Tuesday, May 5, 2020

The Tax Law in Australia

Question: Discuss the tax law in Australia. Answer: Tax is the money earned from income of citizens and is paid by the citizens of a jurisdiction to their government for various purposes. In Australia, tax is paid by both individuals and companies ( Lehmah et al, 1989). The importance of tax collection in Australia include that tax collection aids in the fair redistribution of wealth in the state and second, raises revenue that is used to provide for the various public services such as free health care and salaries for government employees. Resident and non residents are differently. There are test set up to determine if a tax payer is a resident or not. For an individual, the first test is be an Australian resident, second is not a citizen but has been present in the country for more than 183 days in the financial year or not a citizen but been present in the country for an aggregate of more than 122 days in three consecutive years. For a corporation, it is considered resident if it is incorporated in the country, if it is not incorporated in Australia but it is run in the country or if it is listed as a resident by the government of Australia. Residency is important to tax payers. Resident tax payers pay less tax rates compared to non residents. Another difference is that residents are liable for capital gains tax while the non residents are liable only on real property (McMullan, 1992). In Australia, tax was introduced during the colonization period in 1788 by the first governor. The first taxes was the import taxes imposed first on wine and beer and later on all luxurious goods so as to cater for the orphans and to aid in the completion of the Sydney's first goal. Other taxes introduced by the colonial government included the wills tax and the stamp duty. During the First World War, federal income tax was introduced. The government thought taxation as a good way to generate income to cater for the expenses required during the war. Tax Administration Act was adopted in 1953. Australian constitution mandates the Common wealth with exclusive, concurrent and residual powers to impose taxes (Boden, et al 2010). In relation, the constitution also contain various provision such as that the laws made by common wealth have to be approved by the two houses of parliament that protects the state and the public from the powers given to the common wealth creating checks and balances. There are legislations that govern tax law such as Income Tax Assessment Act and the Income Tax Rates Act. There are various types of taxes in Australia. They are levied by the citizens to the three levels of government. There are the local, state and federal governments in Australia each with its role in tax collection. The taxes are then paid either on a progressive scale or on a flat rate. Progressive scale tax administration means that the rate of tax paid from income increases as the income increase. The more the income, the more the tax to be paid. On the other hand, flat rate means that the same rate applies to all irrespective of the amount ( Thuronyi, 2003). There are several types of taxes in Australia. To start with, is the personal income tax which accounts for about 67% of the federal government's revenue (Tomasic et al, 2002). This is a classification of taxes based on the tax payer as they are taxes paid by individuals for personal income. Personal income tax is paid on a progressive scale. Income tax is collected from the income of individuals. These kinds of taxes include income taxes which are the most significant taxes in Australia and are collected by the federal government. The body mandated to collect such tax is the Australian Taxation Office. Withholding tax is a form of tax collection whereby the tax is deducted from the source and the Australian Taxation Office collects it from the employer. Other personal income taxes include, the capital gains tax in which net capital gains are added to the taxable income then taxed in trusts capital gains tax shifts to the beneficiary while in a partnership, the partners are taxed separately and not as a partnership. An exemption is allowed for goods owned since 20th September 1985 when the tax was introduced. the death duty and the partnerships or trust taxes. The second types of income taxes are the corporate taxes. These are taxes paid by corporations for the income they make. The mode of payment here I a flat rate. Both resident and nonresident corporations are taxed. Another tax is the goods and services tax. This is tax paid for the value added on goods and services. The tax was introduced in the year 2000. However, the law provides for some goods and services that are exempted and one do not have to pay taxes for such.Property taxes are levied by state governments and are paid for income earned from owning property, departure tax is also known as the passenger movement charge it is levied on all passengers leaving the country. Luxury car tax is levied on businesses that sell luxurious and expensive cars. Payroll taxes are levied by the state governments in Australia on the wages and or salaries of the tax payers, inheritance tax is tax levied by the government for inherited property. The person who inherits the property pays the tax. Fringe Benefits Tax is a kind of tax collected by the Australian Taxation Office to some people on non monetary benefits that they enjoy. Fuel taxes are taxes levied on the commonly used fuels in Australia, and the custom duties are taxes levied on imported goods such as perfume and alcohol Shome, 1995). In conclusion, taxation in Australia is efficiently and easily understandable. Australia is known for its low tax burden compared to other developed jurisdictions. It is for this reason that I urge that the taxation is efficient. Also necessary institutions have been put in place to ensure taxation in the country runs smoothly both for the citizens and the government. The tax system is in accordance to the cannons of a good tax system that are simplicity, convenience, equality and certainty References. Lehman, G. J., Coleman, C, F. (1989). Taxation law in Australia. Butterworth-Heinemann. Thuronyi, V. (2003). Comparative tax law. Kluwer Law International. McMullan, R. (1992). Parliamentary debates senate hansard. Boden, R., Killian, S., Mulligan, E., Oats, L. (2010). Critical perspectives on taxation . critical Perspectives on Accounting 21(7), 541-544. Tomasic, R., Bottomley, S., Rob McQueen.(2002) Corporations law in Australia. Federation Press. Shome, P. (Ed). (1995). Tax policy handbook. International Monetary Fund.

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