Amendments to the Income Tax Regime for Individuals

In accordance with provisions of Decree No. 394/2016, annual deductions on Income Tax for individuals are increased to the following amounts as from January 1, 2016:

a. Non- taxable income (only applicable for permanent residents): A$ 42,318.

b. Family charges provided the individuals are permanent residents, reliant on the tax payer and do not have an annual net income higher than A$ 42,318.

1. Spouse: A$ 39,778
2. Son/daughter, stepson/daughter aged under 24 years, or unable to work: A$ 19,889 (for each one of them). 
3. Direct descendants (grandson/great-grandson) under 24 years old or unable to work; ascendants (father, mother, grandfather, grandmother, great-grandfather, great-grandmother, stepfather and stepmother); brother or sister under 24 years old or unable to work; father in law/ mother-in-law, son or daughter-in-law under 24 years old or unable to work: A$ 19,889 (for each one of them).

c. Special deduction for third category income provided the individual works personally in the activity or company and for fourth category income –labor income–: A$ 42,318.

It is important to clarify that, according to Section 23 of the Income Tax Law, the amount of the special deduction increases 3.8 times as regards income referred to in Section 79, subsections: a) performance of public services and gains derived from protocol expenses; b) individual services rendered in a labor relationship; and c) retirement, pensions, early retirement or subsidies derived from personal services and services from representatives of cooperative companies. In these cases, the final amount of the special deduction is A$ 203,126 (A$ 42,318 + A$ 42,318 x 3.8).

Furthermore, Decree No. 2142/2013, in force since September 1, 2013, was annulled. By the referred Decree the special deduction was increased (Section 23, subsection c of the Income Tax Law) so that individuals whose highest remuneration and/or gross monthly income accrued between January and August of 2013 was not higher than A$ 15,000 were excluded from taxation. The mentioned Decree also increased by 20% the annual deductions of Section 23 for individuals whose highest remuneration and/or gross monthly income accrued between January and August of 2013 ranged from A$ 15,001 to A$ 25,000. 

Finally, according to General Resolution No. 3831 issued by the Federal Tax Authority, duly published in the Official Gazette on February 25, 2016, in those cases in which due to the new amounts of income tax deductions, the withholding agent should return retentions made in excess, the refund shall be made with the first settlement subsequent to February 25, 2016. On the other hand, the Resolution establishes that the retentions that shall be practiced for January and February 2016 on the individuals subject to income tax due to the annulment of Decree No. 2142/2013 shall be made in monthly equal installments starting with the first settlement subsequent to February 25, 2016.