• Australia is a Federation of States
• Pre WW1 income tax was levied by the individual states
• During WW1 the federal government first levied
Income Tax
• Between WW1 & WW2 uniform income tax was developed but still gathered by the states
• 1942 due to national emergency states handed income tax powers to federal government
• After WW2 the Federal Govt refused to hand powers back to the states

• All Levels of government raise taxation.
– Local Councils
– State Governments
– Federal Governments

• Most of the tax raised is by the way of rates
• Other taxes may be in the way of levies & fees

• Payroll Tax
• Tax levied on wages paid
• Payable where yearly payroll is greater than
$600 000
• Payroll Tax Rate = 6%

• Employee or contractor?
• Provisions were introduced to tax contracts where the contractor works and operates exactly like an employee.
• ATO has guidelines to determine their own status as a contractor, these guidelines only apply to 'Pay As You Go (PAYG)’

–
st
–
–

• Tax is payable on aggregated land value owned above the threshold x $0.016
• Threshold in 2009 = $368 000
• Land Value = $500 000 less threshold
$368 000
$132 000 x $0.016
• Land Tax Pay $2112

• Stamp Duties on Transfer of Property
• Mortgage Duties
• Vehicle Registration & Transfer

• Income Tax
• Company Tax
• Capital Gains Tax
• Fringe Benefits Tax
• GST

• Tax on non cash benefits given to employees
• Paid by employer
• Is a separate tax to income tax
• FBT Tax year 31 st March
• FBT Rate = 46.5% and levied on grossed up rate

• May include such items such as
– allows an employee to use a work car for private purposes
– gives an employee a cheap loan
– pays an employee’s gym membership
– provides entertainment by the way of free tickets to concerts
– reimburses an expense incurred by an employee, such as school fees, and
– gives benefits under a salary sacrifice arrangement with an employee.

• If GST is claimed grossing up multiplier is
2.067
• Employer pays for Private Health Insurance of employee valued at $3000
• Taxable FBT Amount $3000 x 2.067 = $6201
• FBT Tax Payable $6201 x 46.5% = 2883.47
• Benefit Payable is now FULLY tax deductible from Income Tax

• Payable where car is available for Private use.
• The following types of vehicles (including fourwheel drive vehicles) are cars:
– motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more)
– all other goods-carrying vehicles designed to carry less than one tonne, and
– all other passenger-carrying vehicles designed to carry fewer than nine occupants

• Taxable FBT amount =
Value of Vehicle x Statutory % X Days Available
365
Statutory % is determined by distance travelled
<15000km = 26%
15001 to 24999km =
25000 to 40000km =
> 40000km =
20%
11%
7%

• A Toyota Camry is provided valued at $35 000
1. Travels 13000km for the year
$40 000 x 26% x 1 = $10 400 x 2.067 (Grossing)
= $21 496 x 46.5%
= $9996.01
2. Travels 43000km for the year
$40 000 x 7% x 1 = $2800x 2.067 (Grossing)
= $5787.60 x 46.5%
= $2691.23
3. Travels 27000km for the year
$40 000 x 11% x 1 = $4400x 2.067 (Grossing)
= $9094.80 x 46.5%
= $4229.08
Note All cost related to the vehicle private or business are now tax deductible incl. depreciation.

• Capital gains tax (CGT) is the tax you pay on any capital gain you make on the sale of an assett
• Capital Gain/Loss is basically the difference in purchase and sale price
• It is not a separate tax, merely a component of your income tax.
• You are taxed on your net capital gain at your marginal tax rate

• real estate – for example, a holiday home
• shares in a company
• units in a unit trust or managed investment fund
• collectables – for example, jewellery, and
• personal use assets – for example, furniture.

• Capital Gain/Loss = Sale Price – Cost Base
• Cost Base includes
– The Original Purchase Price
– Items that are not immediately tax deductable
• Agent Fees
• Solicitor Fees
• Council Rates for Holiday House – note if it is an investment property earning income, rates would be

• It is not a tax in itself but forms part of your assessable income tax
• Assessable amount is subject to discounts if kept for 12 months
– Individuals 50 % discount
– Trusts 33 1/3 % discount
– Companies 0% Discount

• House Purchased in 2001 for $300 000
• House Sold in 2008 for $700 000
– Cost Base =
$300 000 Purchase Price
– $ 15 000 Agent Fee on Sale
– $ 5 000 Legal Fees
– $ 15 000 Stamp Duty
Cost Base = $335 000
• Capital Gain = $700 000 - $335 000 = $365 000
• Assessable Income = $365 000 x 50%
= $182 500

• House Purchased in 2001 for $300 000
• House Sold in 2008 for $700 000
– Cost Base =
$300 000 Purchase Price
– $ 15 000 Agent Fee on Sale
– $ 5 000 Legal Fees
– $ 15 000 Stamp Duty
Cost Base = $335 000
• Capital Gain = $700 000 - $335 000 = $365 000
• Assessable Income = $365 000 (No discount)

• Capital Gains form part of Assessable Income
• Capital Losses aren’t allowable deductions from Assessable Income
• Capital Losses can only be used to offset
Capital Gains

• Principal Place of residence
• an asset you acquired before 20 September
1985
• cars, motorcycles and similar vehicles
• compensation you received for personal injury
• a personal use asset – for example, items such as boats, furniture, electrical goods

• Progressive Tax levied on assessable income
• Income is “World Wide Assessable Income”
• Assessable Income = Gross Income –
Allowable Deductions

• Income will include worldwide source of
– Salary & Wages
– Payments made under contract
– Bank Interest
– Dividends
– Rent Received
– (There are many other sources of Income)

• Any cost incurred in running your business
• Items that are not allowable
– Fines
– Capital Costs (These must be depreciated)
– Personal Items (E.g. Non Protective Clothing)

Taxable Income 08-09
$0 -$6 000
$6 001 - $34 000
$34 000 - $80 000
$80,001 – $180,000
$180,001 and over
Tax Payable
Nil
15c for each $1 over $6,000
$4,200 plus 30c for each $1 over $34,000
$18,000 plus 40c for each $1 over $80,000
$58,000 plus 45c for each $1 over $180,000
Determine Assessable Income and Tax Payable for Individual
Money Received
Contract Income $95 000
Bank Interest $1 500
Income Protection $3 700
Rent Received $9 500
Costs for the Year
Fuel for work Vehicle
Income Insurance
Materials
$ 3 000
$ 2 500
$15 000
Workcover Licensing
Work Cover Fine
Mortgage Payments
$ 120
$ 1 500
$12 000 ($2500 Int)
Ute Purchase 1/7/xxxx $35 000

Contract Income
Bank Interest
Income
Determine Assessable Income
$ 95,000.00
$ 1,500.00
Fuel
Cost for the Year
Income Insurance
$
$
3,000.00
2,500.00
Income Protection
Rent Received
Gross Income
$
$
$
3,700.00
9,500.00
109,700.00
Materials
Licenses
$ 15,000.00
$ 120.00
Fines Not Allowable
Mortgage Payments Interest Only
Ute
$4,500
Depreciation

Diminishing Value
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Opening
Vaue
$ 45,000.00
$ 35,357.14
$ 27,780.61
$ 21,827.62
$ 17,150.28
$ 13,475.22
$ 10,587.67
Effective
Life x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) =
Depreciation
Amount
$ 9,642.86
$ 7,576.53
$ 5,952.99
$ 4,677.35
$ 3,675.06
$ 2,887.55
$ 2,268.79
Depreciated
Value
$ 35,357.14
$ 27,780.61
$ 21,827.62
$ 17,150.28
$ 13,475.22
$ 10,587.67
$ 8,318.88
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Opening
Vaue
$ 6,428.57
Prime Cost Method
Effective
Life x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) =
Depreciation
Amount
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
Depreciated
Value
$ 6,428.57
$ -

Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Straight Line Method
Opening
Vaue
$ 45,000.00
$ 42,333.33
$ 39,666.67
$ 37,000.00
$ 34,333.33
$ 31,666.67
$ 29,000.00
$ 26,333.33
$ 23,666.67
$ 21,000.00
$ 18,333.33
$ 15,666.67
$ 13,000.00
$ 10,333.33
$ 7,666.67
Effective Depreciation
Life
15
Amount
$ 2,666.67
15
15
15
15
$
$
$
$
2,666.67
2,666.67
2,666.67
2,666.67
15
15
15
15
15
15
15
15
15
15
$
$
$
$
$
$
$
$
$
$
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
Depreciated
Value
$ 42,333.33
$ 39,666.67
$ 37,000.00
$ 34,333.33
$ 31,666.67
$ 29,000.00
$ 26,333.33
$ 23,666.67
$ 21,000.00
$ 18,333.33
$ 15,666.67
$ 13,000.00
$ 10,333.33
$ 7,666.67
$ 5,000.00

Determine Assessable Income
Income
Contract Income
Bank Interest
$ 95,000.00
$ 1,500.00
Fuel
Cost for the Year
Income Insurance
$
$
3,000.00
2,500.00
Income Protection
Rent Received
Gross Income
$ 3,700.00
$ 9,500.00
$ 109,700.00
Materials
Licenses
Fines
Mortgage Payments
$ 15,000.00
$
Not Allowable
$
120.00
2,500.00
Ute
$4,500
$ 9,642.86
Gross Deductions $ 37,262.86

Taxable Income 08-09
$0 -$6 000
$6 001 - $34 000
$34 000 - $80 000
$80,001 – $180,000
$180,001 and over
Tax Payable
Nil
15c for each $1 over $6,000
$4,200 plus 30c for each $1 over $34,000
$18,000 plus 40c for each $1 over $80,000
$58,000 plus 45c for each $1 over $180,000
Assessable Income = $109 700 - $37 262.86
= $72 437.14
Tax Payable = $4200 + ($72 437.14 - $34 000) x $0.30
= $4200 + $11 531.14
= $15 731.14
Note – Partners pay taxes as individuals

• COMPANY TAX
Companies are taxed at a flat rate of 30% with no tax free threshold
Determine Assessable Income and Tax Payable for Individual
Money Received
Contract Income $95 000
Bank Interest $1 500
Income Protection $3 700
Rent Received $9 500
Costs for the Year
Fuel for work Vehicle
Income Insurance
Materials
$ 3 000
$ 2 500
$15 000
Workcover Licensing
Work Cover Fine
Mortgage Payments
$ 120
$ 1 500
$12 000 ($2500 Int)
Ute Purchase 1/7/xxxx $35 000

Contract Income
Bank Interest
Income
Determine Assessable Income
$ 95,000.00
$ 1,500.00
Fuel
Cost for the Year
Income Insurance
$
$
3,000.00
2,500.00
Income Protection
Rent Received
Gross Income
$
$
$
3,700.00
9,500.00
109,700.00
Materials
Licenses
$ 15,000.00
$ 120.00
Fines Not Allowable
Mortgage Payments Interest Only
Ute
$4,500
Depreciation

Diminishing Value
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Opening
Vaue
$ 45,000.00
$ 35,357.14
$ 27,780.61
$ 21,827.62
$ 17,150.28
$ 13,475.22
$ 10,587.67
Effective
Life x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) = x (1.5/ 7 ) =
Depreciation
Amount
$ 9,642.86
$ 7,576.53
$ 5,952.99
$ 4,677.35
$ 3,675.06
$ 2,887.55
$ 2,268.79
Depreciated
Value
$ 35,357.14
$ 27,780.61
$ 21,827.62
$ 17,150.28
$ 13,475.22
$ 10,587.67
$ 8,318.88
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Opening
Vaue
$ 6,428.57
Prime Cost Method
Effective
Life x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) = x (1/ 7 ) =
Depreciation
Amount
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
$ 6,428.57
Depreciated
Value
$ 6,428.57
$ -

Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
Straight Line Method
Opening
Vaue
$ 45,000.00
$ 42,333.33
$ 39,666.67
$ 37,000.00
$ 34,333.33
$ 31,666.67
$ 29,000.00
$ 26,333.33
$ 23,666.67
$ 21,000.00
$ 18,333.33
$ 15,666.67
$ 13,000.00
$ 10,333.33
$ 7,666.67
Effective Depreciation
Life
15
Amount
$ 2,666.67
15
15
15
15
$
$
$
$
2,666.67
2,666.67
2,666.67
2,666.67
15
15
15
15
15
15
15
15
15
15
$
$
$
$
$
$
$
$
$
$
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
2,666.67
Depreciated
Value
$ 42,333.33
$ 39,666.67
$ 37,000.00
$ 34,333.33
$ 31,666.67
$ 29,000.00
$ 26,333.33
$ 23,666.67
$ 21,000.00
$ 18,333.33
$ 15,666.67
$ 13,000.00
$ 10,333.33
$ 7,666.67
$ 5,000.00

Determine Assessable Income
Income
Contract Income
Bank Interest
$ 95,000.00
$ 1,500.00
Fuel
Cost for the Year
Income Insurance
$
$
3,000.00
2,500.00
Income Protection
Rent Received
Gross Income
$ 3,700.00
$ 9,500.00
$ 109,700.00
Materials
Licenses
Fines
Mortgage Payments
$ 15,000.00
$
Not Allowable
$
120.00
2,500.00
Ute
$4,500
$ 9,642.86
Gross Deductions $ 37,262.86

Assessable Income
Tax Payable
= $109 700 - $37 262.86
= $72 437.14
= $72 437.14 x 30%
= $21731.14
Compare Against Individual
Tax Payable = $4200 + ($72 437.14 - $34 000) x $0.30
= $4200 + $11 531.14
= $15 731.14

•immediately write off most depreciating assets costing less than $1,000 each (lowcost assets)
•pool in a general small business pool and deduct at the rate of 30% most other depreciating assets with an effective life of less than 25 years, such as motor vehicles and computers
•pool in a long-life small business pool and deduct at the rate of 5% most depreciating assets with an effective life of 25 years or more, such as wharves and cement silos,
•deduct most newly acquired assets at either 15% or 2.5% in the first year, regardless of when they were acquired during that year.

• The tax system that was introduced 1 st July
2000
• GST Introduced
• Australia Business Numbers introduced
• PPS Tax repealed
• Group Tax replaced with PAYG witholding

• Required for every business registered for the
GST. Sole Trader, Partnerships & Companies
• Payments to business without ABN require
48.5% to be withheld.
• Must be quoted on “TAX INVOICES”
• If you have greater than $50 000 turnover you must register for the GST

• Tax Invoices must be issued for sales > $82.50
GST Inclusive (2009)
• the words ‘tax invoice’ stated prominently
• the name of the supplier
• the ABN of the supplier
• the date of issue of the tax invoice
• a brief description of the goods or services sold, and
• the total price of the sales (including GST).

• the words ‘tax invoice’ stated prominently
• the name of the supplier
• the ABN of the supplier
• the name of the recipient
• the address or ABN of the recipient
• the date of issue of the tax invoice
• the quantity of the goods or the extent of the services sold
• a brief description of the things sold, and
• the total price of the sale (including GST

• What is a recipient created tax invoice?
• If a business makes a sale, it is required to issue a tax invoice to the purchaser, for the sale, within 28 days of it being requested.
• However, in some situations, the price of goods or services is calculated by the purchaser and not the seller (for example, a motor vehicle dealer who accepts a trade-in vehicle and calculates the selling price once they have assessed the value of the vehicle).
• In certain situations, the purchaser is able to issue a tax invoice to the seller once a price has been worked out. This kind of tax invoice is referred to as a recipient created tax invoice (RCTI).

• Method by which wages & salary earners pay tax
• Employer deducts from gross pay from employees at prescribed rates

• System for reporting and paying tax
• This is where the business can report & pay
– Tax withheld from employees
– An estimate of the companies accrued income tax
– GST Collected
– Any other taxes collected or witheld

• The Goods and Services Tax (GST) in Australia is a Value Added Tax (VAT) on the supply of goods and services in Australia.
It was introduced by the 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

• Form submitted to the ATO to report tax obligations
• Including
– GST
– PAYGW
– PAYGI
– Wine Equalization Tax (WET) &
– Luxury Car Tax (LCT)

• Everyone registered for the GST must complete
• If your turnover is less than $20 million you can lodge BAS quarterly
• If your turnover is less than $1 million you can use the Cash Accounting Method

Income (GST Inclusive)
1/01/2009
15/01/2009
$ 6,000.00
$ 3,562.00
29/01/2009
12/02/2009
26/02/2009
12/03/2009
26/03/2009
$ 8,000.00
$ 4,500.00
$
$
$
6,000.00
3,200.00
8,000.00
Income $ 39,262.00
Costs Incurred
Parking Permit postage
$ 32.00
$ 1.30
Pay Bunnings stationary
Postage tolls
$ 1,250.00
$ 62.35
$
$
47.97
160.00
tolls computer
USB Drive
USB Drive tolls
Parking
Drop Saw
Tools
$ 80.00
$ 1,500.00
$ 16.00
$ 16.00
$
$
80.00
$ 8.00
1,250.00
$ 78.38
tolls
Materials
Subcontract
Carpenter
$ 80.00
$ 250.00
$ 2,500.00
Total Expenses $ 7,412.00
Employee Wages
Amount Paid
Tax Withheld
$ 15,000.00
$ 5,000.00

Gross Sales
Does it include GST?
YES
Totals
Date
1/01/2009
15/01/2009
29/01/2009
12/02/2009
26/02/2009
12/03/2009
26/03/2009
Value of Work
$ 5,454.55
$ 3,238.18
$ 7,272.73
$ 4,090.91
$ 5,454.55
$ 2,909.09
$ 7,272.73
GST
$ 545.45
$ 323.82
$ 727.27
$ 409.09
$ 545.45
$ 290.91
$ 727.27
Invoice
$ 6,000.00
$ 3,562.00
$ 8,000.00
$ 4,500.00
$ 6,000.00
$ 3,200.00
$ 8,000.00
This is the front page of the form
$ 35,692.73
$ 3,569.27
$ 39,262.00

Gross Sales
Alternate Method
Does it include GST?
No
Date
1/01/2009
15/01/2009
29/01/2009
12/02/2009
26/02/2009
12/03/2009
26/03/2009
Sales
$ 5,454.55
$ 3,238.18
$ 7,272.73
$ 4,090.91
$ 5,454.55
$ 2,909.09
$ 7,272.73
GST
$ 545.45
$ 323.82
$ 727.27
$ 409.09
$ 545.45
$ 290.91
$ 727.27
Sales (GST Incl)
$ 6,000.00
$ 3,562.00
$ 8,000.00
$ 4,500.00
$ 6,000.00
$ 3,200.00
$ 8,000.00
Totals $ 35,692.73
$ 3,569.27
$ 39,262.00
This is the front page of the form

Costs Incurred
Parking Permit postage
$ 32.00
$ 1.30
Pay Bunnings stationary
Postage tolls
$ 1,250.00
$ 62.35
$
$
47.97
160.00
tolls computer
USB Drive
USB Drive tolls
Parking
Drop Saw
Tools
$ 80.00
$ 1,500.00
$ 16.00
$ 16.00
$
$
80.00
$ 8.00
1,250.00
$ 78.38
tolls
Materials
Subcontract
Carpenter
$ 80.00
$ 250.00
$ 2,500.00
Total Expenses $ 7,412.00
Capital Purchases – Purchases that you are required to depreciate.
Generally assets greater than $1000

Costs Incurred
Parking Permit postage
$ 32.00
$ 1.30
Pay Bunnings stationary
Postage tolls
$ 1,250.00
$ 62.35
$
$
47.97
160.00
tolls computer
USB Drive
USB Drive tolls
Parking
Drop Saw
Tools
$ 80.00
$ 1,500.00
$ 16.00
$ 16.00
$
$
80.00
$ 8.00
1,250.00
$ 78.38
tolls
Materials
Subcontract
Carpenter
$ 80.00
$ 250.00
$ 2,500.00
Total Expenses $ 7,412.00
Non Capital Purchases – All other items including assets less than $1000

Back of the BAS
Statement
Employee Wages
Amount Paid $ 15,000.00
Tax Withheld $ 5,000.00
Note – Subcontractors are treated as non capital suppliers on previous slides

Gross Sales less GST
Installment Rate given by ATO
You can increase the rate
PAYG Tax Payable

$39 262 /11
$7412 / 11

GST Credit
Tax Payable
Amount Owing/Refund