Overview

The tax system in Australia is very different yet very similar to the tax systems of other Western nations. The positive news is the system is relatively straightforward and easy to understand. The tax year runs from July to June of the following year. There are 4 main taxes to be aware of in Australia:

1. Personal Income Tax

Personal income tax is collected by the Federal Government of Australia. Income tax is charged at the same rate across the whole of Australia, regardless of which state you reside in. The following tax rates apply for the tax year 2008/09:

In addition to the above taxes, Medicare Insurance is charged at a flat rate of 1.5%.

2. Goods and Service Tax

The equivalent to Value Added Tax (VAT) in the UK, Goods and Service Tax (GST) is applied to the sales of most good and services in Australia. The tax is applied at a rate of 10% and is usually included within the quoted price for any goods or services. Notable exceptions include basic foodstuffs, medicine and books).

3. Corporation Tax

Companies and corporations in Australia must pay tax on all profits. Unlike the personal income tax scheme which uses a sliding scale, corporate taxes in Australia are calculated at a flat 30% rate. It should be noted that tax is paid on corporate income at the corporate level before it can be distributed to individual shareholders as dividends.

4. Property Tax

Property tax is comparable with UK council tax and is the primary means of raising funds at state level. In addition to the rates that are charged by each states (these vary from state to state), stamp duty must also be paid to the state when purchasing a property. Again this can vary between locations and states and is largely dependent on the value of the property.