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Taxation

Taxation. Taxation In Australia. Australia is a Federation of States Pre WW1 income tax was levied by the individual states During WW1 the federal government first levied Income Tax Between WW1 & WW2 uniform income tax was developed but still gathered by the states

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Taxation

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  1. Taxation

  2. Taxation In Australia • Australia is a Federation of States • Pre WW1 income tax was levied by the individual states • During WW1 the federal government first levied Income Tax • Between WW1 & WW2 uniform income tax was developed but still gathered by the states • 1942 due to national emergency states handed income tax powers to federal government • After WW2 the Federal Govt refused to hand powers back to the states

  3. Taxation In Australia • All Levels of government raise taxation. • Local Councils • State Governments • Federal Governments

  4. Local Government • Most of the tax raised is by the way of rates • Other taxes may be in the way of levies & fees

  5. State Taxes • Payroll Tax • Tax levied on wages paid • Payable where yearly payroll is greater than $600 000 • Payroll Tax Rate = 6%

  6. Payroll Tax - Wages • Employee or contractor? • Provisions were introduced to tax contracts where the contractor works and operates exactly like an employee. • ATO has guidelines to determine their own status as a contractor, these guidelines only apply to 'Pay As You Go (PAYG)’

  7. Land Tax • Every State in Australia has Land Tax • Land Tax is levied in NSW as follows • Property owned at midnight 31st December • Principle place of residence is exempt • Land used as farms are exempt

  8. NSW Land Tax • Tax is payable on aggregated land value owned above the threshold x $0.016 • Threshold in 2009 = $368 000 • Land Value = $500 000 less threshold$368 000 $132 000 x $0.016 • Land Tax Pay $2112

  9. Other State Taxes • Stamp Duties on Transfer of Property • Mortgage Duties • Vehicle Registration & Transfer

  10. Federal Taxes • Income Tax • Company Tax • Capital Gains Tax • Fringe Benefits Tax • GST

  11. Fringe Benefit Tax • Tax on non cash benefits given to employees • Paid by employer • Is a separate tax to income tax • FBT Tax year 31st March • FBT Rate = 46.5% and levied on grossed up rate

  12. Fringe Benefits Tax • May include such items such as • allows an employee to use a work car for private purposes • gives an employee a cheap loan • pays an employee’s gym membership • provides entertainment by the way of free tickets to concerts • reimburses an expense incurred by an employee, such as school fees, and • gives benefits under a salary sacrifice arrangement with an employee.

  13. Amount of FBT Tax • If GST is claimed grossing up multiplier is 2.067 • Employer pays for Private Health Insurance of employee valued at $3000 • Taxable FBT Amount $3000 x 2.067 = $6201 • FBT Tax Payable $6201 x 46.5% = 2883.47 • Benefit Payable is now FULLY tax deductible from Income Tax

  14. Vehicles FBT • Payable where car is available for Private use. • The following types of vehicles (including four-wheel drive vehicles) are cars: • motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more) • all other goods-carrying vehicles designed to carry less than one tonne, and • all other passenger-carrying vehicles designed to carry fewer than nine occupants

  15. Vehicle FBT • Taxable FBT amount = Value of Vehicle x Statutory % X Days Available 365 Statutory % is determined by distance travelled <15000km = 26% 15001 to 24999km = 20% 25000 to 40000km = 11% > 40000km = 7%

  16. Vehicle FBT • A Toyota Camry is provided valued at $35 000 • Travels 13000km for the year$40 000 x 26% x 1 = $10 400 x 2.067 (Grossing) = $21 496 x 46.5% = $9996.01 • Travels 43000km for the year$40 000 x 7% x 1 = $2800x 2.067 (Grossing) = $5787.60 x 46.5% = $2691.23 • Travels 27000km for the year$40 000 x 11% x 1 = $4400x 2.067 (Grossing) = $9094.80 x 46.5% = $4229.08 Note All cost related to the vehicle private or business are now tax deductible incl. depreciation.

  17. Capital Gains Tax • Capital gains tax (CGT) is the tax you pay on any capital gain you make on the sale of an assett • Capital Gain/Loss is basically the difference in purchase and sale price • It is not a separate tax, merely a component of your income tax. • You are taxed on your net capital gain at your marginal tax rate

  18. CGT ASSETTS • real estate – for example, a holiday home • shares in a company • units in a unit trust or managed investment fund • collectables – for example, jewellery, and • personal use assets – for example, furniture.

  19. Capital Gains Tax • Capital Gain/Loss = Sale Price – Cost Base • Cost Base includes • The Original Purchase Price • Items that are not immediately tax deductable • Agent Fees • Solicitor Fees • Council Rates for Holiday House – note if it is an investment property earning income, rates would be

  20. Capital Gains Tax • It is not a tax in itself but forms part of your assessable income tax • Assessable amount is subject to discounts if kept for 12 months • Individuals 50 % discount • Trusts 331/3 % discount • Companies 0% Discount

  21. Capital Gains Tax - Individual • House Purchased in 2001 for $300 000 • House Sold in 2008 for $700 000 • Cost Base =$300 000 Purchase Price • $ 15 000 Agent Fee on Sale • $ 5 000 Legal Fees • $ 15 000 Stamp Duty Cost Base = $335 000 • Capital Gain = $700 000 - $335 000 = $365 000 • Assessable Income = $365 000 x 50% = $182 500

  22. Capital Gains Tax - Company • House Purchased in 2001 for $300 000 • House Sold in 2008 for $700 000 • Cost Base =$300 000 Purchase Price • $ 15 000 Agent Fee on Sale • $ 5 000 Legal Fees • $ 15 000 Stamp Duty Cost Base = $335 000 • Capital Gain = $700 000 - $335 000 = $365 000 • Assessable Income = $365 000 (No discount)

  23. Capital Gains Tax - Exemption • Principal Place of residence • an asset you acquired before 20 September 1985 • cars, motorcycles and similar vehicles • compensation you received for personal injury • a personal use asset – for example, items such as boats, furniture, electrical goods

  24. Income Tax • Progressive Tax levied on assessable income • Income is “World Wide Assessable Income” • Assessable Income = Gross Income – Allowable Deductions

  25. Income • Income will include worldwide source of • Salary & Wages • Payments made under contract • Bank Interest • Dividends • Rent Received • (There are many other sources of Income)

  26. Deductions • Any cost incurred in running your business • Items that are not allowable • Fines • Capital Costs (These must be depreciated) • Personal Items (E.g. Non Protective Clothing)

  27. Determine Assessable Income and Tax Payable Money Received Costs for the Year Contract Income $95 000 Fuel for work Vehicle $ 3 000 Bank Interest $1 500 Income Insurance $ 2 500 Income Protection $3 700 Materials $15 000 Rent Received $9 500 Workcover Licensing $ 120 Work Cover Fine $ 1 500 Mortgage Payments $12 000 ($2500 Int) Ute Purchase $35 000

  28. Answer to Weekly Review

  29. Depreciation Scedule

  30. Assessable Income = $109 700 - $37 262.86 = $72 437.14 Tax Payable = $4200 + ($72 437.14 - $34 000) x $0.30 = $4200 + $11 531.14 = $15 731.14

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