The Australian Tax System
The Australian tax system can seem very complicated but the basic things you need to know are dealt with in this article, including how income tax, the Goods and Services Tax (GST) work, what a tax return is, and when and where to file it.
Taxation in Australia
The Australian Taxation System is far too complex to explain in detail here but, broadly, it is administered by the Australian Taxation Office
(or ATO) and is paid on both your income and the goods and services you buy. The Australia tax year runs from July 1 to June 30.
Before you begin working in Australia you might consider applying for something called a Tax File Number
, which is issued by the ATO. It’s not essential to get one, but you’ll pay more income tax if you don’t.
Taxation is used to pay for things like Government-funded services, the operation of Government itself and the health and welfare system. How much income tax you pay depends on how much you earn. The Goods and Services Tax (or GST) is similar to the VAT in place in some countries and is a flat 10 per cent, paid at the point of sale on goods and services purchased.
There are also other taxes explained on the ATO website, including Fringe Benefits Tax.
Personal Income Tax
It is necessary to pay income tax to the Government in Australia. The rate you pay depends how much you earn and the tax brackets often change as they are set by the Government of the day, according to the nation’s budgetary requirements. Check out the latest ATO tax brackets
to get an idea of what you will pay.
Income tax will normally be deducted from your pay directly by your employer. The ATO website also has a calculator
to help you work out your tax rate. Part of the amount deducted from your income is for something called the Medicare Levy
. This pays for the free (or heavily discounted) public health system in Australia.
Australians who pay income tax must fill in a tax return at the end of the tax year. This means filling in a form with all your earning details – and information about any work-related expenses on which you can claim your tax back – to the ATO. This can result in a refund if you have paid too much tax.
Most people who are only earning wages and therefore have a simple tax return prefer to do it themselves using either the ATO’s online e-Tax
, or a printed TaxPack form.
People with more complicated tax returns – perhaps those who own also have income from rental properties, trusts, shares or other investments – are likely to pay a tax agent, or accountant, to do their tax return.
Goods and Services Tax (GST)
The GST is similar to the VAT in many countries and has been in place since 2000. It is currently charged at 10 per cent of the purchase price on any good or service sold in Australia, except for some foods, which are exempt. You can find more information on the GST on the GST Australia
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