The goal of this guideline is to get a quick introduction to the Australian taxation system. The Commonwealth is the federal (or national) government of Australia that can tax all Australian citizens. The Australian tax model is a system of indirect and direct taxes imposed by both the state and Commonwealth authorities, dependent on the type of tax imposed.
Commonwealth taxes – Jurisdiction to tax
The Australian Federal Government has the authority to tax Australian citizens on earnings from global sources and non-residents on income received in Australia alone. Australian law provides detailed rules on the residence to decide if a person or a corporation is tax resident.
Australia also has a method to decide if a sum of income comes from Australia or from another country. In general, income is obtained from the place of work or from a trade or business.
Foreign transactions are generally done on the basis of where the relevant contract is made, but there are often differences in these general rules depending on the circumstances.
Taxable income is usually the net eligible income of the company minus any permissible deductions. If a loss is sustained, it can be rolled forward to coming years, provided that the loss of the forward tests is fulfilled.
Assessable income covers things such as wages, salaries, business income, interest, dividends and rent. Deductions typically cover expenditure incurred in the process of receiving or generating revenue, in addition to a range of particular deductions allowed under the law.
Exemptions for personal or capital costs are not approved. However, if such conditions are met, it is possible for businesses and entities to compensate for damages.
Capital Gains Tax
CGT is levied on income realized from the selling of properties, with special regulations applicable to the accounting of capital gains.
For taxation purposes, the properties subject to CGT are very large and include both intangible and tangible assets. Certain properties, such as automobiles, personal use resources and one main home, are exempted, whereas foreign citizens are entitled to capital gains on only a small number of assets, such as real property.
Capital gains are included in the gross income of the taxpayer and are thus assessed at the applicable income tax rate of each taxpayer.
Goods and Services Tax
GST is a wide-ranging sales tax (similar to the value added tax in other nations) levied on the selling of most products and services in Australia and those brought into Australia.
It is imposed at a standard rate of 10%. Certain resources, such as exports, foods, health and education, are exempt from GST. When buying a product, all customers are expected to pay GST.
Individuals or businesses working in an organization with annual revenue of more than a defined amount are required to be registered for GST purposes.
Excise duties are imposed on tobacco, alcohol, petroleum and fuel products produced in Australia.
If these goods are imported into Australia instead of manufactured or produced in Australia, customs duties shall apply to their importation at a rate equal to the rate of excise duty.
There isalso tax credit like fuel tax credits eligibility of this depends on a range of criteria. Check up on these with your accountant.
Customs duties shall be levied on imported goods into Australia. The customs duty rate is usually about 5% of the ‘customs value’ of products, but this also varies based on the type of goods that are imported.
The import value of the goods shall be calculated as a matter of law, taking into account the form of goods, their country of origin and the purpose of their importation into Australia.