Augasm

Could anybody explain the fundamentals of the Australian tax system to
me? I've asked several Australians, and after just a few specific
questions I usually get "Ah well, you have to talk to an accountant"

My wife, daughter, and I are moving to Australia in Sept, and we are
currently looking online/through agents/etc for a house to rent. I
also have a job lined up, and hence I know what my pre-tax income will
be at least initially. I'm trying to sort out what my after-tax income
will be, so that I can figure out what we can afford to spend on rent.

I'm coming at the problem having always done my US taxes myself, and
I'm trying to work out how similar concepts are handled within the
Australian tax code. Apparently no Australian does his/her own taxes,
else I wouldn't get constantly referred to an accountant. So perhaps
there's an accountant out there who can briefly explain things to me?

What I'm familiar with is the following: At the end of the fiscal
year, one's tax liability is calculated. All of your income with some
minor adjustments is summed up. Then, in the most simple case, a
couple thousand is subtracted off, the exact number depending on the
filing status (single/married/etc) and how many dependents lived off
of that income. Even just for a husband/wife pair the standard
deduction is nearly $10,000. There's perhaps a few other minor
adjustments, and the final figure is looked-up in the tax table. The
tax table is structured such that the progressive tax scheme varies
differently depending on your filing status.

The logic, as I see it, is this: there is a basic cost of being alive,
one needs to buy food, clothing shelter, and these days clean water.
It's immoral for a government to tax you on income that goes towards
such necessities, and so they give you a tax free allowance -- the
aforemention standard deduction. The government generally provides
incentives for things like home buying and charitable contributions,
so they allow you to itemize individual deductions instead of just
taking the standard deduction. Each person goes with the greater of
the standard or itemized deduction. When the taxable income is finally
determined, it then matters whether there was one or two+ people
living off of that taxable income. Where $60,000 supports one person,
a higher marginal tax rate is indicated, where that $60,000 supports a
married couple, a marginal tax rate in keeping with $30,000 per
individual is indicated. All of this is estimated by the income-earner
in advance of the tax year, and forms are filed with the employer (or
an analogous means if self-employed) to this effect, such that a
reasonable installment is deducted from each pay check. A reckoning is
held a few months after the end of the tax year, and the taxpayer and
government square up upon determination of the final figures.
Sometimes tax payer needs to pay in a bit more if they underestimated,
sometimes the government pays you back if you've overpaid through the
year.

Now it appears to me that in Australia there is one progressive tax
rate scheme and there is no consideration for whether that income is
supporting one person or ten. There appears to be some consessions
here and there, e.g. first time home buyers grants, the new $3000
incentive for having a baby, etc, but these incentives wax and wane
frequently depending on government whim -- $7000 for first time home
buyers was announced a few years ago, then it was bumped up to $14,000
for a short time, then $10,000, then $7000 again (if I remember
correctly), etc; but I can't see that there is anything firmly
embedded in the tax policy which puts a reported income in the context
of how many people it supports.

It could very well be that I'm totally off, as I'm trying to figure
out the Australian tax from lots of little bits and pieces scattered
around the internet. Can anybody offer a cogent explanation of
Australian tax proedure and logic such that I can work out what's ok
to spend on rent?

Thanks so much, and I apologize for the length!

A Mate

Hmmm!!
#1. Many Australians also do their own tax, often online. The site for
online tax is found by following the online links from
http://www.ato.gov.au/

#2. A quick summary - for financial year 2004/05:
The first $6000 of income is tax free. You pay 17% on income between $6,001
and $21,600. Then 30% on income from $21,6001 to $58,000. 42% on income from
$58,001 to $70,000. 47% on everything over $70,001.

#3. The financial year runs from July 1 to June 30.

#4. If you are employed you PAYG - Pay as You Go - meaning your employer
pays your estimated tax weekly, fortnightly or monthly and you then submit a
Tax Return at the end of the financial year; as a result of which the ATO
either sends you an account for tax payable, or a tax refund for tax
overpaid!

There are various 'allowable' deductions, but not as many as in the USA. The
trade-off is that more services are provided by the Government - free
Medical care as an example. There is NO local or State income tax, school
tax etc; and no state sales tax.

In addition there is a VAT style tax (the GST - Goods and Services Tax) of
10% levied on all non food/medical items and services. Unlike the USA ALL
prices are always quoted inclusive of this tax.

Have Fun!!


.
"Augasm" <[email protected]> wrote in message
news:[email protected] om...
    > Could anybody explain the fundamentals of the Australian tax system to
    > me? I've asked several Australians, and after just a few specific
    > questions I usually get "Ah well, you have to talk to an accountant"
    > My wife, daughter, and I are moving to Australia in Sept, and we are
    > currently looking online/through agents/etc for a house to rent. I
    > also have a job lined up, and hence I know what my pre-tax income will
    > be at least initially. I'm trying to sort out what my after-tax income
    > will be, so that I can figure out what we can afford to spend on rent.
    > I'm coming at the problem having always done my US taxes myself, and
    > I'm trying to work out how similar concepts are handled within the
    > Australian tax code. Apparently no Australian does his/her own taxes,
    > else I wouldn't get constantly referred to an accountant. So perhaps
    > there's an accountant out there who can briefly explain things to me?
    > What I'm familiar with is the following: At the end of the fiscal
    > year, one's tax liability is calculated. All of your income with some
    > minor adjustments is summed up. Then, in the most simple case, a
    > couple thousand is subtracted off, the exact number depending on the
    > filing status (single/married/etc) and how many dependents lived off
    > of that income. Even just for a husband/wife pair the standard
    > deduction is nearly $10,000. There's perhaps a few other minor
    > adjustments, and the final figure is looked-up in the tax table. The
    > tax table is structured such that the progressive tax scheme varies
    > differently depending on your filing status.
    > The logic, as I see it, is this: there is a basic cost of being alive,
    > one needs to buy food, clothing shelter, and these days clean water.
    > It's immoral for a government to tax you on income that goes towards
    > such necessities, and so they give you a tax free allowance -- the
    > aforemention standard deduction. The government generally provides
    > incentives for things like home buying and charitable contributions,
    > so they allow you to itemize individual deductions instead of just
    > taking the standard deduction. Each person goes with the greater of
    > the standard or itemized deduction. When the taxable income is finally
    > determined, it then matters whether there was one or two+ people
    > living off of that taxable income. Where $60,000 supports one person,
    > a higher marginal tax rate is indicated, where that $60,000 supports a
    > married couple, a marginal tax rate in keeping with $30,000 per
    > individual is indicated. All of this is estimated by the income-earner
    > in advance of the tax year, and forms are filed with the employer (or
    > an analogous means if self-employed) to this effect, such that a
    > reasonable installment is deducted from each pay check. A reckoning is
    > held a few months after the end of the tax year, and the taxpayer and
    > government square up upon determination of the final figures.
    > Sometimes tax payer needs to pay in a bit more if they underestimated,
    > sometimes the government pays you back if you've overpaid through the
    > year.
    > Now it appears to me that in Australia there is one progressive tax
    > rate scheme and there is no consideration for whether that income is
    > supporting one person or ten. There appears to be some consessions
    > here and there, e.g. first time home buyers grants, the new $3000
    > incentive for having a baby, etc, but these incentives wax and wane
    > frequently depending on government whim -- $7000 for first time home
    > buyers was announced a few years ago, then it was bumped up to $14,000
    > for a short time, then $10,000, then $7000 again (if I remember
    > correctly), etc; but I can't see that there is anything firmly
    > embedded in the tax policy which puts a reported income in the context
    > of how many people it supports.
    > It could very well be that I'm totally off, as I'm trying to figure
    > out the Australian tax from lots of little bits and pieces scattered
    > around the internet. Can anybody offer a cogent explanation of
    > Australian tax proedure and logic such that I can work out what's ok
    > to spend on rent?
    > Thanks so much, and I apologize for the length!

ABCDiamond

Australia do charge 1.5% of taxable income for the Medicare Benefits,(the Medicare Levy) with a 1% surcharge for higher income earners unless they have private medical insurance.

Some things do get advertised without the GST included, but not often, and mainly when the target consumer is a business that will probably be registered for GST, and can therefore claim it back.