Australian taxes are complex, and our primary job is to make you navigate and be compliant with all of them. To make our job more efficient, it helps if you understand the basic concepts and definitions.
There are different types of tax that can apply to you, depending on your circumstances.
Income Tax
Most ‘popular’ as it applies to everyone who earns money, whether as Wages, through business, from investments, or other sources. Depending on legal presence, different rates may apply.
Capital Gains Tax (CGT)
This tax applies to profits made from the sale of assets such as real estate, shares, or other investments. CGT is part of the Income Tax regime and is added to the individual’s income and taxed at applicable rates.
Land Tax
Tax paid by landowners, calculated on the value of the land. Main residence is usually exempt and depending on the state or territory in which the land is located, there may be tax-free thresholds.
Superannuation Contributions Tax
Payable by the Superannuation Fund, 15% tax is charged on concessional contributions – those which you or your Employer claim as a deduction.
Division 293 Tax
If your income (including Superannuation Contributions) is over $250,000, you will be charged an additional 15% tax on all concessional contributions. You may elect your fund to pay this tax for you.
Goods and Services Tax (GST):
GST is an equivalent of VAT in Europe, and registered business charge it on the value of goods and services sold domestically. You must be registered for GST if your annual turnover is likely to exceed $75,000. When registered, you claim back GST charged on goods and services you purchased in the course of your business.
Fringe Benefits Tax (FBT)
When employers provide additional benefits to employees or their associates (e.g., company cars), they may be liable to pay FBT, calculated on their value.
Excise Duty
Companies that produce or wholesale certain goods, such as alcohol, tobacco, or fuel, must pay excise duty.
Luxury Car Tax (LCT)
Tax on new (and in some circumstances, used) luxury vehicles. Usually, car dealers charge this tax on the customers.
Customs Duties
Companies importing goods into Australia are required to pay customs duties based on the type and value of the imported goods.
Financial Year
Financial year in Australia starts on 1st of July and ends on the 30th of June.
Quarters have the same period breakdowns, but their numbering is aligned with financial year:
- 1st July – 30th September is Quarter 1
- 1st October – 31st December is Quarter 2
- 1st January – 31st March is Quarter 3 and
- 1st April – 30th June is Quarter 4.
PAYG Instalment
Briefly mentioned above, PAYG instalments are prepayments of your income tax for the current financial year in advance. Taxpayers can choose to enter the system voluntarily or are automatically enrolled by the ATO.
To read more about it please see our previous blog post https://btmh.com.au/payg-instalments/
PAYG Withholding
If you have employees, you must withhold tax from the Wages you pay them, and pay on their behalf to the Tax Office. This withholding must be reported via Single Touch Payroll and on Activity Statement. Amount to be withheld depends on the amount of Wages, ATO produces tables to follow, but it’s best to use dedicated software for payroll.
Business Activity Statement (BAS) and Instalment Activity Statement (IAS)
Activity Statement is a form to report various taxes and instalments by businesses. If the list of taxes include GST, then it’s BAS. If not, then it’s IAS. Other taxes that can be reported on Activity Statement are:
- Goods and Service Tax (GST)
- PAYG Instalments
- PAYG Withholding
- Fringe Benefits Tax
- Luxury Car Tax
- Wine Equalisation Tax
- Fuel Tax Credits
Usually, these obligations are due every quarter, but can vary in certain circumstances. Also, different tax types may have different reporting periods as well, e.g. Quarterly BAS for GST and monthly IAS for PAYG Withholding.
Understanding Australian taxes doesn’t have to be overwhelming. By familiarising yourself with these key tax types and their requirements, you can manage your financial obligations with confidence. If you ever have questions, our tax professionals are here to help. With the right support, managing your taxes can become a simple step toward reaching your financial goals.
