International Taxation: Basics of Taxation in Australia By Shalini Passi


As per the quote of Peter F. Drucker
“Knowledge has to be improved, challenged, and increased constantly, or it vanishes.”

So, with this thought I wrote an article on International Taxation which is Basics of Taxation in Australia.

If you are keenly interested in knowing about basics of taxation in Australia, a country which contributes almost maximum of its revenue from taxes, then this article is surely going to help you in enhancing your knowledge.

In this article we are going to discuss about how taxes are levied in Australia and what is the financial year and the types of tax levied.

Some facts regarding Australian Taxation Scheme.

Income Taxes as well as GST Revenue are collected by the Federal Government. Income Tax is the most significant source of revenue in Australia.

A tax file number (TFN) is a unique identifier issued by the Australian Taxation Office (ATO) to each taxpaying entity — an individual, company, superannuation fund, partnership, or trust.

The TFN consists of a nine-digit number which may be recorded or used only for specifically authorised tax-related purposes.

Q. When the financial year starts and end?

A. The financial year starts from 1st July and ends on 30th June.


Q. What is the due date for filing of income tax return?


A. The due date for filing of Australian tax returns is 31St October after the end of the tax year. And if 31st October falls on weekend, then due date will be the next business day after 31st October. However, if the return is lodged by a registered agent, the return can be lodged after 31st October.


Q. What are the consequences of not filing a return within due date?


A. Late lodgement penalty amounting to $180 for the first 28 days after the lodgement date which further increases by $180 after each subsequent 28 days period, upto a maximum of $900 is levied and also includes prosecution in extreme circumstances.


Q. What are the various types of taxes levied?


A. The various types of taxes levied are:

  • Personal income taxes
  • Goods and Services taxes
  • Capital Gains tax
  • Corporate taxes
  • Trustees liability taxes
  • Excise taxes includes Luxury Car Tax, Fuel Taxes
  • Property Taxes
  • Custom duties
  • Payroll Taxes
  • Passenger Movement Charge
  • Fringe Benefits tax
  • Superannuation taxes
  • Inheritance tax

Q. What is the name of the office which deals with tax in Australia?

A. Australian Taxation Office deals with taxes in Australia.


Q. What are the types of income to be declared in return?


A. The types of income need to be declared are employment income, super pensions and annuities, Government payments and allowances, investment income(including interest, dividends, rent and capital gains tax), Business Partnership and trust income, foreign income, other income- including compensation & insurance payments, discounted shares under employee share schemes and prizes and awards.


Q. What are the various types of record that need to be kept by the assessee?


A. The various types records that are needed to be kept by the assessee are as follows: -

  • Income statements or payment summaries
  • Statements from your bank and other financial institution showing the interest earned
  • Dividend statements
  • Summaries from managed investment funds
  • Receipts or invoices for equipment or asset purchases and sales
  • Receipts or invoices for expense claims and repairs
  • Contracts
  • Tenant and rental record

Q. What is the duration for which such records are to be kept by the assessee?

A. These records are to be kept for a period of 5 years from the date return is lodged.


Q. What information you need to lodge in case of Individuals?


A. The information that needs to be lodged are as follows: -

  • Bank account details
  • Income statement or payment summaries from all of the employers
  • Payment summaries from Centrelink
  • Receipts or statements for the expenses claimed as deduction
  • Spouse’s income (if you have one)
  • And the details of private health insurance if you have

Q. How income tax is calculated?

A. Tax is calculated at taxable income. Assessable income less allowable deductions is equal to taxable income.

Gross Tax Payable=Taxable Income multiplied by tax rates.

Net Tax Payable= Gross Tax Payable Minus Tax Offsets.

Amount owing or refund= Net Tax Payable plus Medicare levy minus tax credits and refundable offsets.

The Medicare levy surcharge (MLS) is levied @1%, 1.25% or 1.5% is levied in addition to Medicare levy on Australian taxpayers who do not have any appropriate level of private patient hospital cover and earn above a certain income.

Q. What is the difference between tax offsets and deductions?

A. Deductions reduces a taxpayer’s assessable income while tax offsets directly reduce the amount of tax payable. And the amount of offsets for which you are eligible depends on the income as it is based on income slots for which amount of offsets along with certain percentage of income are given.


Q. What is income test?


A. It is a criterion used to determine the eligibility for the number of offsets and benefits which can reduce the amount of tax to be paid.

Current Tax Rates for Companies is 30% while for the “base rate” (small) entity tax rate is 27.5%.

Current Tax Rates for Residents

Income thresholds

Rate

Tax payable on this income

$0 – $18,200

0%

Nil

$18,201 – $37,000

19%

19% for each $1 over$18,200

$37,001 – $90,000

32.5%

$3,572 plus 32.5% of amounts over $37,000

$90,001 – $180,000

37%

$20,797 plus 37% of amounts over $90,000

$180,001 and over

45%

$54,097 plus 45% of amounts over $180,000

Source: ATO

Current Tax Rates for Foreign Residents

Income thresholds

Rate

Tax payable on this income                                                              

$0 – $90,000

32.5%

32.5% of amounts over $0

$90,001 – $180,000

37%

$29,250 plus 37% of amounts over $90,000

Over $180,000

45%

$62,550 plus 45% of amounts over $180,000

Source: ATO

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