AUSTRALIAN TAXES

Chapter 4

Foundations of Taxation Law

 Introduction
• The Commonwealth imposes taxes, as do the six States
and two mainland Territories
• Australia also has over 500 local government authorities,
which levy their own council rates
• At least 125 different taxes levied in Australia, with the 10
largest taxes accounting for more than 90% of all
government revenue
• The majority of these taxes are levied by the
Commonwealth
• Commonwealth also raises the majority of tax revenue
and provides funding to States and Territories

[¶4.1] Foundations of Taxation Law

 History of taxation in Australia
• Colonial taxes
• Customs and excise duties
• Licence fees for gold miners
• Estate duties
• Land tax
• Income tax
• Federation in 1901
• Commonwealth has power to levy taxes
• States lost power to levy customs and excise duties

[¶4.2](a) Foundations of Taxation Law

 Some key years
• 1902 – Customs and excise duties
• 1915 – Income tax
• 1930 – Sales tax
• 1936 – ITAA36
• 1942 – Uniform tax scheme
• 1983 – Medicare levy
• 1985 – Capital gains tax
• 1986 – Fringe benefits tax
• 1997 – ITAA97
• 2000 – Goods and services tax
• 2000 – WET and LCT

[¶4.2](b) Foundations of Taxation Law

 Main Commonwealth taxes
• Income tax
• Temporary budget repair levy (TBRL)
• Medicare levy (ML)
• Medicare levy surcharge (MLS)
• Fringe benefits tax (FBT)
• Superannuation guarantee charge (SGC)
• Excess concessional contributions charge (ECCC)
• Excess non-concessional contributions tax (ENCCT)
• Division 293 tax
• Goods and services tax (GST)

[¶4.3](a) Foundations of Taxation Law

 Main Commonwealth taxes (cont)
• Wine equalisation tax (WET)
• Luxury car tax LCT)
• Customs duty
• Excise duty

[¶4.3](b) Foundations of Taxation Law

 Income tax
• Income tax is payable by taxpayers on their 'taxable
income' for an income year (1 July to 30 June)
• Income tax is payable at different rates depending on the
nature of the taxpayer
• Individuals pay tax at rates that increase progressively
(from 0% to 45%)
• Companies generally pay tax at a flat rate of 30% (or
28.5% if they are SBEs)
• Complying superannuation funds generally pay tax at a
flat rate of 15%

[¶4.3](c) Foundations of Taxation Law

Income tax (cont)
Tax Tax base Tax period Tax rates Taxpayer Legislation

Income Taxable Financial Progressive Income earners ITAA36

tax income year rates (from 0% (eg individuals, ITAA97
to 45% for companies,
individuals) and superannuation ITTPA
flat rates funds) ITA
(generally 30%
ITRA
or 28.5% for
companies and
15% for
complying
superannuation
funds)

[¶4.3](d) Foundations of Taxation Law

 Temporary budget repair levy
• Temporary levy
• Imposes additional income tax on individuals for the
2014/15 to 2016/17 income years
• Charged at a flat rate of 2% on so much of a person’s
taxable income that exceeds $180,000

[¶4.3](e) Foundations of Taxation Law

 Medicare levy and surcharge
• Medicare levy – Payable by individuals on their 'taxable
income' at rate of 2%, subject to thresholds and shading-in
rules
• Medicare levy surcharge – Payable by individuals who do
not have private health insurance and who have 'income
for surcharge purposes' above specified thresholds on
their 'taxable income' and 'reportable fringe benefits total'
at rates of 1%, 1.25% or 1.5%

[¶4.3](f) Foundations of Taxation Law

Medicare levy and surcharge (cont)
Tax Tax base Tax Tax rates Taxpayer Legislation
period
Medicare Taxable Financial Flat rate of 2% Resident MLA
levy income year (subject to Individuals ITAA36
thresholds and (and certain
shading in trustees)
rules)

Medicare Taxable Financial Flat rate of 1%, Resident MLA

levy income year 1.25% or 1.5% individuals MLSFBA
surcharge and (depending on with high
reportable income for income for
fringe surcharge surcharge
benefits purposes) purposes
total

[¶4.3](g) Foundations of Taxation Law

 Fringe benefits tax
• FBT is payable by employers on their 'fringe benefits
taxable amount' for a 'year of tax' (ie 1 April to 31 March)
• FBT rate of tax is 49% (from 1 April 2015)
• Most kinds of benefits (other than salary and
superannuation) provided in respect of employment are
fringe benefits

[¶4.3](h) Foundations of Taxation Law

Fringe benefits tax (cont)
Tax Tax base Tax Tax rates Taxpayer Legislation
period
FBT Fringe FBT year Flat rate of Employers FBTAA
benefits (1 April to 49% FBTA
taxable 31
amount March) FBTACA

[¶4.3](i) Foundations of Taxation Law

 Superannuation taxes
• Superannuation guarantee charge (SGC) – imposed on
employers that fail to provide minimum levels of
superannuation support for their employees, based on the
amount of any shortfall
• Excess concessional contributions charge (ECCC) –
imposed on members of superannuation funds that have
'excess concessional contributions'
• Excess non-concessional contributions tax (ENCCT) –
imposed on members of superannuation funds that have
'excess non-concessional contributions' during an income
year

[¶4.3](j) Foundations of Taxation Law

 Superannuation taxes (cont)
• Division 293 tax – imposed on members of
superannuation funds that are high income earners and
have 'taxable contributions' during an income year

[¶4.3](k) Foundations of Taxation Law

Superannuation taxes (cont)
Tax Tax base Tax Tax rates Taxpayer Legislation
period
SGC Superannuation Quarterly Total individual Employers SGAA
guarantee superannuation
shortfall guarantee SGCA
shortfalls plus
interest and
administration
components

ENCCT Excess non- Financial Flat rate of 49% Superannuation SENCCTA

concessional year fund members
contributions ITAA97

ECCC Excess income tax Financial Fluctuating rate Superannuation ITAA97

arising from year fund members  
excess   SECCCA
concessional
contributions

Division Taxable Financial Flat rate of 15% Superannuation ITAA97

293 tax contributions year fund members  
SSSCCIA
 

[¶4.3](l) Foundations of Taxation Law

Goods and services tax
• GST is payable by entities that make 'taxable supplies' and
'taxable importations'
• GST is charged at the rate of 10% of the value of a taxable
supply or a taxable importation
• Registered entities are entitled to 'input tax credits' for the
GST charged on their 'creditable acquisitions' and
'creditable importations'
• The difference between the GST charged by an entity and
its entitlement to input tax credits for a tax period is
basically its 'net amount' for the period

[¶4.3](m) Foundations of Taxation Law

 Goods and services tax (cont)
Tax Tax base Tax Tax rates Taxpayer Legislation
period
GST Taxable Monthly Flat rate of 10% Suppliers GSTA
supplies and or and GSTTA
taxable quarterly importers
importations GSTIGA
GSTICA
GSTIEA

[¶4.3](n) Foundations of Taxation Law

Wine equalisation tax and luxury car
tax
• Wine equalisation tax (WET) – imposed on assessable
dealings in wine, applied at the last point of wholesale
sale of wine
• Luxury car tax (LCT) – imposed on supply or
importation of luxury cars that have a GST-inclusive
value above the 'LCT threshold‘

[¶4.3](o) Foundations of Taxation Law

 Wine equalisation tax and luxury car
tax (cont)
Tax Tax base Tax Tax rates Taxpayer Legislation
period
WET Assessable Monthly Flat rate of 29% Dealers in WETA
dealings in or of taxable value wine (eg WETIGA
wine quarterly wholesalers)
WETICA
WETIEA

LCT Taxable Monthly Flat rate of 33% Suppliers and LCTA

supplies and or of 10/11th of the importers of LCTIGA
taxable quarterly amount by luxury cars
importations which the car’s LCTICA
of luxury cars LCT value LCTIEA
exceeds the LCT
threshold

[¶4.3](p) Foundations of Taxation Law

 Customs and excise duties
• Customs duty – tax on the importation of goods into
Australia, payable by the importer
• Excise duty – tax on the manufacture of certain products
in Australia, eg:
• Petroleum products
• Crude oil
• Tobacco
• Beer, spirits, alcoholic beverages other than wine

[¶4.3](q) Foundations of Taxation Law

 Customs and excise duties (cont)

Tax Tax base Tax Tax rates Taxpayer Legislation

period
Customs Importation Special Different rates Importers of CA
duty of dutiable rules depending on dutiable goods CTA
goods nature of goods

Excise Production or Special Different rates Producers and EA

duty manufacture rules depending on manufacturers ETA
of excisable nature of goods of excisable
goods goods

[¶4.3](r) Foundations of Taxation Law

 State and Territory taxes
• Payroll tax – imposed on wages (including bonuses,
allowances, superannuation contributions and certain
fringe benefits) provided by employers to their employees
• Land tax – imposed on the taxable value of land owned in
a State, with some exemptions
• Stamp duty – imposed on dutiable transactions, eg:
• Transfers of land
• Transfers of shares in 'land rich' companies
• Insurance policies
• Motor vehicle registrations and transfers

[¶4.4](a) Foundations of Taxation Law

 GST revenue-sharing arrangements
• Commonwealth shares tax revenue with States
• GST revenue allocated to States under various
intergovernmental agreements
• States and Territories agreed that in exchange for
receiving the GST revenue, they would abolish various
'inefficient' taxes

[¶4.4](b) Foundations of Taxation Law

Local government taxes
• Local governments impose municipal rates
• Municipal rates used to pay for services to local residents
(eg rubbish collection, health services, public libraries and
sports and recreation facilities)
• Municipal rates typically levied on value of land in the city
or shire

[¶4.5] Foundations of Taxation Law