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Income Tax
Income tax is levied on taxable income and is paid to the Commonwealth Government. Taxable income is calculated as assessable income less any allowable deductions. Deductions include such things as wages, the cost of stock, rent, bad debts, and previous year losses.
Companies
A company is a distinct legal entity, with its own income tax liability, and must complete a Company Tax Return. A companys income tax is calculated as a percentage of the taxable income the company earned during the financial year. Companies complete a company tax return to calculate the income tax the company should pay. The company tax rate is 30 percent. The amount of tax to be paid is reduced by any PAYG instalments payable during the year.
Partnerships
A partnership that is carrying on a business must show in a Partnership tax return all its income earned and deductions claimed for expenses in the course of carrying on business. Partnerships complete a partnership tax return to show the partnerships income and deductions, and how the profit or loss was shared among the partners.
Each partner pays tax on their share of the partnerships income, and thus must include their individual share of the net partnership profit or loss in their personal tax return.
Trusts
The taxation of trusts is slightly more complex and beyond the scope of this reading. If you would like more information in this regard you should contact our office.
Individuals
Income tax is calculated on taxable income, which is the persons assessable income less any allowable deductions.
Resident Tax Rates 2008-09 (exc. Medicare Levy):
| Taxable Income | Tax on this income |
| $ 0 - $ 6,000 | - |
| $ 6,001 - $ 34,000 | 15c for each $1 over $ 6,000 |
| $ 34,001 - $ 80,000 | $ 4,200 plus 30c for each $1 over $ 34,000 |
| $ 80,001 - $ 180,000 | $ 18,000 plus 40c for each $1 over $ 80,000 |
| Over $ 180,000 | $ 58,000 plus 45c for each $1 over $ 180,000 |
Resident Tax Rates 2007-08 (exc. Medicare Levy):
| Taxable Income | Tax on this income |
| $ 0 - $ 6,000 | - |
| $ 6,001 - $ 30,000 | 15c for each $1 over $ 6,000 |
| $ 30,001 - $ 75,000 | $ 3,600 plus 30c for each $1 over $ 30,000 |
| $ 75,001 - $ 150,000 | $ 17,100 plus 40c for each $1 over $ 75,000 |
| Over $ 150,000 | $ 47,099 plus 45c for each $1 over $ 150,000 |
Tax offsets reduce the tax payable. Tax offsets based on taxable income levels apply to:
- Individuals on low incomes
- Individuals who receive certain Australian government allowances and payments
- Senior Australians
Other tax offsets apply to those living in remote areas, people with dependants, and those who receive particular types of income or incur particular expenses.
Sole traders are not required to complete a separate return for their business as they use their personal income tax return to report their business income and deductions.
For more detailed information on how the taxation system effects you and your business, contact us for an initial free no-obligation meeting.
Quest Chartered Accountant, St Leonards
