HI6008 - Australia & New Zealand Tax Law: A Comparative Review

This literature review provides a detailed comparison of the tax laws in Australia and New Zealand, focusing on the importance of literacy in understanding taxation, the feasibility of using the same taxation reporting and business strategies in both countries, and the potential conflicts and loopholes arising from differing tax laws. The review examines the Goods and Services Tax (GST) and income tax regulations, highlighting the differences in GST rates, payment schedules, and exemptions. It also discusses the double tax agreement between the two countries and its implications for residents and non-residents. The review concludes by identifying gaps in the existing literature and emphasizing the role of government in ensuring fair and efficient taxation systems.

Running head: COMPARING TAX LAW IN AUSTRALIA AND NEW ZEALAND
Comparing Tax Law in Australia and New Zealand
Name of the Student
Name of the University
Author Note

1COMPARING TAX LAW IN AUSTRALIA AND NEW ZEALAND
Introduction
The fiscal system of Australia and the fiscal system of New Zealand tend to differ
from one another in many ways but can be considered similar in some ways too. Tax laws in
particular are quite stringent in both of these countries, with commoners and the elite having
little option but to act in compliance with such laws, given that working against the laws can
invite severe punitive action in both Australia as well as New Zealand. However, the
Australian government has recently made a number of efforts, unlike the government of New
Zealand to make its tax laws more flexible in nature, making them more appealing for the
Australian public than what these had been before (Australian Government 2019). This
report undertakes an in depth literature review on three crucial areas pertaining to the taxation
system in Australasia, namely, how and why literacy is important with regard to taxation law
and the attempts that are being taken by the Australian administration to affiliate with the
people, unlike New Zealand, secondly, whether or not New Zealand and Australia can use the
same taxation reporting and business strategy when operating in both the countries, and
thirdly, whether two different tax laws when in operation in both the countries creates
conflict and loopholes for the purpose of saving taxes. The report concludes by pointing out
the gaps in the literature review that has been undertaken.
1. How and why literacy is important with regard to taxation law and the attempts
that are being taken by the Australian administration to affiliate with the people
It is a fact well known that in most liberal democracies of the world, it is the
communities or the people who decide how it is that they want their economy and their
society to operate. This is clear from the report generated by the Australian government on
the subject of taxation, which is accessible online and which provides a detailed overview of
what it is that the Australian people expect from the administration in the area of taxation and

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the attempts that are currently being made by the government to affiliate itself with its people
in this respect. Of course literacy has an important role to play in such a situation. It is only
literate and educated people who will have informed minds and who can make the choices
that are needed to get the economy and society of the country to operate in the manner
desired (Australian Government 2019). One of the most crucial of choices that communities
get to make is regarding the balance that there ought to be between the private provision of
services and the public provision of services. The Australian government like most other
governments of the world has an important role to play in establishing all the elements of a
framework that enables people to make correct choices with regard to their finances. The
report states that if one has to look at a minimal list of such elements the one can see that
what the Australian government has to provide in order to affiliate itself with its people is
establishment of law and order and rules and regulations that will successfully look into the
security interests of the Australian public, establishing property rights for Australian citizens
and of course creating legal systems that will allow for the enforcement of agreements that
are drawn up between parties, both private as well as public. Beyond such a basic framework,
there is very little that the Australian communities will expect from its government with
individual decision making being a regular feature of communications and transactions that
are carried out as a part of operations carried out by private institutions and private markets
(Australian Government 2019).
Revenue that is generated from taxation is used to finance all the expenditures that the
government of Australia undertakes in the name of public interest. Literacy plays a vital role
in taxation politics by virtue of the fact that it positions the public to gain an understanding of
how it is that they would like their money to be used for the provision of basic services.
Foreign affairs and defense for instance, are services that the Australian government is
expected to provide its people with using tax payer’s money as stated in the report (Chardon

3COMPARING TAX LAW IN AUSTRALIA AND NEW ZEALAND
et al. 2019). The Australian public also gets to decide and how the government should use
the revenue that is generated from taxation in order to make basic services like healthcare and
education available to all of its people. On its part, the Australian government has been doing
a stellar job of rendering basic services in a smooth and efficient manner to ensure a high
standard of life for the people of Australia. The report states that there are many different
types of taxes that are collected by the government from its people in the form of both
voluntary and compulsory transfers, and which is then used to make sure that the people of
the country are serviced by basic amenities like such shelter, security, education, health care
and the proper administration of foreign affairs, giving Australian people a secure and safe
climate in which to reside in and to carry on with their day to day operations without any fear
of insecurity or lack of safety (Chardon et al 2019). In other words, what the report states is
that community expectations regarding the role of the Australian government is something
that is always taken into consideration by the latter at the time of collecting taxes and it uses
the revenue that is generated through its taxation policies to introduce and maintain adequate
welfare measures for the Australian public at all times (Australian Government 2019).
The research that has been carried out for this particular report is based entirely on
primary sources, with a thorough overview of the public and private system of taxation in
Australia being provided to the readers and a comparison also being made between how taxes
are collected and used in Australia and in other countries of the world.
2. Can Businesses operating in Australia and New Zealand using the Same
Taxation Reporting and Business Strategies while operating in both the
countries?
When it comes to business operations that are carried out in Australia and New Zealand, it
needs to be remembered that the most important form of taxation in play here is the Goods

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and Services Tax, known also as the GST. In a report generated by the Australian
government on the comparison between the Australian and New Zealand tax systems, it has
been pointed out that the system of GST collection in New Zealand tends to be different from
the system of GST collection in Australia (ATO 2017). Hence business owners working in
both Australia and New Zealand cannot use the same tax reporting and business strategies.
As stated in the report, when it comes to the payment of GST, a business in New Zealand is
liable to pay this tax only when its annual turnover runs into as much as $ 60,000 and that too
over a twelve month period strictly. Based on the rate of the turnover, business owners in
New Zealand can choose to file tax returns on a monthly basis, in every two months or in
every six months. The rate of GST that business owners are expected to pay in New Zealand
stands at 15 percent. The GST in New Zealand is charged on all goods, services and items
that are sold or consumed in the country. When it comes to Australia, the rate of GST stands
at ten percent. It is charged on all types of consumer goods with a few exceptions here and
there. The GST rate is one that is included in the price of the goods and services that are
being sold in the Australian market and business owners can file for tax returns on a
quarterly, annual or monthly basis depending on their convenience (ATO 2017).
In New Zealand, there are certain goods that are not liable to be taxed under GST, and
which are considered to be exempted from GST taxation. Financial services such as the
payment as well as collection of interest and residential accommodation supplies are those
that are exempted entirely from GST taxation. In Australia, there are certain transactions
which also fall outside the scope of the GST. These include genuine sales or gift items by
business entities that are not registered in Australia such as the GST free sales or the input
taxed sales (Chardon et al. 2019). In New Zealand the GST returns can be posted using the
GST return form that has been drawn up by the government of New Zealand for this purpose.
In Australia, the GST amounts are reported and the GST credits are claimed by business

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owners through the lodging of a specific document that is known as the Business Activity
Statement or BAS. This report produced by the Australian government thus makes it clear
that taxation and business strategies for business owners working in both Australia and New
Zealand are likely to be different in a number of ways (ATO 2017).
3. Understanding whether Two Different Tax Laws in Operation in Australia and
New Zealand creates conflicts and loopholes
When it comes to taxation such as income tax, it needs to be remembered that both
Australia and New Zealand follow the same rules. The work done by Chardon et al. (2019),
the income tax agreement signed between Australia and the Commonwealth in 1972 and the
report generated by the Australian government that highlights the comparison between the
taxation system in Australia and the taxation system in New Zealand all point to the fact that
the income tax treatment in both countries depends on residency status. Non residents are
taxed on income sourced from New Zealand and the citizens of New Zealand are taxed on the
world wide income (ATO 2017). In Australia too, non residents are taxed on the revenue that
they earn form their activities in Australia while the residents of the country are taxed on
what they earn in Australia and other parts of the world. For those who reside in both
Australia as well as New Zealand, article 4 of the double tax agreement drawn up between
New Zealand and Australia is one that is comprised of what is termed as tie breaker
provision. This provision allocates residency to one out of the two jurisdictions and not both
(Australia Government 2019). When it comes to New Zealand residents living in the country
of Australia, they will be taxed only on the business profits that they incur in Australia such
as the business profits that are generated upon running a permanent establishment such as a
warehouse or an office space in Australian cities and towns. The tie breaker provision that is

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contained in the Australia and New Zealand double tax agreement is one that applies to New
Zealand residents in the country of Australia as well (ATO 2017).
The income year plays a vital role in taxation policy formation and implementation. In
Australia the year for charging and collecting income tax, or the financial year rather, is one
that begins from the 1st of July of one year to the 30th of June of the next year. In New
Zealand the income year starts from the 1st of April in one year to the 31st of March in the
next year. There is no capital gains tax that is charged in the country of New Zealand. In
Australia a capital gains tax is levied upon the sale of an asset such as a house or apartment.
However New Zealand has recently introduced the Bright Line Test for those owning land for
residential purposes. Residents of Australia are likely to be charged with capital gains tax on
assets that they hold worldwide and not just in the country of Australia. Foreign residents are
not expected to pay any capital gains tax in Australia. Income tax can be paid in Australia and
New Zealand in the form of installments all round the year with the residual income tax being
what is paid at the end of the year (ATO 2017).
The imputation system in New Zealand puts companies in a position to pass of the
benefits associated with the income tax that they have paid in New Zealand onto their share
holders. This is something that can be done by the company by imputing the tax credits for
the income tax that has been paid already. The imputation system in Australia involves
distributing among shareholders the tax that has already been paid by the company in the
form of franking credits and which are attached to the dividends that they have received.
While shareholders are taxed on the profits that they incur through the distribution of their
dividends, they are given credits for the tax which is already paid by corporate entities. In this
way, the system of double taxation is easily avoided. New Zealand companies can join the
Australian system of imputation at any given point of time, in order to pay dividends that are
franked with the Australian franking credits (ATO 2017).

7COMPARING TAX LAW IN AUSTRALIA AND NEW ZEALAND
There are no debt and equity rules to be followed in New Zealand. In Australia, the
debt and equity rules are quite specific and such rules determine whether the returns on
investments are to be treated as dividends or as interest. When it comes to trusts, the initial
amount of money that is placed in trusts is not taxed in either New Zealand or in Australia.
Where depreciation is concerned, in both Australia and in New Zealand certain assets cannot
be depreciated, such as land and trading stock (Chardon et al. 2019).
By comparing the different modes of taxation in New Zealand and Australia it can be
said that loopholes are hard to detect and that both systems of taxation can be stringent and
flexible in their own ways. At times business owners and workers who operate in Australia
and New Zealand both are likely to find one system of taxation more beneficial and flexible
than the other, while in other instances, one can be more harsh than the other. For example,
one does not have to pay capital gains tax in New Zealand but does so in Australia. Conflict
can be generated in this respect and it is better to design a system of taxation for those who
are joint residents of or who do business jointly in Australia and New Zealand to be subjected
to one uniform system of taxation (ATO 2017).
Conclusion – Gaps in the Literature Reviewed
Although the literature reviewed provides a thorough understanding of what the
taxation systems in Australia and New Zealand are like and the benefits and disadvantages of
both systems, it could point out to more way and means by which a uniform system of
taxation can be deployed for business people or workers who run operations in both Australia
as well as New Zealand. A uniform system of taxation will help to avoid conflict and will
enable business people and workers who have a presence in both countries for professional
reasons, to earn well and pay the right amount of tax that is needed to the countries where
they run operations in and earn revenue from.

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References and Bibliography
Australian Government (3 April 2006). International Comparison of Australia’s Taxes.
(Online). Available at: http://comparativetaxation.treasury.gov.au [Accessed 20 April 2019]
Toni Chardon, Mark Brimble and Brett Freudenberg. (2019) Tax and Superannuation
Literacy: Australian and New Zealand Perspectives. (Online). Available at:
https://www.business.unsw.edu.au/About-Site/Schools-Site/Taxation-Business-Law-Site/
Documents/Chardon-Brimble-and-Freudenberg_ATTA-Tax-Literacy-and-New-Zealand.pdf
[Accessed 20 April 2019]
ATO. (2017, February 16). Comparing the New Zealand and Australian tax system.
Retrieved from https://www.ato.gov.au/Business/International-tax-for-business/In-detail/
Trans-Tasman-rules/Comparing-the-New-Zealand-and-Australian-tax-system/
No. 12912. Agreement between the Government of the Commonwealth of Australia and the
Government of New Zealand for the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income. Signed at Melbourne on 8 November 1972. (2000).
Treaty Series 1938, 371-371. doi:10.18356/390f6819-en-fr