Goods and services tax (GST)
The Federal Government levies GST at a rate of 10% and distributes the revenue to state governments. The GST is a value-added tax (VAT) applied at each level in the manufacturing and marketing chain and applies to most goods and services, with registered suppliers getting credits for GST on inputs acquired to make taxable supplies.
Food, with some significant exceptions; exports; most health, medical, and educational supplies; and some other supplies are 'GST-free' (the equivalent of 'zero-rated' in other VAT jurisdictions) and so not subject to GST. A registered supplier of a GST-free supply can recover relevant input tax credits, although the supply is not taxable.
Residential rents, the second or later supply of residential premises, most financial supplies, and some other supplies are 'input-taxed' ('exempt' in other VAT jurisdictions) and are not subject to GST. However, the supplier cannot recover relevant input tax credits, except that financial suppliers may obtain a reduced input tax credit of 75% of the GST on the acquisition of certain services.
Health insurance is GST-free. Life insurance is input-taxed. General insurance is taxed. Reverse charges may apply to services or rights supplied from offshore, where the recipient is registered or required to be registered, and uses the supply solely or partly for a non-creditable supply.
GST is applicable to cross-border supplies of digital products and services imported by Australian consumers. This measure ensures that digital products and other imported services supplied to Australian consumers by foreign entities are subject to the GST. Non-resident suppliers are required to register, collect, and remit GST on the digital products and services that they provide to Australian consumers.
The way Australia's GST rules apply to all cross-border supplies that involve non-resident entities operate to ensure that non-resident businesses do not have to engage in Australia’s GST system unnecessarily. This includes switching off the GST liability for certain supplies between non-residents and extending the GST-free rules to certain supplies made to non-residents.
There is no double taxation of digital currencies by ensuring that supplies of digital currency receive equivalent GST treatment to supplies of money.
GST is payable on certain supplies of low-value goods (valued at AUD 1,000 or less) that are purchased by consumers and are imported into Australia.
Wine equalisation tax (WET)
The Federal Government levies WET at the wholesale level at a rate of 29%, in addition to 10% GST, which is calculated on the price including the WET, and it applies to wine from grapes, fruit and certain vegetables, mead, and sake. Retailers do not receive an input tax credit for WET. A rebate is available to a wine producer of 29% of the wholesale price (excluding WET or GST) for wholesale sales, and of 29% of the notional wholesale selling price for retail sales and applications for own use (up to a maximum rebate of AUD 350,000).
Luxury car tax
The luxury car tax is levied by the Federal Government at the rate of 33% of the value of the car that exceeds the luxury car tax threshold (AUD 84,916 [79,659] for fuel-efficient vehicles and AUD 71,849 [69,152] for other vehicles in the 2022/23 [2021/22] financial year) and is payable on the GST-exclusive value above the threshold. No input tax credit is available for luxury car tax, regardless of whether the car is used for business or private purposes.
Imports into Australia are subject to duties under the Australian Customs Tariff unless an exemption applies. The top duty rate is 5%.
From 1 July 2022, there is no customs duty on electric vehicles, plug-in hybrid vehicles and hydrogen fuel-cell vehicles with a customs value less than the fuel-efficient luxury car tax threshold (see above).
Australia currently has comprehensive free trade agreements with Chile, China, Hong Kong, Japan, Indonesia, Korea, Malaysia, New Zealand, Peru, Singapore, Thailand, and the United States. Australia’s free trade agreement with India enters into force on 29 December 2022 and the agreement with the United Kingdom is expected to be implemented soon. In addition, there is an ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) between ASEAN member states (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam), Australia, and New Zealand and a Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. A regional comprehensive economic partnership free trade agreement also operates between Australia, New Zealand, and Southeast Asian nations (Brunei Darussalam, Cambodia, China, Japan, Laos, Malaysia, Myanmar, the Philippines, Republic of Korea, Singapore, Thailand, and Vietnam). A Pacific Agreement on Closer Economic Relations Plus, which is a regional development-centred trade agreement between Australia, New Zealand, and nine Pacific island countries (Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu) also applies. Negotiations are also underway with the European Union, the Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates [UAE)], the UAE, and the Pacific Alliance (Chile, Colombia, Mexico, and Peru).
Excise duties are imposed at high levels on beer, spirits, liqueurs, tobacco, cigarettes, and petroleum products. Excise rates for tobacco, alcohol, and fuel are indexed bi-annually based on movements in the consumer price index (CPI). Some examples of current excise rates include:
- Beer not exceeding 3% by volume of alcohol packaged in an individual container not exceeding 48 litres: AUD 47.86 per litre of alcohol calculated on that alcohol content by which the percentage by volume of alcohol of the goods exceeds 1.15.
- Tobacco in stick form not exceeding in weight 0.8 grams per stick of actual tobacco content: AUD 1.14040 per stick.
- Petroleum condensate, crude petroleum oil, and diesel: AUD 0.46 per litre.
- Liquefied petroleum gas (LPG), other than LPG exempted from excise duty: AUD 0.15 per litre.
A fuel tax credit system provides a credit for fuel tax (excise or customs duty) that is included in the price of taxable fuel. Broadly, credits are available to entities using fuel in their business and to households using fuel for domestic electricity generation and heating.
All states and territories (except the Northern Territory) impose a tax based on the unimproved capital value of land. In general, the principal place of residence and land used for primary production is exempt from land tax.
Many states also have a land tax surcharge regime for foreign/absentee owners. The state of Victoria also imposes an annual 1% vacant residential land tax on the capital improved value of certain vacant land.
Additionally, the state of Victoria has a windfall gains tax that applies to the increase in value of land in Victoria resulting from a rezoning that takes effect on or after 1 July 2023, subject to certain transitional arrangements. When the taxable value uplift of all land owned by an owner or group resulting from the same rezoning is between AUD 100,000 and AUD 500,000, the tax is calculated at a rate of 62.5% on the uplift in excess of AUD 100,000. For taxable value uplifts exceeding AUD 500,000, the tax is calculated at a rate of 50% on the whole uplift.
All states and territories impose a stamp duty on a wide variety of transactions at different rates. All jurisdictions impose a stamp duty on real estate conveyances, but most exempt conveyances of goods (not associated with other property) from stamp duty. The imposition of duty on share transfers involving unlisted entities differs from state to state. Corporate reconstruction exemptions are available.
The New South Wales government exempts from stamp duty the purchase of new or used battery electric and hydrogen fuel cell vehicles that cost up to AUD 78,000 (dutiable value) that are registered from 15 August 2022.
Advice from a stamp duty specialist should usually be obtained where substantial stamp duty may be imposed because the amount of duty may depend on the form of the transaction.
Australia does not impose a tax on carbon emissions or have an emissions trading scheme. However, there is the Clean Energy Regulator, who can issue Australian Carbon Credit Units (ACCUs) for greenhouse gas abatement activities undertaken as part of the Australian government’s Emissions Reduction Fund. Each ACCU represents one tonne of carbon dioxide equivalent net abatement (through either emissions reductions or carbon sequestration) achieved by eligible activities. ACCUs that have not been surrendered, cancelled, or relinquished can be traded.
Some states and local government agencies in Australia may impose waste levies. Since 1 July 2021, the state of Victoria has a road-user charge that applies to Victorian registered zero and low-emission vehicles.
Australia imposes Federal excise duty on a number of fuel and petroleum products with a fuel tax credit system in place (see above).
Discrete tax concessions related to environmental matters have been enacted. For example, a concessional WHT rate of 10% can apply to distributions from a managed investment trust (MIT) that holds only ‘clean buildings’ (see the Withholding Taxes section for further details).
Fringe benefits tax (FBT)
The Federal Government levies FBT on employers at the rate of 47% on the 'grossed-up value' of non-salary and wages fringe benefits provided to employees (and/or the employee's associates) by the employer or associates. The grossing-up of the value ensures tax neutrality between providing benefits and cash remuneration. FBT generally is deductible for income tax purposes. There are some exemptions from FBT, including some minor benefits, remote area housing in certain circumstances, specified relocation costs, and COVID-19 tests (including polymerase chain reaction and rapid antigen tests) to determine whether the individual can attend or remain at their place of work. A new FBT exemption will apply for car fringe benefits comprising the use or availability for use of an eligible car that is a zero or low emissions vehicle first held and used on or after 1 July 2022 where its first retail sale value was below the luxury car tax threshold for fuel-efficient vehicles (see earlier). In addition, there are some concessional valuation rules, in particular for motor vehicles and certain living-away-from-home benefits.
States and territories impose a tax on employers' payroll (broadly defined). The various jurisdictions have harmonised their payroll tax legislation, but some differences remain, particularly tax rates and the thresholds for exempting employers whose annual payroll is below a certain level, after taking into account grouping rules. For example, in New South Wales, the rate for the year ended 30 June 2023 is 5.45% with an annual exemption threshold of AUD 1,200,000. In Victoria, the general rate for the year ended 30 June 2023 is 4.85% (except for regional Victorian employers, where it is 1.2125%), and the annual exemption threshold is AUD 700,000. A variety of rates and thresholds apply in other state and territory jurisdictions.
A mental health and wellbeing surcharge applies in Victoria at a rate 0.5% of annual taxable wages exceeding AUD 10 million and an additional 0.5% on annual taxable wages exceeding AUD 100 million. From 1 January 2023, a mental health levy will apply in Queensland to employers and groups of employers who pay more than AUD 10 million in annual Australian taxable wages at a primary rate of 0.25% of Queensland taxable wages and an additional 0.5% for those with annual Australian taxable wages in excess of AUD 100 million.
Superannuation guarantee (SG) levy
Legislation requires employers to contribute a certain percentage of an employee's earnings base, subject to limited exceptions, to a registered superannuation fund or retirement savings account on behalf of the employee. Failure to make these contributions will result in the employer being liable for a non-deductible SG charge.
The current SG percentage is 10.5% until 30 June 2023 and will progressively increase up to 12% as follows:
- From 1 July 2023: 11%.
- From 1 July 2024: 11.5%.
- From 1 July 2025: 12%.
No level of Australian government imposes a social security levy.
Major Bank Levy
Australia has implemented a levy (known as the Major Bank Levy) on Australian authorised deposit-taking institutions (ADIs) with total liabilities of greater than AUD 100 billion. The levy is imposed at a rate of 0.015% on certain liabilities of the ADI that are reported to the regulator on a quarterly basis under a reporting standard.
States impose taxes on insurance premiums, which may be substantial.
Petroleum Resource Rent Tax (PRRT)
PRRT currently applies to all petroleum projects in Australian offshore areas (or Commonwealth adjacent areas) other than production licences derived from the Joint Petroleum Development Area in the Timor Sea. It also currently applies to all Australian offshore oil and gas projects, other than the Joint Petroleum Development Area in the Timor Sea.
PRRT is applied to a 'project' or 'production licence area' at a rate of 40% of the taxable profits derived from the recovery of all petroleum in the project, including:
- crude oil
- shale oil
- sales gas
- natural gas
- LPG, and
The taxable profit of a project is calculated as follows:
Taxable profit = Assessable receipts - Deductible expenditure
Deductible expenditure broadly includes exploration expenditure, all project development, and operating expenditures.
PRRT is self-assessed by the relevant taxpayer. The taxpayer is, in most cases, required to give the Commissioner of Taxation a PRRT return for each PRRT year. PRRT is generally payable by quarterly instalments.
PRRT applies in addition to normal income tax. PRRT payments (including instalments) are, however, deductible for income tax purposes.
Local municipal taxes
Local taxes, including water, sewerage, and drainage charges, are levied based on the unimproved capital value of land and include a charge for usage (e.g. water usage).