Hi there, I'm starting to receive royalty payments (small modest amounts) as part of a patent I developed a number of years ago and wanted to ask, how are the royalties treated from a tax perspective? Royalties paid solely from an Australian institution
I was asked to provide an ABN but as I don't have a company or business, I believe they would need to withhold 46.5%. Does this mean during tax return I get refunded the difference between that and my marginal tax rate?
Thanks for your reply, could you elaborate, would you need more details?
I don't wish to provide tax or financial advise advice over the internet. What I will say though is that everyones financial circumstances are different and on this occasion it might pay to see an accountant for 15 minutes.
Fair enough thanks Muzeeb, any advice on what are good firms? H&R Block?
Have a look on the ato website, if you can't find anything give them a call I have found them helpful in the past. You could pay an accountant but if the royalties are small then it may not be worth it.
Thanks so much
Ask your head of state, he must know a thing or two about royalty payments by now.
Hi yes you should get tax refund of the difference.
They shouldn't be withholding tax at all if you give them a TFN. However you will get the money back on your tax return.
It's not a share investment so TFN is of no use.
A lot of things require a TFN on taxation. Like wages.
Royalties are taxed at 30% if you're a foreign residence and 0% if you're an Australian tax resident. So showing a TFN and declaring you're an Australian resident should be enough that they pay the royalties without taxation.
They have it wrong in that they're treating it like a supplier without an ABN thus the high rate. It's different for royalties.
how are the royalties treated from a tax perspective
treated as income
I believe they would need to withhold 46.5%. Does this mean during tax return I get refunded the difference between that and my marginal tax rate?
This is correct if it withheld.
Just get yourself a sole traders ABN and do it as part of your tax return.
I make a stack off royalties, they are treated just like an income stream, which you can mitigate tax paid by having an ABN ;)
Speak to an accountant, as there are ways of potentially reducing the tax paid, depending on your income situation!
Thanks so much!
If you did it as a hobby or not in business, you can fill in this form and give it to them!
https://www.ato.gov.au/forms/statement-by-a-supplier-not-quo…
Thank you kindly, would you know tax implications of this, just my marginal? Thanks a lot
Well if it's a hobby then not really taxable, but otherwise you could report at other income. Yes at your marginal tax rate plus Medicare levy.
Just get an ABN.
Invent and patent a device that allows you to communicate with the ATO remotely. Oh wait.
Possibly. It depends. Maybe.