Understanding Australian Taxes: Part 1

Are you ready to lodge your 2013-2014 income tax returns? Each year, you most likely lodge your taxes and either wait for your refund or pay your tax liability. Although you pay tax on a daily basis, have you ever asked yourself why you even lodge your taxes in the first place?

To get a basic understanding of the tax code in Australia, Australian Tax is here to help. First, you’ll need to understand the key elements of taxation within the country. These elements include the following;
1. The major forms of taxation
2. Government spending and levels of Australian government
3. The politics surrounding Australian taxation.

The Major Forms of Taxation
Understanding the basic forms of taxation will help to explain where your tax money goes and what it’s used for. The different methods on how revenue is collected by the government can be divided into seven different categories.

The 7 Forms of Taxation
These major forms of taxation include the following;
1. Income taxes
Australia’s largest form of income is from income taxation. Income taxes are placed on the three following groups;
A. Capital Gains: this income tax is on any “asset sold or otherwise disposed of”
B. Corporations: this income tax is calculated at a flat 30% tax
C. Individuals: Based on a progressive scale by income distribution

2. Goods and Services: a tax of 10% if placed on most goods and services

3. Property: those who own either personal or commercial use property are subject to a property tax. .

4. Excise: tax on vehicles by the litre

5. Payroll: a tax placed on businesses and companies based on earnings

6. Fringe benefit: a tax collected to support fringe benefits

7. Superannuation: taxes withdrawn from an individual’s pension

Unlike some other countries, the central government gets most of its revenue (67% percent) from the income tax managed by the Australian Taxation Office (ATO).

For all, taxable income is found after applying any possible deductions to gross income. For individuals, this taxable income is a progressive while there’s a flat tax rate in place for businesses.

It’s pretty clear that each of the seven types of taxation in place are served to a certain group. Even though you may understand the seven forms of taxation, it’s also good to know where the money goes the different levels of government involved.

Once you understand how your taxed and why, you’ll get a better understanding on why you’re lodging your taxes. Either way, you’ll have to lodge your taxes. Click the phrase “Continue Reading” to learn more about taxes.  Get started today with Australiantax!

Photo via Jim Bowen on Flickr