As a freshman pursuing accounting in Australia, taxation may appear as one of the most troublesome chapters one may face during your education. That is possibly because you don’t have a solid understanding of the different taxes. Discovering the various forms of taxes will assist you to find accurate solutions to accounting problems in an efficient manner.
Now, let’s dive in to discuss the different types of taxes that every accounting student should know about.
1. Income tax
Income taxes are the primary sources of revenue for funding the different initiatives of the government.
Income tax is levied on people who belong to the taxable group of people. The idea of income tax originated in Tasmania. And by 1907, income tax was levied on the income of almost every individual residing in all the states of Australia.
2. Goods and Services Taxes
The government in Australia charges 10% tax on the supply of goods and services. This tax is usually imposed on people who have registered for GST.
Supplies like medical services, food products, services related to education are free from GST. They may be taxed on financial services or accommodation (residence). The revenues, which the government generates from Goods and Services tax are distributed among the various states.
3. Property Taxes
State governments rely heavily on property taxes for carrying out various initiatives. Property taxes from commercial establishments, residential complexes, and industrial houses fund the state governments.
There are situations when the local governments levy a tax on the value of the land. Taxes imposed on the value of the land is ideally applicable to properties of very high value.
4. Corporate Taxes
The corporate taxes in Australia are levied 30% flat rate. Companies need to pay tax to the federal government in Australia for the profits they earn. Before the distribution of profits (as dividends) among the shareholders, the corporate tax is paid to the government.
Franking credit, which is basically a tax credit in Australia, is made available to the shareholders so that they can check the corporate tax, which has already been paid. This process is considered as dividend imputation.
5. Excise Tax
Excise taxes are imposed by the federal government on cigarettes, alcohol, and petrol. These are regarded as elastic goods because the demand for these goods is always present even if there is an increase in the prices of these commodities.
With this knowledge, you can now easily grasp the taxation chapter of accountancy.