Norfolk Island tax exemptions to end in 2016

Norfolk Island tax exemptions to end in 2016

The current self-governing status of Norfolk Island will end from 1 July 2016. Under the changes, residents of Norfolk Island, who are Australian citizens, will be given the same access to government services and entitlements as those residing on the mainland and other external territories. Additionally, Norfolk Island residents will be required to pay taxes, including all personal and business taxes, but not the GST. However, the Island’s residents will also be entitled to social security payments, Medicare and the Pharmaceutical Benefits Scheme. Access to these benefits is currently denied for local residents.

The Tax and Superannuation Laws Amendment (Norfolk Island Reforms) Bill 2015 has received Royal Assent and effective from 1 July 2016:

    • removes an income tax exemption available to Norfolk Island residents, companies and trustees on income sourced from Norfolk Island and outside Australia; and
    • removes the full exemption from the Medicare levy for residents; and
    • applies transitional arrangements to the capital gains tax liabilities of resident entities; and
    • removes superannuation guarantee exemptions that apply to employers and employees in relation to work performed on Norfolk Island; and
    • establishes transitional arrangements which will phase in the superannuation guarantee over the next 12 years; and
    • extends the mainland social security, immigration, and health arrangements to Norfolk Island; and
    • extends the dividend imputation system to Norfolk Island resident companies.

The individual marginal tax rates that will apply from 1 July 2016 will be as follows:

Taxable Income Tax on this Income
0 to $18,200 Nil
$18,201 to $37,000 19c for each $1 over $18,200
$37,001 to $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 to $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 47c for each $1 over $180,000

Medicare levy is currently levied at 2% of taxable income (above certain thresholds) and applies in addition to the tax rates advised above.

Additionally the Temporary Budget Repair Levy will be levied at 2% of taxable income in excess of $180,000 and will be applied in addition to the tax rates advised above for the period 1 July 2014 through to 30 June 2017.

If you are impacted by the changes and would like to discuss further, please contact our office on 07 54740711.