Australian Tax – A Brief History
The first taxes in Australia were raised to help pay for the completion of Sydney’s first gaol and provide for the orphans of the colony. Import duties were put on spirits, wine and beer and later on luxury goods. When the first Governor, Governor Phillip, arrived in New South Wales in 1788, he had a Royal Instruction that gave him power to impose taxation if the colony needed it.
After 1824 the Government of New South Wales raised extra revenue from customs and excise duties. These were the most important sources of money for the colony’s Government throughout the 19th century. Taxes were raised on spirits, beer, tobacco, cigars and cigarettes. These taxes would vary between States or colonies as they were then called. This still persists today.
How does the Australian Tax System work?
There are many forms of taxation in Australia. Individuals and companies in Australia may be required to pay taxes or charges to all levels of government: local, state, and federal governments. Taxes are collected to pay for public services and transfer payments (redistribution of economic wealth).
Different forms of taxes in Australia:
- Income Taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office. This is the most significant source of revenue in Australia. The state governments do not impose income taxes, and have not done so since World War II. Unlike some other countries, personal income tax in Australia is imposed on an individual and not on a family unit. Individuals are also taxed on their share of any partnership or trust profits to which they are entitled for the financial year.
- Goods and Services Taxes (GST):The Federal Government levies a value added tax of 10% on the supply of most goods and services by entities registered for Goods and Services Tax (GST). This tax system was introduced in Australia on 1 July 2000 by the then Howard Liberal government. A number of supplies are GST-free (e.g., 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.
- Capital Gains Tax (CGT) in the context of the Australian taxation system applies to the capital gain made on disposal of any asset, except for specific exemptions. The most significant exemption is the family home. Rollover provisions apply to some disposals, one of the most significant is transfers to beneficiaries on death, so that the CGT is not a quasi death duty. CGT operates by having net gains treated as taxable income in the tax year an asset is sold or otherwise disposed of.
- Corporate taxes: Companies and corporations pay company 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).
- Property taxes: Local governments are typically funded largely by taxes on land value (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.
- Excise taxes: The Federal Government imposes excise taxes on goods such as cigarettes, petrol, and alcohol.
- Customs duties are imposed on many imported goods such as alcohol, tobacco products, perfume, and other items. Some of these goods can be purchased duty-free at duty free shops.
- Luxury Car Tax is payable by businesses which sell or import luxury cars, where the value of the car is above $57,466, or $75,375 for fuel-efficient cars with a fuel consumption of less than 7L per 100km.
- Payroll taxes are a tax paid by employers to Australian state governments. The tax amount is assessed on the basis of wages paid out by an employer. Payroll taxes in Australia are different in each state.
If you would like to learn more about how Australian Tax could affect you or your business please contact us.
For an appointment, or a confidential discussion of your needs, please contact our Tax Accountants today, or call 1300 627 829.
