Income tax

An income tax is a tax levied on the financial income of persons or of corporations. Various income tax systems exist, ranging from a flat tax to a progressive tax system. A tax levied on the income of companies is often called corporate tax, corporate income tax or corporation tax. Individual income taxes generally tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income, the difference between gross receipts and expenses.

Income tax in Australia

Australia uses a form of progressive income tax. The current tax-free threshold is AUD6,000 and the highest marginal rate for individuals is 47% upon that part of income exceeding AUD95,000.

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As with many other countries, income taxes are withheld from wages and salaries in Australia, often resulting in refunds payable to taxpayers. A nine-digit "Tax File Number" must be quoted to employers for employees to have withholdings calculated using the various tax brackets. In the absence of this number employers are required to withhold tax at the highest marginal rate from the first dollar. Likewise, banks must also withhold the higest marginal rate of income tax on intrest earned on personal bank accounts. Many Australians disliked the idea of private institutions holding a government-issued serial number for persons as having privacy implications. Of course, in the USA the social security number is ubiquitous.

Related Topics:
Privacy - Social security number

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The company tax rate is a flat 30%, though through the Dividend imputation system Australian residents effectively do not pay this company income tax upon the profits distributed as dividends Australian-resident corporations. When an Australian corporation pays corporate income tax, 'franking credits' are generated and can then be applied to dividend payments at a maximum rate of 30 cents per dollar of dividend. Shareholders may then use these credits to offset their own personal income tax payable, including claiming a refund for excess credits left over after offsetting all payable income tax.

Related Topics:
Dividend imputation - Resident - Corporation - Franking credit

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Capital gains tax in Australia is part of the income tax system rather than a separate tax. After adjusting for various discounts and concessions, assessable capital gains for a financial year are added to assessable income and tax paid upon the total.

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Australia is a federation of states. Since World War II the states no longer levy any income taxes but do levy taxes including land tax, stamp duty and payroll tax.

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