Taxation in Australia
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[edit] Personal income taxes
See main article: Income tax in Australia
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 2006-07 Tax year are:
0% From 0 to 6,000
15% From 6,001 to 25,000
30% From 25,001 to 75,000
40% From 75,001 to 150,000
45% Above 150,000
Medicare (National Health Insurance) is charged at a flat 1.5% rate. If you earn more than 50,000 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.
Individuals are also taxable in their own name, for their share of any partnership or trust profits for the financial year.
[edit] Corporate taxes
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).
[edit] 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.
[edit] Property taxes
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 taxes on the transfer of property title (stamp duties) and the registration of commercial leases.
Fire Service Levies are also commonly applied to domestic house insurance and business insurance contracts. These levies are required under State Government law to asist in funding the fire services in each State.
[edit] Excise taxes
Both the federal and state governments impose excise taxes on inelastic goods such as cigarettes, petrol, and alcohol.
[edit] Payroll taxes
State governments impose payroll taxes at varied rates.
[edit] Inheritance tax
There is absolutely no inheritance taxes in Australia, although inherited assets may have Capital Gains Tax implications for beneficiaries.
[edit] Superannuation taxes
See main article: Taxation of Superannuation in Australia
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.
[edit] History
[edit] Administration
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.
