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Australia - Taxation (Other)

There are several taxes that are not in existence in Australia in the same way that they are in other countries. Inheritance tax does not occur in Australia and gift tax only applies in certain cases. There is no equivalent of wealth tax either.

Capital gains tax is applied on any large amount of money made. The gain is declared on the standard tax return and is not a separate tax as such, but is considered to be part of the income tax system. This is calculated at the marginal tax rate on the net capital gain. In order to find the net capital gain you simply take your total capital gains minus any losses within the year and take into consideration any net capital losses from other years which have not been applied, and then minus any discounts which you have been informed that you are entitled to.

The rate of tax that you pay will depend on all your income and you should refer to the standard income tax rates that apply to your income level. Capital gains tax will apply if your finances benefit from a capital gain event. This can be connected to assets held all over the world if you have Australian residency. A CGT event is considered to be anything that you make a profit on. This includes the sale of a house, stocks, shares and anything that makes you more than you paid for it.

VAT in Australia is known as Goods and Sales Tax. This is a very broad tax which is applied to most goods and services at a rate of 10%. Most businesses that are registered to pay this tax will automatically include it in the price of their goods. If you run a business in Australia with a minimum turnover of $75,000 or if you run a taxi company you must be registered for GST and include this in the cost of the goods you sell or the services that you provide. You must report all sales and purchases on activity statements so that adjustments can be made and the necessary sum paid to the authorities.

Businesses can claim credits for GST but if you are not registered for this tax then you should not include it in the price of your services or goods. There are concessions for businesses that are ‘not for profit’. If you find that the turnover of your company falls below the required level for GST registration then it can be cancelled.

There are taxes which are connected to property which are determined by each state. Amounts applicable will vary depending upon the area that you are in but these are based on land ownership. There are some states that will also levy a tax depending upon the usage of the land. The tax is usually calculated based on the value of the unimproved land on a particular day of the year. The taxes which are applied will be reviewed regularly and the dates for reviews and percentages apply will vary from state to state.

In addition to land taxes there are property taxes which are applied by local authorities, similar to the council tax in the UK. These are applied to both residential and commercial property and the funds raised are used for the budgets for the local councils. These are based on the value of the property and may also be applied to land that is owned as well, although this depends on the policies of the state in which you live.

Gift tax is only applied in certain circumstances. The legal system in Australia has a test known as ‘nexus’. This is to establish if there is a direct link which connects the gift and the activity, such as employment. For example, your employer may give you a car which is essential for work. In effect this helps you to earn money. If you received a car as a gift from a relative this is not intended for increasing income so is not taxable. As the issue of gift tax is fairly complicated it is always better to seek the advice of a taxation expert in order to be sure that you comply with the regulations.

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