Taxable income is generally an entity’s total assessable income less any allowable deductions. These credits are then used to offset against Australian tax paid on the same amount, again ensuring income is only taxed once. In addition, Australia also operates a system of foreign tax credits under which tax credits are given to Australian residents who pay foreign tax on foreign income. To avoid this, Australia has entered into many double tax agreements with other countries which will prevail over domestic law to ensure that taxation is only imposed once on any given amount of income. The risk associated with the residence and source rules is that one amount of income may be taxed in two different countries. International transactions are often sourced according to where the relevant contract is made, although there are often variations to these broad rules depending on the circumstances. Generally, income is sourced in the place of employment or the fixed place of business. The Federal Government of Australia has jurisdiction to tax Australian residents on income from worldwide sources and non-residents on only Australian sourced income.Īustralian legislation contains specific rules relating to residency to determine whether an individual or company is a resident for tax purposes.Īustralia also has a system for determining whether an income amount is sourced in Australia or another country.
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