Australia

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

Companies are required to deduct income tax from employees wages or salaries under a system called Pay as You Go (PAYG) and must report these deductions to the ATO..

Companies are also obliged to contribute a minimum of 9% of the employees salary or wages to a superannuation scheme nominated by the employee.
FBT is paid on certain benefits that employers provide to their employees or their employees' associates in place of salary or wages. A company is liable for the Fringe Benefit Tax - FBT (tax of 48.5%, owed on the value of fringe benefits granted to the employees of a company)

   
Tax rate on long-term capital gains This law makes two main changes to the capital gains tax (CGT) liability of foreign residents: it reduces the categories of assets which currently give rise to a CGT liability, and it introduces a liability to Australian CGT where a foreign resident disposes of an interest in an entity interposed between the foreign resident and certain Australian real property assets.
The assets held by foreign residents that can give rise to an Australian CGT liability are collectively known as śtaxable Australian property∆. This replaces the previous terminology of śassets having the necessary connection with Australia∆.
These changes mean that a number of provisions have been amended, including provisions dealing with:
- interests held by foreign residents in Australian fixed trusts;
- CGT assets where an entity becomes/ceases to be an Australian resident; and
- rollovers.
The changes apply to CGT events, which happen on or after 12 December 2006.
Capital Gains Tax Capital gains are taxed at the normal rate as for income. The completion of the CGT labels on your entity∆s tax return involves a:
- Three-step process for entities with capital gains or capital losses under the $10,000 threshold, or
- A four-step process for entities with capital gains or capital losses over the $10,000 threshold.
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies With a few exceptions, dividends paid among residents companies are tax-free. However, dividends paid by resident companies to non-residents are subject to a withholding tax at the source at a rate of 30% (15% in case a tax treaty is applicable).
   
Tax rate on branches A tax rate of 30% is imposed on branches, except under some non imposition agreements conditions.




Income tax

Fiscal year The Australian tax year begins on 1st July and ends on 30th June.
   
Income tax rate Tax rate schedule on the income 2006/2007:
AUD 0 - AUD 6,000: Nil.
AUD 6,001 - AUD 25,000: 15c for each AUD 1 over AUD 6,000.
AUD 25,001 - AUD 75,000: AUD 2,850 plus 30c for each AUD 1 over AUD 25,000
AUD 75,001 - AUD 150,000: AUD 17,850 plus 40c for each AUD 1 over AUD 75,000
Over AUD 150,000: AUD 47,850 plus 45c for each AUD 1 over AUD 150,000
   
Tax deductions or other allowances -Work related expenses
- Self-education expenses
- Travel expenses
- Car expenses
- Gifts and donations
- Clothing expenses



VAT rates

Standard rates GST (Goods and Services Tax - GST) is the Australian equivalent of a value added tax: The GST has a rate of 10% which applies during the sale or the purchase of the majority of goods and services in Australia, or when importing goods into Australia.
Excise Taxes are levied on alcohol (wines beers and spirits), tobacco and petroleum products.
   
Reduced rates Some goods are exempt from GST: basic uncooked or unprepared foods ,education, health, children care and so on.



Other important taxes


Name of tax
Rate
These are imposed by the individual States and Territories of Australia, which make up the Federation.  
 
They are generally limited to Payroll taxes (within certain thresholds), stamp duties, council and municipal rates, licenses, taxes on the sale of gasoline and diesel fuel.  
 


 

Accounting


General accounting principles
In Australia, accounting is defined by the Corporations Laws. It requires that companies must refer to standards promulgated by the Australian Accounting Standards Board ( A.A.S.B). Any error registered concerning standards A.A.S.B must be mentioned on the audit report (A.A.S.B).
Australian accounting standards are almost similar to the international accounting standards (I.A.S.B).

Obligations and publications
ATO is the Australian Government organisation responsible for administering the Tax laws, and collecting Government revenue.
ASIC is the Australian government organisation responsible for Enforcing and regulating company and financial services laws.

Certification and auditing
Auditors must be registered as such. They obtain this registration either from the Institute of Chartered Accountants of Australia ( I.C.A.A) or from the Australian Chartered Accountants Organization.

Professionals and representative organizations
The web site of the Australian Certified Practicing Accountants Organisation :
CPA Australia
The web site of the Australian Auditing and Assurance Standards Board:
http://www.auasb.gov.au/
Australian Securities and Investment Commission- Government regulator of Corporate Governance:
http://www.asic.gov.au/asic/asic.nsf
Financial Reporting Council- responsible for oversight of auditing and accounting standards:
http://www.frc.gov.au/
National Institute of Accountants (NIA) is a professional organisation for accountants:
http://www.nia.com.au
Institute of Chartered Accountants in Australia:
http://www.icaa.org.au/

Comments
Most Australian firms, both public and private, have a relationship with a public accountancy practice, such as Horwath, or one of the big international accounting and auditing firms such as Deloitte, KPMG, or PWC .
The reason is that their accountant provides assistance, advice and consultancy regarding their compliance with tax laws, and also management consultancy.



Useful links
Australian Taxation Office - ATO

Last modified in 2006 - ongoing update
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