- Taxation in Australia
Personal income taxes
Only the federal government imposes income taxes on individuals, and this is the most significant source of revenue for this level of government. The state governments do not impose any income taxes, and have not done so since
World War II. Income taxes in Australia are progressively imposed with higher income earners paying a higher percentage than lower income earners.
Where income is earned in the form of capital gains on prescribed assets, only half of the gain is assessable for
Capital Gains Tax(CGT) purposes if it was held for at least 12 months. If the assets was held for less than 12 months, then it is fully assessable for CGT purposes. A person's principal place of residence however is exempt from CGT.
The sliding scale rates for the 2008-09 Tax year are:
0% From 0 to 6,000
15% From 6,001 to 34,000
30% From 34,001 to 80,000
40% From 80,001 to 180,000
45% Above 180,000
Medicare (National Health Insurance) is charged at a flat 1.5% rate. If you earn more than 100,000 and do not have private health insurance you are liable for an extra 1% of your taxable income. This extra charge is known as the Medicare Levy Surcharge.
The Low Income Tax Offset is an offset applicable in full for those earning up to $30,000. Since the 2007-08 Budget it has been increased $600 to $750. The offset will phase out for those earning over $30,000 at 4c for every dollar of taxable income over $30,000 thus the threshold ends at $48,750. A side effect of the increase of the Low Income Offset is the amount income per child that can be diverted to children though family trusts has also been increased.
Individuals are also taxable in their own name, for their share of any partnership or trust profits for the financial year.
Companies and corporations pay tax on profits. Unlike personal income taxes which use a progressive scale, corporate taxes in Australia are calculated at a flat 30% rate. Tax is paid on corporate income at the corporate level before it is distributed to individual shareholders as dividends. A tax credit (called a
franking credit) is provided to individuals who receive dividends to reflect the tax already paid at the corporate level (a process known as dividend imputation).
Goods and Services taxes
The Federal Government levies a multi-stage tax of 10% on the supply of most goods and services by entities registered for Goods and Services Tax (GST). A number of supplies are GST-free (eg, many basic foodstuffs, medical and educational services, exports), input-taxed (residential accommodation, financial services, etc), exempt (Government charges) or outside the scope of GST.
The revenue from this tax is distributed to the States.
State governments do not levy any sales taxes though they do impose stamp duties on a range of transactions.
Local governments are typically funded largely by property taxes (council rates) on residential, industrial and commercial properties.
In addition, some State governments levy tax on land values for investors and
primary residences of high value.
The State governments also levy stamp duties on transfers of land and other similar transactions.
Fire Service Levies are also commonly applied to domestic house insurance and business insurance contracts. These levies are required under State Government law to assist in funding the fire services in each State.
The Federal Government imposes excise taxes on inelastic goods such as cigarettes, petrol, and alcohol.
State governments impose payroll taxes at varied rates.
There is no inheritance tax in Australia however assets acquired from the estate may become subject to Capital Gains Tax.When you inherit an asset as a beneficiary of the estate of a person who died on or after 20 September 1985, you must keep special records.
If the asset was acquired by the deceased person before 20 September 1985, you need to know the market value of the asset at the date of the person's death and any relevant costs incurred by the executor or trustee. This is the amount that the asset is taken to have cost you. If the executor or trustee has a valuation of the asset, ask for a copy of that valuation report. Otherwise you will need to get your own valuation.
If the asset you inherit was acquired by the deceased person on or after 20 September 1985, you need to know full details of all relevant costs incurred by the deceased person and by the executor or trustee. Request those details from the executor or trustee. Even if you inherit a house that was the family home of the deceased person, you need to keep records of costs paid by the deceased person in case you are not able to claim a full exemption for the house after you inherit it.
Private pensions (known as superannuation in Australia) may be taxed at up to three points, depending on the circumstances: at the point of contribution to a fund, on investment income and at the time benefits are received. In some circumstances, no tax is applicable at all.
The compulsory nature of Australian Superannuation means that it is sometimes regarded as being similar to social security taxes levied in other nations. This is more frequently the case when comparisons are being made between the tax burden of respective nations.
Taxation in Australia is administered at the federal level by the
Australian Taxation Office. Federal GST revenue is notionally given to the states under a distribution formula determined by the Commonwealth Grants Commission.
Constitutional basis of taxation in Australia
Australian Bank Notes Tax Act 1910
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