The Australian income taxation system is the lifeblood of the revenues for the country. Income tax is levied on three sources of individuals earning in the country. These are personal earnings, which is the salaries and wages of an individual, business income or revenues earned by companies and capital gains or taxes from transactions involving capital in the country.
All these income sources account for sixty six percent of federal government’s revenue and more than half of the total revenue for the three government organs, namely the executive, legislative and judicial branches of government.
For those income by individuals, the tax rate imposed upon them is progressive, meaning the higher the income is, the greater the levied tax applicable. When an individual earns Aus$6,000 a year or less, no tax is levied on the individual. The highest rate applicable to an individual is at 45% of revenue. The tax is withheld at source, meaning the employer or business would deduct the applicable tax on the income and then remit the same to the government office. Each taxpayer is given a nine-digit Tax File Number to specify the payments made as tax of the individual.
Company revenues are taxed at a flat rate of thirty percent on all earnings for each fiscal year. This is applied through the dividend imputation system. This is done through the generation of franking credits that are then applied to the dividends earned by the corporation.
As for capital gains taxes, the tax becomes applicable only when the gain is realized. This tax applies to individual and corporate taxpayers because of the acquisition of an asset and the seller of the asset would then be taxed for the income received as a result of the exchange of the asset.
The financial year or tax year in Australia runs from July 1st of the year to June 30th of the following year. The taxes are collected by the Australian Taxation Office, which is a specific organ of the Australian government.
The income tax is applied to the taxable income of an individual entity. These are essentially deductions that the government exacts on its citizens, both the individual and the artificial sense, on the earnings during a particular period or transaction.
All these taxes are applicable not only because they are citizens of the country, but also because one is a resident of the country. This means even non-residents who earned income while in the country is still subject to one or all of the forms of the taxation applicable. The test of residency for taxation purposes would be if the individual makes contributions to the superannuation fund for more than half a year, have domicile in the country or they spend considerable time in the country.