For many contractors, Australia may seem like a dream destination to live and work, with its diverse population, strong economy and natural beauty. If you would like to seek new clients in Australia and be a part of its work culture, there are several areas to understand before you begin contracting.
This guide will describe your options for getting paid, obtaining work visas and filing taxes. It also covers the criteria for tax residency. Contractors who are new to Australia may need assistance with some of these steps, as it can take some time to fully comply with all the requirements.
How Do I Get Paid as a Contractor in Australia?
As an independent contractor, you are technically self-employed which can present some barriers depending on how you set up your work. Here are your options for getting paid in Australia:
Contract as Your Own Foreign Limited Company/Self-Employed
This method would only be viable for very short contracts in Australia. In this case, payment would be remitted to your foreign account. You will still need to ask your client to sponsor a work permit for you, and that may be more than they are willing to do in some cases. Even if you can obtain a short-term business visitor visa, most gainful work activity is not permitted with that type of visa.
Setup Your Own Australian Business as a Self-Employed
With this option, you would set up an Australian limited company and second yourself as an employee, much like in other countries. It involves registering your proprietary limited company, applying for an Australian Business Number, and demonstrating sufficient funds. It takes about 3 days and costs AUD469.
There are a couple of risks involved and you would also have to handle all of your own tax withholding, contributions and filing requirements, just as an employer would, and sponsor your own work visa.
Use an Australian Umbrella Company
The simplest option for a long term contract is to work through an Australian umbrella company. The umbrella company would help you with the following
- Set up the local contracts
- Sponsor a work visa
- Facilitate payments
- Withhold taxes and contributions and
- Generally, handle all of the administrative details.
Do I Need a Visa to be a Contractor in Australia?
You will need some type of visa to contract in Australia, depending on how long you plan to stay. If you are under 35 years, you might qualify for the working holiday visa. This is valid for 12 months and allows you to do any type of work.
Otherwise, you will have to apply for a standard work visa, usually the TSS 482. You will need a sponsor for this visa and will have to meet the skills requirements. It can be valid for up to 2-4 years but may take as long as four months for approval. Sponsorship options include:
Limited Company: Self-Sponsorship
If you set up your own Australian limited company, you can apply to sponsor yourself for a visa. Once you have your company registered you will apply for approval as a Standard Business Sponsor, and Nomination of the position. After approval, you can file the application for a 482 visa.
Umbrella Company Sponsorship
If all of that seems daunting, you may prefer to engage an umbrella company to sponsor your visa, and they will take care of all the paperwork. This also allows you to work for multiple clients during the visa validity period.
Client/Employer Sponsorship
If you will be contracting long term with a single client, they may be willing to sponsor your visa. But you might be viewed as more of an employee in that case, and you could run the risk of misclassification as a contractor.
Tax Residency in Australia
If you work in Australia on a contract for more than six months and do not have a regular abode of residence outside of Australia, you will be deemed a tax resident. If you don’t plan to reside permanently in Australia and have another domicile, you might be able to avoid residency status.
Tax residents are taxed on their worldwide income, and non-residents are only taxed on their Australian income. There is a significant difference, and tax residents may need to look to a tax treaty to avoid double taxation.
How to File Taxes in Australia
Tax rates in Australia are different for tax residents and non-residents. The non-resident tax rate that would apply to most contractors (who have a foreign abode) is a flat 32.5% on all earnings up to AUD 90,000, with slightly higher rates on amounts above that. Non-residents are not required to pay Medicare tax. Residents use a progressive tax rate that applies to income of AUD 18,200 and higher.
The tax year is from July 1 to June 30. Tax returns can be filed anytime from July 1 to the final deadline of October 31 and can be filed online. Here is a guide on how to use the online filing system.
Step 1: Firstly, 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.
Step 2: Create a myGov Account
If this is your first time filing a tax return, you are required to create a ‘myGov’ account on the website.
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 in to 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. 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: Last but not the least, 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’.
How Contractor Taxation Helps Contractors in Australia
Contractor Taxation is ready to assist you with contracting in Australia, and we offer verified umbrella companies that can take care of all the paperwork and compliance for contracting. When you consider the other options of either a DIY approach or convincing your clients to help you, using an umbrella company can be a practical and efficient choice.
Please contact us with your questions about contracting in Australia so we can help you get started working ‘down under’.
