davewolfs

I am hoping that one of you who has worked at a daily rate on contract can comment on how you usually file your taxes.

I currently live in the United states and my average tax rate is around 26% (and I am in a high tax bracket). It would be ideal if I could maintain a tax rate similar to this.

Ideally, what I would like to know if those who are paid contract have their taxes deducted directly from their hourly rate or if you bill your client directly and pay yourself a salary from an individual corporation (whether it be foreign or domestic).

Sorry if I am being scarce on the details, but I am by no means a tax expert and am trying to understand how most individuals are usually paid and what taxes they might be exposed to when doing contract work in Australia (i.e withholding tax + superannuation tax).

Any feedback on your experience with your previous engagements is greatly appreciated.

Dave

Buzzy--Bee

Dave, it depends.

I am a daily rate contractor, but I am "employed" by a "company" that contracts to my eventual employer, so to all intents and purposes I am an employee.

The bloke who sits next to me has his own contracting company, and so pays his taxes in a big lump sum. Unfortunately last year he failed to save tax money monthly so he is now paying off a big bank loan which he had to borrow to pay the tax man!!!

By the way, is

a tax you pay to avoid being haunted?

Buzzy

Geelong Gent

http://www.ato.gov.au/

If you want to operate a company then you will need to obtain an ABN (Australian Business Number) - refer website and look through application it will assist with info. Main point in running a company will be obtaining public liability insurance and monthly/quarterly BAS statements (read up on these)

Employee/Employer tax is deducted via PAYG (Pay As You Go). The tax is forwarded on to the ATO (Australian Tax). At the end of the year you get a tax summary and in most cases you should obtain a tax refund.
Super (compulsory rate set at 9% payable by employer to relevant super fund) is paid by employer quarterly. This is calculated on your normal earnings (ie within normal work hours) and is Australian equivalent of pension saving.

On say $1500 per day it works out about $600 tax or 39%

davewolfs

So as a contractor and on a daily contract rate, I assume your employer simply charges you the required taxes per pay check?

I ran the calculator at:

http://calculators.ato.gov.au/script...xcalc/main.asp

And the rate is approximately 37% But with LAHFA, this might not be so bad.

Could someone confirm if the above tax rate calculator includes the supernatural tax, and if not how much is this tax and do foreigners have to pay it?

davewolfs

I ran $1500 a day through the calculator:

http://calculators.ato.gov.au/script...xcalc/main.asp

And it worked out to around 39%, so with that said, I guess I can assume that this tax rate and the tax rates posted at:

http://en.wikipedia.org/wiki/Income_tax_in_Australia

Include the superannuation tax?

Geelong Gent

There are pro's and con's each side (for employee or for self employed). Research given your own circumstances and aspirations. They do not suit everyone the same.

Super contributions is imposed on the employer not the employee and should not really be called super "tax". On top of the super contributions an employee can make salary sacrificed contributions (ie the amount is deducted from your gross figure, using above example say $500 from $1500 leaving only $1000 of which would now be subject to income tax.) This is going to get longwinded and confusing but super tax is within the super fund and at a rate of 15%. - This is not on your income but that earned by the super fund (or in my case my self managed fund).

Please get independent financial/tax advice because there are numerous advantages and disadvantages based on your personal circumstances.

davewolfs

I will, but for the time being could you please confirm if the 39% rate or the above tax calculator include the 9% mandatory super contribution.

Dave

Geelong Gent

39% does not include the 9%

davewolfs

WOW!

Do non-residents (or someone on a 457 VISA) have to pay this tax as well?

ukecadet

WOW !.Thats what I thought when I saw you were paying only 26%,you lucky bugger.Income tax is the tip of the iceberg,there are plenty of others as well.Here,s my latest,a terrorist levy on my house insurance.What's all that about .I have to go,just spotted someone near my wheelie bin,could be Taliban

davewolfs

Yes, the tax fed rates here are very good and I live in a state where there is no state tax.

See the married rates:

http://www.moneychimp.com/features/tax_brackets.htm

ukecadet

I'm shaking my head .The rates are so low.My wife has looked at jobs in ER Departments in the US in the past and thought it was'nt worth moving there because there was'nt that much difference in the rates of pay.After looking at that link,she would be quids in paying less than half the tax she pays here in Aus.We might take a trip to the USA.

davewolfs

Keep in mind that this is FED tax only. It's best to use the calculator at so you can determine your net and if state tax is applicable:

http://www.paycheckcity.com/netpayca...calculator.asp

Just enter 0 for your allowances if both you and your wife are working and you have no children.

Also, if you aren't a resident for the entire year you lose some of the tax break so these rates would probably be higher your first year. Best to consult with a professional.