Australia - Taxation



The main taxes (personal and corporate income, payroll, and goods and services tax (GST) are levied by the federal government, but the states and municipalities impose other levies. Federal rates are determined in legislation that is foreshadowed in the budget, presented each August; rates apply to the fiscal year beginning in July, except for company tax rates, which apply to the previous year's income.

In July 2000, the Australian government implemented a complete tax system overhaul with the introduction of a 10% GST on most goods and services, with the exception of basic foods, education, health and some other sectors. The GST replaced most sales taxes and was followed in 2001 by a cut in the corporate tax rate to 30% for both public and private firms. Undistributed profits of private firms are taxed at a higher rate. Nonresident companies pay an additional tax of 5%. Both the federal government and states can levy land taxes, and states levy both stamp duties on various documents and payroll taxes. Excise taxes are levied on alcoholic beverages, tobacco products, luxury cars, coal, kerosene, liquefied petroleum gas, and indigenous crude oil.

As part of the new tax system, federal, state, and territorial governments agreed to fund a First Home Owners Scheme (FHOS) to offset the impact of the new GST on first-time home buyers. A grant of A $7000 was made available for first-time purchases of new and existing housing. On 9 March 2001 the grant was extended to contracts entered into before 1 January 2002. In December 2001 the additional grant was extended to June 2002 but reduced to A $3000, but in July 2002, the grant reverted to its original amount of A $7000 as it was again extended.

Personal taxation is levied by the Commonwealth on a sharply progressive basis. The pay-as-you-earn system (called PAYE) is used. As of 2000, individual tax rates ranged from zero on income up to A $6,000 to 47% on income over A $60,001. Social security taxes are included as part of income taxes. Deductions are allowed for dependents, donations, medical expenses, and children's educational expenses, and for payment of life insurance or pension premiums. There is also a pensioner rebate that varies depending on income.

In early 1990, the Australian Taxation Office and the US Internal Revenue Service (IRS) formalized a simultaneous audits agreement to investigate suspected noncompliance with tax laws in both countries.

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