Australian Income Tax Law: Overview, Legislation, ATO, Rulings, Tax Planning, Residency, Taxable Income, Medicare Levy

This article provides an overview of Australian income tax law, including legislation, the role of the ATO, public and private rulings, tax planning, residency, taxable income, and Medicare levy. It also covers principles of professional conduct for tax agents and the process for amending tax returns.

Australian income tax law

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1
Section 51 of the Constitution of Australia is one which relates to enumerating the
legislative power which are provided by Federal Parliament by the Australian States of
federation. This involves a list of 39 subsection relating to head of power.
In addition to this, another section that is 53 of the Australian constitution is the one
which relates to the imposing of taxation and all the revenue and money to be taxed. This section
limits the power of the Senate and it does not apply to imposing of bill and appropriating various
fines and other penalties.
2
Australian Federal taxation legislation is created through process that involves proposed
legislation introduced in the parliament by presenting a bill so that it can be both passed by both
house & then royal assent can have received in order to convert it into act. The steps that are
followed for the purpose of creating federal laws in Australia includes drafting, introducing bill,
going to committee, subcommittee review of it. In addition to this, next step after it is marking
up, voting by full chamber, referral to another chamber and then presenting to president.
3
Once the royal assent is received by legislation, it impacts legislation within the bill may
come into effect immediately. The main purpose of royal assent is that representative
government needs the head of state to take action in accordance with the will of democratically
elected. In the mentioned situation, court play important role in making sure that legislation has
come into existence immediately after the decided period of time. For instance, commissioner
need to make binding ruling that he must honour, in this tax paying cannot be penalized by ATO
even if later it is found to be inappropriate.
4
Assess-able income refers to the total income of an individual deducting allowable
expenditure such as employment expenses, donation and business expenses. Key components of
assess-able income included pension, benefits, allowable, wages, work allowances and other
income sources.
5

For the administration of federal taxation system in Australia the Australian Taxation
Office (ATO) has been assigned. This is an Australian statutory agency which relates with
revenue collection for the government of Australia and is also responsible for the administering
of federal taxation system, and associated matters. The organization dealing with this is
Commonwealth Taxation and it comes under jurisdiction of Australia government and key
document involves is Land Tax Act 1910.
6
Public Rulings: This ruling depends on the public advice. Public give their opinion in
respect of that laws are made. There is different type of public ruling like taxation ruling,
taxation determination which is short term based, GST ruling, class and product rulings. This
ruling is bringing out by the commissioner for the particulars of the persons giving tax.
Private Rulings: This ruling specifies that how the laws related to tax will be applied
matters related to some specific plan of action. It is a direction given by the Australian Taxation
Office (ATO). It mainly does ruling on the specific or set plan of specific company.
7
The TPB code of professional conduct states that there are different principles which
need to be followed by the tax agents. Also the code of professional conduct regulates the
professional and personal conduct which all the registered tax agent need to be follow and
comply with. The list of TPB code of professional conduct involves 14 principles divided in five
major categories which are as follows-
 Honesty and integrity
 Independence
 Confidentiality
 Competence
 Other responsibilities
8
The various criteria that need to be satisfied for an individual to become a tax agent are as
follows-
They must be proper and fit person including people with good fame, integrity and many others.
Along with this another criterion are that they must satisfy the experience and qualification
requirements for becoming a tax agent.

Along with this there need to be completion of online application including all the supporting
documents.
9
From the evaluation it can be interpreted that reasonable care in ascertaining a client state
if affairs is well established feature in Australia that help in understanding and ascertaining the
code that does not extent the common law duty of registered agent. In addition to this, reasonable
care estimation will rely on determination of all situations. This as well pay attention on
conducting own professional judgement taking into account all crucial& relevant components for
identifying complexity of transaction.
10
The three different types of return which can be lodged by small business taxpayer running the
business with three employees is as follows-
 Income tax
 Employment tax
 Self- employment tax
11
No the returns and assessment are not the same things and both are different from one
another. The major difference between both of these is that the notice of assessment of the fact
which reflects the taxable income after all the deductions and not the gross income. On the other
side, the tax return is a document for reporting the income which the person or company have
earned for a particular financial year. This also involves any type of deduction as well which the
person is claiming against the income.
12
Yes, it is necessary for the taxpayer to retain all documents after lodging the tax return. In
Australia, the person has to keep the record for five years in most of the cases from the date the
tax return has been lodged.
13
The period of review expire for a small business individual is four years.
a. In case the person lodged an individual tax return on 15 July 2019 then period of review
will be 16 July 2023

b. In case the person received their individual assessment on 28 July 2019 than the period of
review will be 29 July 2023.
14
First step in this particular case is to finding of how to lodge an amendment so that
mistake can be fix. The request can be done through following options such as online via
myGov, by completing the paper amendment for, registered tax agent and by sending a letter.
The mentioned course of action can be used by client in order to review amended assessment
within ATO.
15
In case the client is not happy with the decision made upon review within ATO then they
can appeal further. for this they have the option of early assessment and resolution and here they
can contact to Dispute Assist. This Dispute Assist is a free service provided to help unpresented
individual and small business.
16
As per the principle of IRC vs Duke of West minister 1936 act1 is that for paying less tax
it is allowed to person its financial affairs. In order to become successful in paying less tax this
is interpreted that there will be no punishment imposed on person.
17
Tax planning: This planning ensures that the how the taxes should be minimized by doing all the
work. This planning involves the income schedule, schedule of purchasing and the expenses
borne by them. It basically set out the plan by which the liability of the taxpayer should be
minimized.
Tax Avoidance: This is done to take some other specific advantages related to investments in
like agriculture sector, horticulture sectors etc. This involves increasing the rebates, avoiding tax,
or by increasing the deduction against their earnings.
Tax Evasion: this is considered as unlawful practice. It means not paying of the tax by the
taxpayer to the authority. It is a crime for the taxpayer and as a result it can be punished by both
federal and state government. Punishments can be up to 10 years of jail.
18
This also interact with the rule of residency because in case the person is not a resident of
Australia then the treatment for source of income will be different as compared to the resident of

Australia. hence, the rule of residency also need to be undertaken at time of analysing the source
of income for accessibility as per tax legislation.
19
Harry’s tax on taxable income in the 2021 income year
particulars Amount
taxable income 41,100.00
less Rate of tax 19%
Tax on taxable income in the 2021 7809
Megan’s tax on taxable income in the 2021 income year
particulars Amount
taxable income 99250
less Rate of tax $5,092 + 32.5% for each $1 over $45,000
tax on taxable income in the 2021 37348.25
Margo’s tax on taxable income in the 2021 income year
particulars Amount
Assess-able income 1,86,000
Add PAYGI 42000
228000
less deductions 7000
taxable income 221000
less tax rate $51,667 + 45% for each $1 over $180,000
tax on taxable income in the 2021 61612
Violet’s tax on taxable income in the 2021 income year

particulars Amount
Assess-able income 46,000,
Add PAYGW 9,500
55500
less deductions 5,000.00
taxable income 50500
less tax rate 5,092 +32.5 cents for each $1 over $45,000
tax on taxable income in the 2021 21504.5
20
A
Taxable income = 69500
For the Medicare levy in case of singles the income need to be $90001 and in case of Patrick the
income is 69500 so he is not eligible for Medicare levy or any other surcharge.
B
Taxable income = 98000
In case person is not covered by private health insurance then Medicare levy is 1.5 % of taxable
income
So Medicare levy = 98000 * 1 % = 980
C
The total income of both Adam and Tanja is 189000 that is 119000 + 70000. Hence, this comes
under the threshold limit of $180001 to $210000 and the rate of Medicare levy is 1.0%. So the
Medicare levy for the family will be
189000 * 1.0 % = 1890.