Tax Basics
Introduction to the Australian
Taxation System
April 2016
Presented by Richard Turner CA
Virtuosis
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Disclaimer
• This presentation is not endorsed by Serpell PS
• This presentation is general in nature and does not
amount to providing advice.
• Any views expressed in this presentation on the
interpretation of legislation may not necessarily
agree with the views of the ATO.
• You must not rely on this presentation. You should
seek formal advice for your situation before making
any decisions.
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Agenda
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Overview of Tax system
What income is subject to tax
How the tax law applies to people
Taxation and school banking
Registration and paperwork
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Overview of Tax
• Types of taxes in Australia
• Income tax
• Capital gains tax
• Goods and Services Tax (GST)
• Fringe benefits tax
• Payroll tax, Land tax & Duties tax
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Income Tax
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Tax on income you earn
Paid to Commonwealth of Australia
Administered by Australian Taxation Office
No state income taxes (yet !)
Self Assessment basis
Subject to random audits by ATO
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Types of income
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Examples of Income subject to income tax
Salary & wages
Dividends
Interest
Pensions & allowances
Royalties
Business ventures
Profit on sale of assets
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Types of Tax Payers
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Payers of tax are called “Tax Payers”
Individual
Partnership
Company
Trust
– Family, Trading, Unit
• Superannuation Fund
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Individual Tax Payers
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Depends on tax status
Tax Resident or Non Tax Resident
Temporary Resident
Unrelated to other residency tests
Rules to stop double taxation
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Tax Residency Test
• Ordinary resident test
– Regularly reside in Aus
• Domicile test
- Permanent home is in Aus
- Unless permanent home is overseas
• 183 day
– Present in Aus for at least 183 days in tax year
– Unless permanent home is overseas and
– No intention to take up residence in Aus
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How Tax Residents Are Taxed
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Taxed on world-wide income
Even if income taxed in another country
Tax may be reduced for overseas tax paid
Exception for temporary residents
– foreign income exempt if tests are met
• Eg. Aus Resident pays tax on interest earned in
a HK bank account
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How Non Residents Are Taxed
• Taxed on income earned only in Aus
• Income may be subject to withholding tax
• Withholding tax is a final tax
– no need to lodge tax return
– withholding rates 10 to 15% of income
• Income may be taxed by overseas county
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Tax Rates for Resident Adult
Taxable income
Tax on this income
0 – $18,200
Nil
$18,201 – $37,000
19c for each $1 over $18,200
$37,001 – $80,000
$3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000
$17,547 plus 37c for each $1 over $80,000
$180,001 and over
$54,547 plus 45c for each $1 over $180,000
•Add Medicare levy of 2%
•Add Temporary Budget Repair Levy 2% for taxable incomes over
$180,000.
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Tax Rates for Resident Minor
Passive income Tax rates
$0 – $416
Nil
$417 – $1,307
Nil + 68%* (66% + 2%) of the excess over $416
Over $1,307
47%* (45% + 2%) of the total amount of income that
is not excepted income
•Add Medicare levy of 2%
•Add Temporary Budget Repair Levy 2% for taxable incomes over
$180,000.
•Excepted income includes employment income (taxed at lower rates)
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Taxation of Minors
• Interest income subject to tax
• Subject to high rates of taxation
• Child or parents/guardian can be taxed:
– Depends on who provided the funds
– Depends who uses the funds
– Depends if parents/guardian act as trustees
• Parents taxed if they provide/use funds.
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School Banking
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Primary school child is a minor
Child may receive interest income
Child may register for / provide tax file no.
Interest subject to withholding tax if:
– Over tax exempt threshold
– tax file no. not provided to Bank
– Account held by non tax resident
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School Banking
• Child will need to include income from
interest if:
– Deposits relate to funds belonging to child,
and funds to be used by the child
• Parents will need to include income from
interest if:
– They contribute significant amounts, or funds
used for their purposes
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Registration
• If you earn income above thresholds, or
want to claim back tax withheld:
- Need to lodge a tax return
- Need to lodge by 31 October
- Registered Tax Agents can lodge later
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Registration
• Need to apply for a tax file number
• Available for free from ATO
• If running a business, need to:
– Apply for Australian Business Number (ABN)
– Register for GST
– Register as an employer (PAYG payer)
– Register for FBT if providing staff benefits
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