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  1. #1
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    Default Taxes - what do we really understand about them?

    Okay - so I've seen a lot of discussion regarding taxes in the last couple of days here. I've seen some things people have brought up which seems ill informed, and other stuff which has got me wondering. So I thought I'd start a thread where people could discuss taxes and get a better picture. (eg. If people saw the things I was posting on earlier in the week, I started getting curious about other countries taxation systems and why they work there, but wouldn't (apparently) work here).

    I'll start it off.

    Do people here realise what our taxation system is in Australia?

    For example - the carbon tax - unless you own a big business, no member of the public actually pays the carbon tax. Same goes for the Mining resources tax. Yet, I've seen posts where people have said, "I pay tax, like the carbon tax"


    The main form of income via tax for the government is income tax.

    This is the current rates:
    Financial year 2012-13[3]



    Taxable income

    Tax on this income

    Effective tax rate



    0 – $18,200

    Nil

    0%



    $18,201 – $37,000

    19c for each $1 over $18,200

    0 – 9.7%



    $37,001 – $80,000

    $3,572 plus 32.5c for each $1 over $37,000

    9.7 – 21.9%



    $80,001 – $180,000

    $17,547 plus 37c for each $1 over $80,000

    21.9 – 30.3%



    $180,001 and over

    $54,547 plus 45c for each $1 over $180,000

    30.3 – 44.9%

    Goods and Services tax which was introduced in 2000 - I do fully remember when this happened - and honestly - prices didn't go up (or they went up by 5 or 10c). The reason was the corresponding decrease in Sales tax, state banking taxes, federal wholesale taxes and fuel taxes.

    Okay - I can't think of any other taxes at the moment, but I wondered how many people realise who is paying which taxes.

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    It always amazes me how many people don't understand how tax works. It's not like it doesn't happen to/affect all of us!

    I'm always shocked how many people don't understand how PAYG works. I can't tell you how many times my ex or someone has complained to me that he has been taxed too much by his employer. Your employer doesn't tax you! It estimates your tax liability, and if it works out to be too much you get whatever you have overpaid back as a return from the tax office. It's a bit like paying your electricity bill in advance every fortnight. You don't know how much your bill will be, so you estimate, and if you over estimated then you are in credit when the bill comes.

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    lambjam is offline Nitwit! Blubber! Oddment! Tweak!
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    Default Taxes - what do we really understand about them?

    While we don't pay things like the carbon tax directly, we certainly do indirectly. The whole point of the carbon tax is that it will be passed on to the consumer, who will then (hopefully!) make different choices.

    Re GST, I remember looking at the interim tags in Portmans around May/June. They had a pre-GST price and a "after June 30" price, which was exactly 10% higher. So those items certainly went up

    The GST simplified sales tax and did away with other, less visible taxes, but I'm not sure it's correct to say that costs didn't increase.
    Last edited by lambjam; 07-02-2013 at 12:24.

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    Gst is a funny one, because at the time there were also income tax cuts, meaning, the relative cost of goods was not supposed to change.

    I do agree that prices are supposed to rise due to the carbon tax, hence the "green energy bonus". Technically no person pays the carbon tax. Its the equivalent of fuel prices rising, leading to more expensive transport, leading to more expensive goods.

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    Default Taxes - what do we really understand about them?

    I was at uni working casual at Target when the GST came in (I remember getting awesome overnight 8 hours shifts at penalty rates doing repricing)
    Some stuff went up, other stuff when down. For example CDs had some kind of tax on them which was removed, and that tax was more than the GST was worth so their overall price went down. Bed linen didn't have the other tax, so it was +10% on the regular price.

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    Default Taxes - what do we really understand about them?

    I also find it amusing when people say they are paying 45% tax (or 50 as was claimed in previous threads!). I wonder if they realise they only pay that on the portion of their income which falls above the last tax bracket...I suspect they think it is 45% of their total income. Incorrect.

    I feel like I know a reasonable amount about tax as I run a small business, but I'm definitely no guru. Each fin year there are at least a couple of things I have to contact the ATO about to get a ruling on as I can't work out where they fit.

    As for people's perception of use taxes, yeesh don't get me started!
    As a citizen I have to accept that some of my money goes into a pool which contributes to funding things which I inherently disagree with (for example Medicare rebates on procedures I find morally offensive). I don't 'directly' get anything in terms of rebates etc as we are currently double-high-income-no-kids, but that's ok as I have confidence that I will be able to get those things should I need them at another point in my life.

    I consider some things a joyful bonus, for example I will receive PPL in July when I have my baby. Will that $11000 change our lives? No, but I'm still going to claim it.

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    Quote Originally Posted by shelle65 View Post
    It always amazes me how many people don't understand how tax works. It's not like it doesn't happen to/affect all of us!

    I'm always shocked how many people don't understand how PAYG works. I can't tell you how many times my ex or someone has complained to me that he has been taxed too much by his employer. Your employer doesn't tax you! It estimates your tax liability, and if it works out to be too much you get whatever you have overpaid back as a return from the tax office. It's a bit like paying your electricity bill in advance every fortnight. You don't know how much your bill will be, so you estimate, and if you over estimated then you are in credit when the bill comes.
    Yep. Also it's amazing how many people don't know whether they need to claim the tax-free threshold on their tax dec form when they start a new job. You should claim it (if you're sn Australian resident for taxation purposes), unless its a second job (and you're already earning above the threshold (around 18,000).

    Also, if your employer offers salary packaging, which effectively lowers your taxable income this increasing your total income, you need to be careful with HECS/HELP (and other government) debts you owe. These are not exempt from FBT amounts so you may still need to pay some extra tax (or get a rude shock at tax time).

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    Default Taxes - what do we really understand about them?

    Quote Originally Posted by MeetTheBluths View Post

    Also, if your employer offers salary packaging, which effectively lowers your taxable income this increasing your total income, you need to be careful with HECS/HELP (and other government) debts you owe. These are not exempt from FBT amounts so you may still need to pay some extra tax (or get a rude shock at tax time).
    Lol I totally did that as a new grad, had no idea how salary packaging worked, just knew that everyone said it was great. I packaged up to the maximum, including a new car (which I needed and would have bought anyway to replace my student banger), but then at the end of the fin year I nearly had a stroke when I was doing my tax return!

    It was my first big financial lesson in understanding something, not just doing it cos everyone else was.

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    Default Taxes - what do we really understand about them?

    One area of tax I know NOTHING about is capital gains tax.

    DH and I lived separately in our own houses before we got married last year so now one of them is going to be subject to CGT and DH keeps trying to explain to me how it works and I swear he tells he something different each time (which I'm sure isn't actually the case cos he knows that kinda thing inside out). Now whenever it comes up I plead pregnancy-brain and change the subject! Lol

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    Good thread idea. I actually looked up Canada's tax rates after the thread yesterday where I assumed our tax rates were higher. They're not. Canada has very high income tax rates. So why is the redistribution of tax money in Australia quite well geared (relatively speaking) toward family and individual support, and not so in other countries reaping just as much cash from the taxpayer?


 

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