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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.
Company profits are taxable under an imputation system at a flat rate of 30%.
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 2008 - 2009
|Taxable Income||Marginal Rates of Taxation|
|$0 - $6,000||Nil|
|$6,001 - $34,000||15c for each $1 over $6,000|
|$34,001 - $80,000||$4,200 plus 30c for each $1 over $34,000|
|$80,001 - $180,000||$18,000 plus 40c for each $1 over $80,000|
|Over $180,001||$58,000 plus 45c for each $1 over $180,000|
|NOTE: 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 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 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 & 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 is levied on a wide range of transactions, but not on share transactions.
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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