LAW6001 Taxation Law: Exploring the History of Income Tax in Australia

This presentation provides a comprehensive overview of the history of income tax in Australia, highlighting major historical landmarks such as the introduction of income tax in Queensland in 1902 and its expansion to the federal level during wartime in 1915. It details the evolution of various...Read More

History of
Australia Income
tax
Presented by

Major historical landmarks for
income tax
• Income tax was introduced in 1902 in Queensland (Australia 2018).
• Since then, many adjustments have been made depending on the
historical event.
• For example, in 1915, during the wartime, income tax was expanded
from territorial or state level to federal level
• Another major adjustment took place in 1942 during the Second World
War
• During this time, Federal government took over raising taxes (Australia
2018).

History of each income tax
categories
• Income tax in Australia covers different tax categories
• Each category of income tax has specific unique history
• The major part of income tax in Australia is individual or personal
income tax
• Other components of income tax in Australia include
• Company tax
• Capital gains tax
• Family tax benefit

History of personal income tax
in Australia
• Personal income tax represents the major source of income taxes
in Australia
• Personal income tax in Australia is progressive (Ault, & Arnold,
2010).
• It has evolved in terms of tax rates and brackets
• Like any country, Australia has to adjust the tax rates each year
in order to accommodate the existing economic conditions
• This means that each year has specific tax rates and brackets

History of personal income tax
in Australia
• Since the rates and brackets for personal income tax in
Australia varies from year to year, the presentation cannot
give the breakdown of historical changes
• However, it should be noted that the rates have been
progressive in nature
• The next slide compares the personal income tax for two
financial years (1983–84 and 2016–17)

Comparing individual tax rates
(1983-84 and 2016-17)
• Individual income tax rates
and brackets 1983-84
• Individual income tax rates
2016-2017
Taxable
income
Tax on this
income
Effective tax
rate
$1 – $18,200 Nil 0%
$18,201 –
$37,000
19c for each
$1 over
$18,200
0 – 9.65%
$37,001 –
$87,000
$3,572 plus
32.5c for
each $1 over
$37,000
9.65 –
22.78%
$87,001 –
$180,000
$19,822 plus
37c for each
$1 over
$87,000
22.78 –
30.13%
Taxable
income
Tax on this
income
Effective tax
rate
$1 – $4,594 Nil 0%
$4,595 –
$39,499
30c for each
$1 over
$4,595
0 – 22.93%
$39,500 –
$45,787
$4,471.50
plus 46c for
each $1 over
$19,500
22.93 –
33.43%
$45,788 and
$11,963.98
plus 60c for 33.43 – less

Introduction of medical levy in
personal income tax
• Medical levy was introduced in 1984 following the
introduction of Medicare.
• The rate was set at 1% of personal taxable income
• In 1993, it was raised to1.4% of income
• Two years later, the l decline in Medicare levy receipts
lead to an additional of 1.5%, to offset a

Company tax history
• Company tax is another category of income tax in Australia
• Company tax in Australia has not evolve so much as compared to
personal income tax
• For example, most of the companies have been paying flat rate of
30% of their profits since 2001
• In 1987, Australia introduced Australian dividend imputation
system
• From 2015–2016, small businesses with income level of $2
million were taxed at the rate of 28.5%.

History of capital gain tax
• Capital gain tax is another category of Australian income tax
• It was introduced in 1985 (Parsons, 2011).
• It is based on the Consumer Price Index (Nethercott,
Richardson, Devos, & CCH Australia Limited 2010). .
• In 1999, the Consumer Price Index was replaced with the
allowance for a simple discount to apply to gains on capital
assets

History of family tax benefits
• Family tax benefits constitute another category of
Australian income tax
• Family tax benefits has not undergone much changes
(Compton, 2012).
• The table below shows breakdown of family tax benefits as
from 2008/9
Age FTB-A amount
under 13 $4,631
13-15 $5,818
16-17 $1,945
18-24 (if still
dependent) $2,379

Conclusion
• It is clear that income tax in Australia comprises of four
major categories (individual income tax, company tax,
capital gain tax and family benefit tax)
• Each category has unique history (Barkoczy, 2018).
• Individual income tax has undergone extensive evolution
because each year, there is an adjustment in income tax
rates (Australian income tax legislation 2011

References
• Reinhardt, Sam; Steel, Lee (2006). Economic Roundup Winter 2006: A brief history of
Australia's tax system. Australian Government | The Treasury
• Australia. (2018). Australian income tax legislation, 2018. North Ryde : CCH Australia,
• Woellner, R. H., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2017). Australian Taxation
Law 2018. South Melbourne, Victoria Oxford University Press
• Australian income tax legislation 2011. (2011). North Ryde, N.S.W: CCH Australia.
• Nethercott, L., Richardson, G. A., Devos, K., & CCH Australia Limited. (2010). Australian
taxation study manual: Questions and suggested solutions. North Ryde, N.S.W: CCH
Australia.
• Parsons, R. W. (2011). Income taxation in Australia: Principles of income, deductibility and
tax accounting. Sydney, NSW: Thomson Reuters.
• Barkoczy, S. (2018). Foundations of taxation law. South Melbourne, Victoria : Oxford
University Press

References
• Ault, H. J., & Arnold, B. J. (2010). Comparative income taxation: A structural
analysis. Austin: Wolters Kluwer Law & Business.
• Parsons, R. W. (2011). Income taxation in Australia: Principles of income,
deductibility and tax accounting. Sydney, NSW: Thomson Reuters.
• Nethercott, L., Richardson, G. A., Devos, K., & CCH Australia Limited. (2010).
Australian taxation study manual: Questions and suggested solutions. North
Ryde, N.S.W: CCH Australia.
• Compton, T. (2012). Rental Property and Taxation: An Australian Investor's
Guide. Hoboken: John Wiley & Sons.
• Australian income tax legislation 2011. (2011). North Ryde, N.S.W: CCH
Australia.