Expats, non-residents and foreign workers sure to see their tax burden grow
For every action, so goes Newton’s third law, we can expect an equal and opposite reaction. The 2012 Australian federal budget introduced last month offers ample corroboration for the continuing validity of this basic principle.
We mentioned in the first part of our budget 2012 recap how low and middle income families would largely benefit from the tax compensation package designed to mitigate the dollars-and-cents impact of the carbon tax on the daily life of every Australian.
It should come as no surprise then that for every winner it seeks to relieve the budget offers its fair share of losers who will see their potential tax liability bloom in the coming financial years.
Crested at the top of that unlucky list are working holidaymakers, non-resident employees, expatriates, and Australians living away from home for work purposes. The new budget goes at their pocket-book in a three-pronged approach that is bound to leave them shell-shocked.
Marginal tax rates:
The first, dramatic change goes into effect on July 1st of this year and strikes at the personal income tax rates currently active for non-residents regardless of whether the income is earned from work in Australia or from rental property they own.
Up to now, those earning less than $37000 have benefited from a relatively less onerous marginal tax rate of 29%.
They will now be corralled with their better remunerated colleagues – those whose income fell above the $37K threshold but below $80000 – and see their earnings taxed at a new 32.5% marginal rate.
Simply put, a working holidaymaker who had earned, say, $20000 last year and paid a total of $5800 in Australian tax – remember that non-residents are not entitled to the tax-free threshold – will now have to fork out $6500, or $700 more than the previous amount. A nice little bump!
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