Did you know that your PAYG depends on your visa type in Australia?
You may be wondering how pay as you go withholding tax (PAYG) is calculated or even classified by a payroll specialist., and how it can vary from one person’s income to another, depending on the type of their residency in Australia. You can compare two people with two different types of visas with similar pays, who would typically be on the same tax bracket, to find that their take home portion is different.
Here is a quick snapshot to help you get an idea regarding the classification of such taxes.
If you are from overseas and come to Australia to work, you may be considered either a foreign resident or temporary resident for tax purpose. However, if you are in Australia for the purpose of residing, you are a resident for tax purposes.
Foreign residents:
A foreign resident for tax purposes, has no tax-free threshold. In 2022 – 2023 year, your income is taxed at a flat rate of 32.5% for earnings up to $120,000; any income exceeding this amount will attract a higher percentage.
Temporary residents:
A person holding a temporary visa, and who is not an Australian resident within the meaning of the Social Security Act 1991 (that is, not an Australian citizen or permanent resident), the person is considered a temporary resident, and the taxable income is treated similar to that of a foreign resident.
Holiday makers
For the purpose of PAYG, holiday makers have a different set of tax rates. For instance, any earnings up to $45,000 are taxed at the rate of 15%, any earnings of $45,001 or more will then become at the same tax scale as that of a foreign or temporary resident.
Resident for tax purposes
If you arrive in Australia with the intention of residing and have resided in Australia for a full year, you pay no tax on the first $18,200 of your income. This is called the tax-free threshold.
If you entered with the intention of residing in Australia during the financial year, your tax-free threshold will be adjusted. Your tax-free threshold will be lower than the full year’s threshold available to most resident taxpayers. Your adjusted tax-free threshold has two components:
- a flat amount of $13,464
- an additional $4,736 – apportioned for the number of months you were in Australia during the income year, including the month you arrived.
The Australian financial year runs from 1 July to 30 June the following year. You need to calculate the number of months from the month you arrived (if arrived after 1 July) until 30 June, being the end of the income year.
If you are a business owner and have one or more employee, you may require the assistance of a specialised payroll consultant or bookkeeper. If you require assistance or a free consultation, you may contact Amal Bousamra (Nee Hosny) | Forthright Bookkeeping on 0410 527 521 or via email to [email protected].
