australian tax, it is important to plan ahead if you intend to return to Australia as a resident.