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As the business world continues to shrink, companies increasingly expand their operations to new locations – and Australia has emerged as one of the most welcoming destinations. Not only does the country provide access to a large consumer base and highly educated and qualified workforce, but its strategic location makes it easier to leverage the growing economies of Southeast Asia. And with a business culture similar to those in the West, multi-national organizations can expand to the region without the typical cultural and language barriers typically encountered.
Despite the advantages, there is one area that can cause confusion for employers expanding to Australia – contending with the country’s complex taxation laws. And with the country introducing several new regulatory changes for 2015, companies looking to employ workers in the country, or those already there, must understand what they can do to comply.
Among the biggest changes was the implementation of increase to the Medicare levy. As of January 2015, employers were faced with a 0.5 percent increase to this tax, with the intention of helping to fund the country’s National Disability Insurance Scheme. As a result, the Medicare levy is now equal to a total of 2 percent of an employee’s yearly salary. The new year also saw the introduction of an increase in the low-income threshold for the levy. Now the lower income limit for families without children has been raised from $33,693 to $34,367, with an increase of $3,156 for each child. At the same time, low income families will continue to remain exempt from these taxes, unless their income increases by more than the consumer price index (CPI).
These changes also impact those at the upper end of the income spectrum. Top earners, or those with income greater than $180,000 per year, must now pay a 2 percent budget repair for every dollar of taxable income. This is a temporary levy that will be in place for three years. Still, employers must ensure they comply with these new regulations and make the appropriate payroll deductions.
Another major change involves the discontinuation of several tax credits, such as the dependent spouse tax offset. The government also abolished the mature age workers tax offset. As this credit was develop to encourage older workers to remain in the workforce, it has been replaced with a new wage subsidy designed to encourage business to hire mature workers. Through this perpetual credit, companies that hire job candidates who are 50 or older and have been receiving income support for at least six months will be eligible for a $3,000 tax credit after the employee’s first six months on the job. They receive an additional $3,000 after one year of employment, $2,000 after 18 months of service and an additional $2,000 after two years, adding up to a maximum of $10,000.
The above are just some of the many regulatory changes introduced by the government of Australia in 2015. What other changes should employers know about? And how they ensure compliance with each of these new laws? Find out in the second part of this series on payroll in Australia.
