Australian Income Taxation System and Rules

AUSTRALIAN INCOME TAXATION
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Australian Income Tax System
Institution
Date

AUSTRALIAN INCOME TAXATION
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EXECUTIVE SUMMARY
The objective of this report is to enable the learner understand and demonstrate the Australian
income tax system, anti-avoidance provisions and rules applied in Australia. It also aims at
equipping the learners with knowledge and understanding on forms of deductions on income tax
globally and within Australia and provisions on international transactions pertaining Australian
residents and nonresident taxpayers.
The detailed case study on capital gains and Goods and Consumption Taxes is a good example
on how ATO (Australian Tax Office) can approach issues related to capital gains and goods and
services duties. In addition, the report analyzes various legislation laws and fundamental values a
tax system should demonstrate.

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TABLE OF CONTENT
Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
INCOME TAX................................................................................................................................4
CAPITAL GAIN TAXES (CGT)................................................................................................4
Non Resident individual...........................................................................................................5
GOODS AND SERVICES TAX (GST)......................................................................................5
FRINGE BENEFIT TAX.............................................................................................................5
AUSTRALIA TAXATION SYSTEM............................................................................................6
Self assessment taxation system...............................................................................................6
Withholding taxes.....................................................................................................................6
GST anti - avoidance provisions..............................................................................................6
TAXATION LEGISLATION AND CASE LAWS........................................................................7
PRINCIPLES OF TAXATION.......................................................................................................9
REFERENCES..............................................................................................................................10

AUSTRALIAN INCOME TAXATION
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INTRODUCTION
Income tax from Australian residents and non-residents whose income originate from Australia
is imposed by the federal government. For tax purposes, the Australian laws have regulations on
how to determine whether an individual or a company is a resident. It also determines the source
of income whether its Australia or Diaspora. In most cases, tax is imposed from the place or
location of work. The only problem with source and residence rules is that a given income may
be taxed in both countries. To prevent this, Australian government signed double tax consent
with many countries with the aim of ensuring any amount of income is taxed once. Additionally,
it provides foreign tax credits to Australian residents paying foreign taxes on their foreign
income.
INCOME TAX
This is the company’s computable earnings without acceptable deductions. Dividends, salaries,
rent, wages, interest and income from business are some of the taxable income (Evans, 2019,
pg.217). Deductions as well are expenses and costs incurred in gaining income. Deductions on
capital and personal expenses however are not deductible unless certain conditions are reached
(Anesa et al.2019, pg.79).
CAPITAL GAIN TAXES (CGT)
CGT is charged on income earned from sale of a property. Real and intangible assets are subject
to Capital Gain Tax. Assets like motor vehicles, one’s residence and assets meant for personal
use have exemptions. Real property asset among other assets are subject to capital gain for
foreign residents. For assets held more than a year, an Australian resident is allowed a 50%
discount for the purpose of taxation. With the amendment of capital gain tax rule, a non-resident
is not allowed to have the 50 percent discount and instead, loss on capital can only be
compensated by capital earnings.
As per the rules outlined above, one is legally responsible to pay tax on capital gains and
earnings or income and. Australian nonresidents and resident individuals are liable to income tax
and Capital Gain Tax (CGT). When imposing duty to individuals, progressive levy scale system
is used. This means the tax rate is proportional with an increase in taxable income.