Taxation in Australia
Taxable income is computed in broadly the same way for individuals
and businesses. Once assessable income is calculated,
allowable deductions (losses, essential outgoings and some
capital payments) are deducted to arrive at the taxable income
on which tax is charged.
Profits
Company profits are taxable under an imputation system at a flat rate of 30%.
Income Tax
If you draw a salary as a director or employee of your business,
you will be liable for personal income tax. Beyond the tax-free
threshold, you will be taxed according to marginal rates of
taxation.
Tax Rates 2006 - 2007
Taxable income |
Marginal Rates of Taxation |
$0 – $6,000 |
Nil |
| $6,001
– $25,000 |
15c
for each $1 over $6,000 |
$25,001
- $75,000 |
$2,850 plus 30c for each $1 over $25,000 |
$75,001
– $150,000 |
$17,850 plus 40c for each $1 over $75,000 |
Over
$150,000 |
$47,850 plus 45c for each $1 over $150,000 |
The
above rates do not include the Medicare
levy of 1.5% which is payable if you are entitled to
public healthcare. |
Double Taxation Agreements
Australia has a number of Double Taxation Agreements with
a number of other countries. These agreements mean that, in
most cases, tax is imposed only by the country of residence
of the taxpayer. However, the country in from which the
income originates may impose some withholding taxes on dividends, interests
and royalties. You will generally be considered a resident
of Australia for tax purposes if you do not have a permanent
place of abode outside Australia and you spend 183 days or
more in any one tax year in Australia.
Capital Gains
Capital gains arising from the disposal of assets are, in
most cases, treated as income and subject to Capital Gains
Tax (CGT). The rate of CGT may be reduced where the asset
has been held longer than 12 months before disposal.
Goods and Services Tax (GST)
GST is charged at a flat rate of 10% and is levied on the supply
of goods and services that are connected with Australia. There
are some exemptions in relation to the supply of certain goods
and services.
GST is essentially a value-added tax, which means that tax
is paid at each step along the chain of transactions involving
the goods or services until the end user is reached. It is
the consumer who ultimately bears the tax.
Registered suppliers can claim an input tax credit (a GST
refund) for the GST component of goods and services acquired
in the course of carrying out their business.
Stamp Duty
Stamp Duty is levied on a wide range of transactions, but
not on share transactions.
Customs Duty
Customs Duty is payable at the time goods enter Australia
and is generally levied on the customs value of the goods,
which may not be the same as the sale price.
Taxation responsibilities as an employer
As an employer, you are obliged to withhold tax from your employee’s
income and make monthly payments to the Australian Taxation
Office.
You are also required to provide a minimum level of superannuation
support for your employees (currently 9% of salary).
Tax may also be payable in respect of fringe benefits offered
to employees, such as company cars and medical benefits.
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