Australian Tax System
The Australian financial year runs from 1 July to 30 June and by 31 October in each year, a tax return must be lodged declaring income earned during the previous financial year.Tax is paid on all income earned whether from within or outside Australia e.g. income from overseas rental properties or dividends earned on shares held outside Australia must be declared.
Certain tax deductions are allowed and some countries have tax treaties and arrangements with Australia so it is always best to have an expert prepare your Tax Return to ensure that your allowable deductions are maximised.
Individual tax rates are as follows:
These rates apply to individuals who are residents of Australia for tax purposes:
$6,001-$35,000: 15c for each $1 over $6,000
$35,001-$80,000: $4,350 plus 30c for each $1 over $35,000
$80,001-$180,000: $17,850 plus 38c for each $1 over $80,000
$180,001 and over: $55,850 plus 45c for each $1 over $180,000
If you are a non-resident for the full year, the following rates apply:
$0-$35,000: 29c for each $1
$35,001-$80,000: $10,150 plus 30c for each $1 over $35,000
$80,001-$180,000: $23,650 plus 38c for each $1 over $80,000
$180,001 and over: $61,650 plus 45c for each $1 over $180,000
A sole trader pays tax at the applicable individual rate as part of their personal tax return.
Companies pay a flat rate of 30%.
All Australian residents who earn an income from employment must obtain a Tax File Number (TFN). A TFN is a unique identifying number issued to individuals and organisations to assist with the administration of taxation and other financial matters e.g. lodging a tax return, opening a Bank Account, joining a superannuation fund, applying for an Australian Business Number.
For migrants and temporary visitors to Australia who have a visa that allows them to be employed, a TFN must be obtained before they can be paid a salary.
A TFN can be applied for on-line at http://www.ato.gov.au/ and follow the links to Individual' then Apply for a Tax File Number'.
In addition to income tax, most Australians are required to pay a Medicare levy of 1.5% of annual taxable income. The requirement for individuals to pay the levy, which funds the Medicare health scheme, is assessed when each year's tax return is lodged. The levy, if required to be paid, is deducted from any tax refund due.
Non-residents are not required to pay the Medicare levy.
If you are aged between 18 and 70 years and earn at least A$450.00 per calendar month before tax, your employer is obliged to pay an amount equivalent to 9% of your ordinary earnings into a compliant Superannuation Fund or retirement savings account. These forced savings cannot generally be accessed until the contributing member retires from the workforce or becomes an invalid. In the event of death, the Superannuation proceeds are generally paid to nominated beneficiaries unless the benefit is defined' in which event payment ceases upon death.
Compliant Superannuation Funds are managed by Trustees and whilst each Fund has its own set of rules, all Funds must comply with government regulations.
Retirement Savings Accounts operate under similar rules to Funds and are generally available through approved financial institutions.
In addition to income tax, there are various other forms of taxation imposed by both the Commonwealth government and the various State and Territory governments. Commonwealth taxes are imposed Australia wide whilst State and Territory taxes are applicable only to the State/Territory in which the tax is imposed. Examples of State taxes are Land Tax, death duties, stamp duty on the purchase of real estate and congestion levies.
Other Commonwealth taxes include excise duties, Goods and Services Tax (GST) and Capital Gains Tax (CGT).
GST affects all Australian and visitors. GST is a broad based consumption tax charged at the rate of 10% on the sale or supply of most goods and services and other items in Australia.
For GST purposes, a sale or supply includes a sale of goods, lease of premises, equipment hire, providing advice, export of goods. A purchase includes the acquisition of goods and services such as trading stock, a lease and consumable. Perishable items of food are exempt from GST whilst processed foods attract GST. The sale of second hand' real estate is also exempt from GST.
If you are in a business that has an annual turnover greater than $75,000.00 you must register for GST by obtaining an Australian Business Number (ABN). As an individual, if you earn investment income e.g. from property investments, shares etc greater than $75,000.00 you will also have to obtain an ABN. An ABN can be obtained on-line at http://www.ato.gov.au/. Follow the links to Businesses' then to Apply for an ABN'.
CGT is not a separate tax as such but forms a component of income tax and is assessed on any capital gain made in a given year. Capital gain is basically the difference between what you paid for an asset and what you received for it. It generally is imposed only on certain assets acquired after 20 September 1985. Not all assets e.g. your principle place of residence are subject to CGT.
It is always recommended that the services of a financial advisor/accountant be obtained to ensure that you are fully aware of your financial and taxation obligations and entitlements before making any major decisions of a financial nature. Immagine Australia is able to provide you with appropriate referrals.