It is a rarity to find the claim of Australian tax office among the claims of other tax administrators that it needs tax for payment of community services such as health care, education, emergency services, roads and train lines, Australian defenses, welfare and disaster relief among tax collecting nations.Let us take pleasure to learn the most intricately developed tax system of Australia, the land of thousands of the most talented students who go there, learn and settle down or move to their countries to practice their learning.Let us look at the details.India ranks among the countries which sends maximum students/professionals/artists to upgrade their skills.
The obvious reference to their web site is
ATO indicates Australian tax office during the whole discussion in this article.
What is TFN?
Popularly known as Tax file number which is essential to pay the taxes as an identification number.
It is tax payer’s personal reference number in the tax and superannuation systems.
You can apply for a TFN at any age.However, if you apply online using myGovID, one must be 15 years old or older and have an Australian passport.
Tax year
1 July to 30th June
Tax return due date
31 October
Resident tax rates 2022–23
|
|
Resident tax rates 2022–23
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $45,000||19 cents for each $1 over $18,200|
|$45,001 – $120,000||$5,092 plus 32.5 cents for each $1 over $45,000|
|$120,001 – $180,000||$29,467 plus 37 cents for each $1 over $120,000|
|$180,001 and over||$51,667 plus 45 cents for each $1 over $180,000|
The above rates do not include the Medicare levy of 2%.
Deductions
Work related expenses
Other expenses
Motor vehicle and car expenses
Travel expenses
Clothing, laundry and dry-cleaning expenses
Self-education expenses
Who do we have any other work- related expenses in view of other developments in technical field?
Do you know that you are entitled for expenses related to your tax matters as narrated below?
Cost of preparation of your tax return, your spouse return, consultation fees, cost of software used, tax return preparation software cost, usage of services of a tax preparer, travel expenses related to visiting his/her office, litigation costs if any, related to tax matters contesting the decision of tax authorities,.
Capital gains tax
Investments and assets
Taxation of employer-provided stock options – Discounts provided to employees on shares or options acquired under an employee share scheme (ESS) are generally included as ordinary income in your assessable income for that year.The governing rules are complex and professional advice should be sought.
A qualifying share or option is a share or option acquired under an ESS that satisfies certain prescribed conditions.
The taxable discount amount for shares is generally the difference between the market value of the share and the amount you paid.For options, the discount is the greater of the following two amounts:
No tax withholding obligation is imposed in Australia for benefits under employee share schemes, unless you fail to give your employer your Australian Tax File Number (TFN) by the end of the financial year.
Let us look at the government website for guidance.
Information for investors including deductions you can claim | Australian Taxation Office (ato.gov.au)
From the same place, the following are covered in details.
Top ten tips to avoid rental property owners commit common tax mistakes
What are they?
Apportioning expenses and income for co-owned properties.
Make sure your property is genuinely available for rent, getting initial repairs and capital improvements right, claiming borrowing expenses, claiming purchase costs, claiming interest on loans, getting construction cost correct, claiming right proportion of the expenses, keeping right records, getting capital gains right while selling etc.
Top tips for investment property, rental properties-interest expenses, rental properties-borrowing costs, same topic under damaged or destroyed property, renting out a room and proper expenses to be claimed etc.
Capital gains tax on sale of rental properties, what happens to real estate transfers when marriage or relationship fails, capital gains tax on sale of investments, etc.
Let me cover crypto assets investments and tips to manage them.
This is very important in view of collapse of many important banks which dealt with the said investments for many high-net-worth clients.
Crypto assets
Covered from the web site of the Australian tax authorities for authenticity and clear directions too.(This is the first time I have come across clear directions on this highly disputed topic from the top tax authorities, a clear departure from the conservative approach of others.)
“Make tax time easier by remembering these 3 tips:
1.Disposal of crypto assets
2.Calculating capital gains tax (CGT) on crypto assets
3.
Keep records
1 Disposal of crypto assets
You must report a disposal of crypto assets for capital gains tax purposes if you:
If you only transfer crypto from one wallet to another wallet while maintaining ownership, it’s not considered a disposal of crypto for tax purposes.If your crypto holding reduces during this transfer to cover the network fee, the transaction fee is a disposal and has capital gain consequences.
You have a CGT reporting obligation even if you: • use the proceeds from selling crypto to buy more crypto • don’t convert the proceeds into fiat currency (for example, A$)
2 Calculating capital gains tax (CGT) on crypto assets Convert your crypto asset purchases and sales into A$ to calculate your capital gain or capital loss.
A capital gain or capital loss is the difference between your: • cost base (cost of ownership – including the purchase price of the coin plus certain other costs associated with acquiring, holding and disposing of it) • capital proceeds (what you receive or the market value of what you receive) when you dispose of your crypto.
If you purchase crypto using AUD, the amount you pay is included in your cost base.
If you acquire a crypto asset by exchanging it for another crypto asset, your cost base is the market value in A$ of the crypto you used at the time you purchased the coin.”
What precautions to be taken while using crypto assets?
Complete details of purchase price along with cost of purchase, timing of purchase with documentary proof of the same, and if sold, complete details with expenses to sell.The purchase price at the time of purchase of one crypto at the exact time along with the sale with similar details like one AUD equivalent to —- crypto currency will help in calculating capital gain or capital loss.The website detailing the transaction must be valid for the tax authorities.
It is also advisable to get the guidance of tax authorities in this regard.
Only the capital gains tax payer makes from disposing of personal use crypto acquired for less than $10,000 are disregarded for capital gains tax purposes.
The tax payer’s CPA is expected to verify the standing instructions of the authorities to act thereafter.
Business
Tax treatment for business enterprises is as under:
Simplified depreciation rules
One can choose to use the simplified depreciation rules for a small business with an aggregated turnover of less than:
Aggregated turnover is based on the income of the business and that of any associated businesses.
Simplified depreciation rules for small business include:
There are three temporary tax depreciation incentives available to eligible businesses – temporary full expensing, the increased instant asset write-off and backing business investment.The details of these three incentives are available in the official web site of the ATO.
Tax rates for business
Corporate tax rate is 30% but after heightened public watch over MNCs tax performance, a commentary on the same is reproduced from government.
“Each year, we are required by law to publish certain tax information.
For the 2022–23 income year and onwards, this includes:
For income years up to 2021–22 the following thresholds apply:
Entities include all taxpayers treated as corporations for tax purposes, for example:
We do this through the Report of entity tax information.The data in each report is taken directly from tax returns.
You can access the Report of entity tax information at data.gov.au.external link
How we produce the report
The Report of entity tax information includes information from returns and amendments (requested by the relevant entity), that are processed by 1 September of the year following the tax year being reported.If an entity’s relevant labels show an amount of zero or less, we leave that field blank.
In accordance with the law, we cannot include any details of amended assessments issued by us following audits or settlements.
If an entity lodges after 1 September, their information will be published the following year.
We write to affected corporations each year to advise them about the forthcoming report.This allows them time to advise us if the information is not correct.
Due to tax law confidentiality provisions in the Taxation Administration Act 1953, we can’t give information beyond what’s published in the Report of entity tax information.
Entities and organisations named in the report can choose to provide further information under the voluntary tax transparency code.”
My observation
It is admirable to see income tax authority actually commenting upon the income of big corporations who virtually rule the world by avoiding declaration of income, and come under public eyes who like you or me actually pay the tax.
With so much discussions on not for profit organizations in India who did not submit financial statements on time and some getting their registration delisted, let us learn the rules in Australia which is a much smaller nation compared to us but with too much social welfare for its citizen.
An NFP organisation is an organisation that is operating for its purpose and not for the profit or gain (either direct or indirect) of its individual members.If it operates for profit, it loses its tax benefit status and be charged for taxation.
NFP organisations are of two broad categories, namely, charities and others non NFP ones like for sports, recreation, community service, professional or business organizations.
Charities must register with the Australian Charities and Not-for-profits Commission (ACNC) before they can be endorsed by taxation authorities for tax concessions or apply for certain categories of deductible gift recipient (DGR) status.
Other NFP organisations that are not charities may be able to self-assess whether they are income tax exempt or taxable, or whether they will have access to other tax concessions.
They will need to be authorized by tax authorities to obtain DGR status.
Charities indulge in charitable purposes for the good of the society.
Before you start an NFP organisation
Before starting a charity, the organizers of charities must consider
The legal structure you choose should meet your organisation’s needs now and into the future.
The organisation’s legal structure will affect many things, such as:
Legal structures commonly used by NFP organisations include unincorporated associations, incorporated associations, companies, cooperatives, Indigenous corporations and trusts.
Different legal structures have different reporting requirements and tax obligations.
Tax concessions
Depending on the type of NFP organisation, different tax concessions are available and the process for accessing each concession varies.
Charities need approval of authorities for tax free treatment.For others, they may themselves assess their status.
The tax concessions NFPs may access include:
To access tax concessions and NFPs may need to register for an Australian business number (ABN), GST, FBT, pay as you go (PAYG) withholding, fuel tax credits or other taxes.
In addition to tax registrations, they may need other licences, permits or registrations to operate.
An annual review of legal matters is recommended by tax authorities.
About deductible gift recipients (DGR)
When you receive donations to support your organisation, your supporters can claim a tax deduction if you have been endorsed by us as a deductible gift recipient (DGR).
All organisations, including charities, must be endorsed by us as a DGR if they want their donors to be able to claim a tax deduction.
Due process is needed for proper registration for legal, taxation or other regulatory matters.
To register a NFP organization following steps are needed:
1.0 To assess legal and taxation status
2.0 To obtain ABN from the government
3.0 Get registration for GST, FBT, PAYG withholding if need be.
and verify whether a director identification number (director ID) is essential.
Detailed endorsement process from the government is available in the web site of the government.
Conclusion
The latest approval of Indian-Australian free trade agreement, an epoch- making event of the century was the spur for this article.Third largest number of Indian students/professionals and now business people visit Australia, a vast span of area still to be explored and developed for business purposes.Taxation other than visa occupies the second most important subject to be taken care of in case of close business cooperation.
Australia ranks among the best with its tax administration, tax professionals and all types of precedents to tackle tax matters.Being one of the most structured tax administrations with maximum cooperation for business people, huge opportunities exist to multiply the business between India and Australia..
