Australian Taxation and SuperannuationThe Australian Taxation System The taxation system in Australia is based on self-assessment, this means that the Australian Taxation Office (ATO) uses the information you provide on your tax return and any related schedules and forms to work out your refund or tax liability. Taxes that are paid to the Australian Government are used to provide services to the community such as health, education, defense, road and railways, social security and welfare. An income year (financial year) is a period of 12 months that commences on 1 July. At the end of the income year, you have until 31 October to lodge your income tax return (unless your tax return is prepared by a registered tax agent). Tax File Numbers (TFN) A TFN is a unique number issued by the ATO, it is not compulsory to have a TFN, however, if you do not have one you may have more tax withheld than is necessary or be unable to receive government benefits you are entitled to. Taxable income Your taxable income is the income you have to pay tax on. It is the term used for the amount left after you have deducted all the expenses you are allowed to claim from your assessable income. Assessable income – allowable deductions = taxable income Example Diana goes to school and also has a part-time job packing fruit. She earned $6,300 in wages in the last financial year. She bought a pair of boots, a pair of gloves and some overalls to protect herself at work, all of which cost her $250. The costs of protective items are allowable as deductions so Diana can claim these expenses against her income. Diana uses the formula to work out her taxable income: Assessable income – allowable deductions = taxable income $6,300 – $250 = $6,050. The important thing to remember about deductions is that you apply them to reduce the amount of income you pay tax on, you do not deduct them directly from your tax amount. Australian Tax Rates for Residents 2008 - 2009 $1 – $6,000 Nil These tax rates do not include the Medicare levy Medicare Levy Medicare is the scheme that gives Australian residents access to health care. To help fund the scheme, resident taxpayers are subject to a Medicare levy. Normally, the ATO calculate your Medicare levy at the rate of 1.5% of your taxable income. A variation to this calculation may occur in certain circumstances. The Medicare levy can be adjusted, in some cases individuals may be exempt from the levy or it may be reduced for people on low incomes. Individuals and families on incomes above the Medicare levy surcharge thresholds, who do not have private patient hospital cover, may have to pay the Medicare levy surcharge. This surcharge is in addition to the Medicare levy. It is calculated at the rate of 1% of your taxable income (including your total reportable fringe benefits). Superannuation Guarantee Employers must pay superannuation contributions on behalf of all their eligible employees. This compulsory contribution is called the superannuation guarantee. The aim of the superannuation guarantee is to ensure as many Australians as possible enjoy the benefits of superannuation income when they retire from the workforce. You and/or your employer can put money, called contributions, into a superannuation fund. Superannuation funds are managed by trustees whose responsibility is to ensure your money is invested with care. Each fund has its own rules, but must also follow government rules that are designed to ensure all superannuation is properly managed. These funds are called complying superannuation funds. The superannuation guarantee must be paid into a complying superannuation. Your employer should contribute a minimum of 9% (super guarantee) of your earnings base to a complying superannuation fund. They should do this at least every quarter – or every three months. If you are working in Australia as a temporary resident you may be eligible to claim your superannuation money if:
You may still be able to return to Australia on another visa even if you claim and receive your superannuation money. This payment is called the departing Australia superannuation payment. It is commonly referred to as DASP This payment is not available for permanent Australian or New Zealand citizens because they have the option of retiring in Australia. Goods and services tax (GST) The Goods and Services Tax (GST) in Australia is a Value Added Tax (VAT) levied at a flat rate of 10% on most goods and services, apart from GST exempt items, and input taxed goods and services in Australia. GST was introduced by the Australian Federal Government with the A New Tax System (Goods and Services Tax) Act 1999, taking effect from July 1 2000. The basic premise of the new tax was to broaden the tax base, which was heavily biased toward the provision of services. For GST, a sale or supply includes a sale of goods, lease of premises, hire of equipment, giving advice, export of goods, and supply of other things. A purchase includes an acquisition of goods or services such as trading stock, a lease, consumables and other things. Price tags you see in shops always include GST, so you needn't add anything to the display price. The above information and more can be found at The Australian Taxation Office Website. |