How can an Umbrella Company Help with Contracting in Australia?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Australia. Even better, most are experts in Australian and expat tax law, meaning they’ll also help you optimise your earnings in Australia.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Australia.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Australia, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Australia and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Australia
One of the most consistently challenging aspects of contracting in Australia is complying with the country’s tax system. As well as paying tax in Australia, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Australia
If you’re working in Australia under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Australia for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Australia, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Australia through PAYE is left with the prospect doing everything themselves.
Do you know much about Australian Tax Law? Does Australia have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Australia can range from 0 to 45 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Australia
| When Do You Need to Lodge Your Tax Return? | 1 July - 31 October |
| Tax Filing Deadline | 31 October |
| Can you file it online? | Yes, https://my.gov.au/LoginServices/main/login?execution=e1s1 |
How to File Taxes in Australia as a Contractor
Step 1: Have your Tax File Number (TFN) Ready
If you have not yet applied for a TFN, you can find out how on the Australian Tax Office (ATO) website here(link is external).
Step 2: Create a myGov Account
If this is your first time filing a tax return, you are required to create a myGov account. You can do so here(link is external).
Step 3: Link Your myGov Account to the ATO
Call the ATO on 13 28 61 and enter your TFN and date of birth when requested. Select 1 at the prompt to get your unique linking code. The code expires after 24 hours. Sign into myGov, select ‘Services’ from the navigation bar, and select ‘Australian Tax Office’ under ‘Link a service’. Select ‘I have a linking code’ and following the instructions as prompted.
Step 4: Access myTax
You can access myTax by logging into your myGov account here(link is external). Click ‘Australian Taxation Office’ under ‘Your services’ on the home page.
Step 5: Enter the Relevant Information
Within myTax, you will be asked to:
- Confirm your contact and financial institution details; and
- Answer a series of tick-box questions regarding income, investments, government payments and deductions.
Some of the information above may already be selected or filled in based on information provided to the ATO by your employer, banks, private health insurance fund or other government agencies (e.g. Centrelink). It is recommended that you file taxes in early August because this is when the ATO typically receives this information.
MyTax will generate a tax return once you have answered all the relevant questions. You can use the Add/Edit buttons to add or edit pre-filled information.
Step 6: Lodge Taxes
Before you lodge your taxes, myTax will estimate your refund or amount owing. Confirm your bank account details, check that the information you are declaring is correct, and click ‘Lodge’.
Tax Figures in Australia
| Currency | Australian Dollar (AUD) | ||||||||||||||||||||||
| Tax-free Threshold in Australia | AUD18,200 | ||||||||||||||||||||||
| Income Tax Rates |
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| Notes | Rates for Residents and Non-Residents: Different employment income rates apply to residents and non-residents (specified in the table above). Medicare Levy: A Medicare levy of 2% applies to most residents. An additional Medicare levy surcharge of between 1 – 1.5% applies to higher income tax payers who are not covered by health insurance for private patient hospital cover. Working Holiday Makers: Special tax rates apply to working holiday makers i.e. individuals holding a temporary working holiday visa or a work and holiday visa in Australia. The first AUD37,000 of income (from all sources) is taxed at 15% with the balance taxed at ordinary rates. |
Tax Residency in Australia
When do you become a tax resident in Australia
You become a tax resident in Australia when:
- You have a contract of employment in Australia and you are in the country for more than 6 months;
- Your domicile is in Australia (unless you have a permanent place of abode outside Australia);
- You have been in Australia for at least 183 days in the income year (unless your usual place of abode is outside Australia and you do not intend to reside in Australia); or
- You are an ‘eligible employee’ under superannuation legislation for Federal public servants.
You become a temporary resident in Australia when:
- You have been granted a temporary visa under the Migration Act 1958;
- You are not an Australian resident within the meaning of the Social Security Act 1991; and
You do not have an Australian spouse within the meaning of the Social Security Act 1991.
Does the 183 day rule apply in Australia
Yes
Am I taxed on my global income in Australia
Residents are taxed on their worldwide employment income. Non-residents are taxed on their Australia-sourced employment income only.
Can you set up your own Limited Company in Australia?
| How long does it take to set up | 3 days |
| How much does it cost | AUD469 |
| Is it easy? | Starting a Business Rank: 7/190 (Source: World Bank) |
Tax Calculator in Australia
If you are a contractor and want a calculation on your tax and net retention in Australia, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Australia
Contractors in Australia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. An Australian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Australian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Australian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Australia
We work with numerous umbrella companies in Australia, many of whom are experts in tax and immigration laws. If you have any questions about tax in Australia, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Australian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Australia but without the overhead of directly dealing with the Australian tax authorities. Get in touch with us today for some reliable advice on tax in Australia!
A Contractor’s Guide to Work Permits in Australia
Immigration is one of the primary concerns for any contractor hoping to start working in Australia. Permanent employees will find it easy to get their Australian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Australian work permit, known more commonly as the TSS work visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Australia is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
Can Work Permit be Processed in Country?
The visa that the employee is currently on would determine if they will get a bridging visa to remain in country. If the applicant is in Australia and holding a valid visa when the TSS visa application is lodged, they will automatically be granted a bridging visa that will allow them to remain in Australia until their TSS visa is finalised. Once approved, they would NOT need to depart Australia and re-enter on the visa. If the applicant is outside Australia when the application is lodged, they would need to remain outside Australia until the visa is approved.
Work Permit Application Process
There are three steps to apply for the TSS:
- Sponsorship Application by Employer
- Nomination Application for a Skilled Position by the Employer
- Visa Application by the Employee/Worker
There is fairly long list of documents required to apply for the TSS including:
- Job Description
- Completed Department of Immigration Questionnaire
- Copy of Educational Degree(s)
- Proof of Work Experience and References (2 or 5 years depending on visa length)
- Passport
- Health Insurance Documents
- Criminal Background Check
The application typically will be approved in 1-4 weeks if all the requirements are met.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Australia (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Australia. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Australia and match contractors with the right company for them. If you’ve already secured a contract in Australia, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
