Tax advisory & planning services in Australia.

Australia taxes companies at either 25% or 30% depending on whether they qualify as a base rate entity. A company qualifies at the lower 25% rate if its aggregated turnover is below AUD 50 million and no more than 80% of its assessable income is base rate entity passive income, which includes interest, rent, royalties, dividends and net capital gains.

Aggregated turnover includes revenue from related entities across the group, not just the Australian entity. Foreign-owned subsidiaries that form part of large multinational groups will typically be taxed at 30% even where their standalone Australian turnover is below the threshold.

Australian resident companies are taxed on worldwide income. Non-resident companies are taxed only on Australian-sourced income. For a full overview of rates, incentives and deductions, see our corporate income tax guide.

A foreign company without an Australian entity may still be subject to Australian tax if its activities create a permanent establishment (PE) here. Under domestic law and most of Australia’s double taxation agreements, a PE includes:

• A fixed place of business such as an office or branch
• Substantial equipment or machinery used in Australia
• A construction or installation project of sufficient duration
• A dependent agent with authority to habitually conclude contracts on behalf of the foreign company

Where a PE exists, Australia taxes only the profits attributable to it. Where no PE exists and the foreign company is resident in a treaty partner country, Australian tax on business profits generally does not apply. Foreign companies from non-treaty countries are taxable on Australian-sourced income regardless of PE status. Preparatory and auxiliary activities such as storage, display and information gathering do not create a PE.

Foreign companies entering Australia typically choose between registering a branch or incorporating a local subsidiary. Both are subject to the same corporate tax rate and Australia imposes no branch remittance tax on profits sent overseas.

A subsidiary is an Australian tax resident and can access the franking credit system. Fully franked dividends paid to a foreign parent carry no withholding tax obligation. A branch is a direct extension of the foreign parent, which remains legally liable for Australian operations.

Key structuring considerations include thin capitalisation rules, which limit debt deductions for foreign-owned entities to 30% of tax EBITDA under the fixed ratio test, transfer pricing obligations on intra-group transactions, and the availability of any applicable double taxation agreement. For a detailed comparison, see our branch office vs subsidiary guide.

Australia requires all cross-border transactions between related parties to be priced on an arm’s length basis under Division 815 of the Income Tax Assessment Act 1997, aligned with OECD Transfer Pricing Guidelines. Documentation must be prepared contemporaneously and available at the time of lodging the tax return.

Australia follows the OECD three-tier documentation framework. A local file is required for all entities with international related-party dealings. A master file and country-by-country reporting are both required where the global group has consolidated revenue of AUD 1 billion or more. Penalties for non-compliance can reach 75% of the tax shortfall for reckless or intentional misstatements, and contemporaneous documentation significantly reduces that exposure.

Australia imposes withholding tax on certain payments made to non-residents. Default domestic rates and applicable treaty rates are as follows:

• Unfranked dividends: 30% default, reduced to 5% to 15% under most treaties
• Interest: 10% default, reduced to 10% under most treaties
• Royalties: 30% default, reduced to 5% to 10% under most treaties depending on payment type

Fully franked dividends are exempt from withholding tax entirely under Australian domestic law, making profit repatriation through franked dividends the most tax-efficient method where sufficient franking credits exist.

To apply a treaty rate, the foreign recipient must be tax-resident in the treaty partner country and provide evidence of residency to the Australian payer before payment is made. Notable countries without a treaty include Hong Kong, the UAE and Brazil, meaning default domestic rates apply to those structures and withholding tax reduction through treaty access is not available. For country-specific treaty coverage, see our double tax agreements guide.

Fringe benefits tax (FBT) is payable by employers on certain non-cash benefits provided to employees in connection with their employment. Common benefits subject to FBT include company vehicles, car parking, entertainment, expense reimbursements and low-interest loans.

The FBT rate is 47% and the FBT year runs from 1 April to 31 March. Employers must assess taxable fringe benefits, maintain appropriate records and lodge FBT returns, generally by 21 May following the end of the FBT year. A minor benefits exemption applies to infrequent benefits valued below AUD 300. For a full walkthrough of the return process, see our fringe benefits tax return guide.