Australia: Taxes and Costs

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Taxes are high in Australia

Effective Tax Rate on Rental Income
Monthly Income	US$1,500
Tax Rate	11.63%
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INDIVIDUAL TAXATION

The tax year in Australia starts at 01 July and ends on 30 June the following year. Married couples are taxed separately.

INCOME TAX

Income is taxed at progressive rates. Nonresident individuals are subject to tax at the following rates:

Rental Income

Expenses that can be claimed are advertising costs (for tenants), bank charges, body corporate fees, borrowing expenses, council rates, depreciation (decline in value of depreciating assets), insurance, land tax, property agent fees or commissions, repairs and maintenance (stationery, telephone, water charges, gardening and mowing, pest control), and travel undertaken to inspect the property or to collect the rent.

CAPITAL GAINS TAX

Capital gains on the disposal of assets are liable to tax at the standard income tax rates. The capital gain is computed by deducting the ‘cost base’ from the gross selling price or fair market value of the property when it was sold.

The ‘cost base’ of the property is the sum of the following amounts:

• acquisition cost of the property,
• incidental expenses of buying and selling the property,
• improvement costs, and

Indexation

The cost base of the property sold within one year of acquisition cannot be indexed. Otherwise, the cost base can be indexed (except for non-capital costs of ownership of an asset). The indexation method that can be applied depends on the date the property was acquired.

• For assets acquired by individuals on or after 21 September 1999, the unindexed capital gain (known as discount capital gain) is reduced by 50%. The taxable capital gains are 50% of the cost base.
• For assets acquired before 21 September 1999, the cost base was indexed according to movements in the consumer price index and indexation is frozen as at 30 September 1999.

PROPERTY TAXATION

LAND TAX

Land tax is an annual tax, levied on all real estate properties, payable by the owner. Exemptions to land tax are extended in most states, to a person’s primary place of residence, and to farms. The tax base is the assessed value of the property.

New South Wales

The tax threshold for 2007 is AUD352,000 (US$310,740). The tax due is AUD100 (US$88) plus 1.7% levied on the value exceeding the threshold amount. The tax threshold for 2008 is AUD359,000 (US$316,919). The tax due is AUD100 (US$88) plus 1.6% levied on the value exceeding the threshold amount.

Land tax is levied on owners of land; exemptions are extended to homes (principal place of residence), incidental business premise (i.e. home office), permitted occupancies (renting out two rooms in your primary residence) and farms (land use for primary production).

Victoria

Land tax is levied on the total taxable value of all owned land in Victoria. Exemptions apply to a person’s primary place of residence as well as land used for primary production. Properties valued up to AUD225,000 (US$198,626) are exempt from taxation. However, for properties exceeding the threshold amount, the following land tax rates apply for 2008:

Australia Capital Territory

Land tax applies to all rateable premises including residential properties that generate income through rent. Land tax rate is different for commercial premises and residential rental properties.

Australia - more data and information

• Guide to buying houses and registering property sales in Australia

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