Out of the all laws prevalent in Australia, one of the most significant laws is the taxation law. In Australia, taxation is not imposed by a single entity but by all three levels of government: Federal, State and Local.
Tax is a compulsory payment payable to the national, local, or regional government for the purpose of undertaking the activities and works for the public welfare. Australian law dictionary defines tax as ‘an invariable sum of money assessed as payable by a particular individual or other entity in accordance with the relevant legislation’.
On the other hand, A dictionary of law defines tax as ‘a compulsory contribution to the state’s funds. It is levied either directly on the taxpayer by means of income tax, capital gains tax, inheritance tax, and corporation tax or indirectly through tax on purchases of goods and services and through various kinds of duty such as road tax, duties on betting and game etc’.
The law governing the taxes is known as taxation law and the system of levying tax is known as taxation. As per Section 51 of the Australian Constitution, the power to impose taxes and to make laws regarding the collection and administration of taxes lies with the Commonwealth. The primary objective of taxation is to provide funds to the governmental activities. Adam Smith in his work ‘The Wealth of Nations’, provided for some of the features for a well-designed effective tax system. These are:
· Equality
· Certainty
· Convenience
· Efficiency
This blog titled, ‘Taxation System in Australia’ provides a brief discussion about the types of taxes imposed at different levels in Australia.
TAXATION SYSTEM IN AUSTRALIA
Taxes at Federal level
Income Tax: Income tax is a significant form of direct tax which is collected by the Australian Taxation Office (ATO) on the income of the people. Australia follows a progressive tax system which implies that more the income is, the higher the tax will be levied.
Goods and Services Tax: GST is a form of indirect tax which is laid upon the goods and services. It can be also termed as consumption tax.
Superannuation Tax: This type of tax relates to the contributions made into the retirement savings (also called ‘superannuation funds’). It also includes concessional and non-concessional contributions within its ambit.
Capital Gains Tax: This type of tax is applicable to the gains occurred from the sale of assets (e.g., property, shares). However, certain exemptions and concessions are available for certain assets.
Fringe Benefits Tax (FBT): This type of tax is levied on the non-cash benefits provided by employers to employees such as company cars, health insurance, and housing.
Customs and Excise Duty: This type of tax is collected on imported goods and certain locally produced items and is administered by the Australian Border Force.
Taxes at State Level
Land Tax: Land tax is imposed by state governments on landowners. This type of tax is levied based on the value of land holdings.
Payroll Tax: This type of tax is levied on employers based on their total payroll expenses. The objective behind this tax is to provide funds to state services.
Stamp Duty: It is applied to various transactions such as property purchases, motor vehicle transfers). These are not uniform and generally provides for State-specific rates and exemptions.
Taxes at Local Level
Property Rates: Property rates are collected by local councils (municipalities). These are basically based on the property values and used for local services.
CONCLUSION
Taxation system is the backbone of the financial system of any country and Australia is no exception to it. Effective taxation system helps in the adequate generation of revenue which in turn helps the government to effectively and efficiently work for the welfare of the public in the country.
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