Every businessperson understands that tax is an essential topic to be familiar with and have control over. Even if you are a regular employee in Australia, it is important that you understand a significant deal about tax and superannuation. It is one of several ways to work towards tax compliance. Let’s go back to basics to understand further.
Why Do We Pay Tax?
Firstly, you need to understand that the Australian Taxation Office is the body that collects tax for the Australian Government. The taxes we all pay fund community services such as education, health care, emergency services, and many more basic services. Basically, taxes keep the country running and ensure that we can all enjoy safe, healthy, and comfortable lives in a functioning society.
Difference Between Tax and Superannuation
Tax and superannuation are normally discussed together as if they are the same thing, but they are not. While they are related, these two concepts are different in many regards. While tax is what citizens and residents of Australia pay to fund several community services, superannuation is money set aside during working life for when the taxpayer retires. Employers pay superannuation directly into a fund (employees can choose a fund and keep track of the entries) that the employee will benefit from after retirement.
Different Types of Taxes for Different Entities
Businesses and individuals in Australia are not taxed the same. There are different types of taxes paid by Australian citizens, the differences all coming down to what you do, how you make your money, and how much you earn. Businesses are taxed based on their business activities and revenue sources. Individuals are taxed on income and capital gains. Australia also uses what is called a progressive tax scale, meaning that the tax rate increases as taxable income increases.
Companies are treated as separate entities from their shareholders for the purpose of taxation. The implication is that income received by the company is taxable to the company. Company profits are taxed at flat rates.
In addition to income tax and capital gains taxes (CGT), the Australian Government also collects goods and services tax (GST). This is a broad-based consumption tax that is similar to what is called value added tax (VAT) in most countries. Other taxes and levies in the country include fringe benefits tax (FBT), Medicare levy and Medicare levy surcharge, the superannuation guarantee charge, and luxury car tax.
Working Towards Tax Compliance
Tax is an obligation and tax compliance is something every business and individual must achieve. It can be challenging when you don’t understand the language and if your knowledge of taxation is limited. To achieve tax compliance without a headache, it is best to work with a reliable accounting firm.
Quantum Accounts can help you every step of the year to file and pay your taxes on time, every time.
Contact us to set up an obligation-free consultation.