Income tax is the most important source of revenue for government within the Australian taxation system.
Income tax is collected on behalf of the federal government by the Australian Taxation Office.
In 1942, to help fund World War II, the federal government took over the raising of all income tax, to the exclusion of the States.
In addition, the Temporary Budget Repair Levy, introduced by the Abbott Liberal government, was payable at a rate of 2% for taxable incomes over $180,000.
[5] In addition, the Temporary Budget Repair Levy was payable at a rate of 2% for taxable incomes over $180,000.
In addition, the Temporary Budget Repair Levy was payable at a rate of 2% for taxable incomes over $180,000, and expired on 1 July 2017.
[5] In October 2016, the federal government passed a bracket adjustment that raised the third marginal tax rate threshold from $80,000 to $87,000.
[6] The temporary budget repair levy, which was introduced by the Liberal–National coalition Government under Prime Minister Abbott in financial year 2014/15 and payable at a rate of 2% for incomes over $180,000, ceased to apply on 1 July 2017.
The current tax-free threshold for resident people is $18,200, and the highest marginal rate for individuals is 45%.
In addition, most Australians are liable to pay the Medicare levy, of which the standard is 2% of taxable income.
[7] As with many other countries, income tax is withheld from wages and salaries in Australia, often resulting in refunds payable to taxpayers.
The levy was set at 1% of personal taxable income and applied to all but the lowest income-earning tax-payers.
[8] The Medicare levy was raised again by the Keating Labor government in July 1993, up to 1.4% of income, again to fund additional healthcare spending outlays.
[9] The Labor government was not re-elected in September 2013, but the Medicare levy increase went ahead as scheduled in July 2014.
[10] In May 2017, Turnbull's Liberal–National coalition Government announced that from 1 July 2019, the Medicare levy will increase from 2% to 2.5% to fully fund the National Disability Insurance Scheme.
The Australian Taxation Office (ATO) offers various tax offsets to provide targeted assistance to different groups of taxpayers, encouraging certain behaviours or helping those in specific situations.
For employees with only a single job, the level of taxation at the end of the year is close to the amount due, before deductions are applied.
From 2015 to 2016, designated "small business entities" with an aggregated annual turnover threshold of less than $2 million were eligible for a lower tax rate of 28.5%.
Since 1 July 2016, small business entities with aggregated annual turnover of less than $10 million have had a reduced company tax rate of 27.5%.
The small business definition will remain at $10 million from 2017 to 2018 onwards, however the base rate entity threshold (the aggregated annual turnover threshold under which entities will be eligible to pay a lower tax rate) will continue to rise.
Net capital gains (after concessions are applied) are included in a taxpayer's taxable income and are taxed at marginal rates.
The Government under Prime Minister Howard replaced cost base indexation with the allowance for a simple discount to apply to gains on capital assets held for more than twelve months (one year).
The disposal of assets which have been held since before 20 September 1985, when capital gains tax went into effect, are exempt from CGT.
When assessing the amount of ordinary income, only the profits are counted based on a notional basis.