Unlock eSignature Legitimacy for Accounting and Tax in Australia

How to eSign a document: e-signature legitimacy for Accounting and Tax in Australia

in this video I'll explain how the Australian tax system works and the types of taxes Australians have to pay in an easy to understand format all in under 5 minutes let's get straight into it let's begin with income tax which is the main form of tax for individuals in Australia this is a tax you pay to the Australian government each year which includes salary and wages business income investment income and capital gains the amount of tax you owe depends on your taxable income which is your accessible income minus deductions accessible income is the income on which you must pay tax if it exceeds the taxfree threshold of $188,200 this income includes salaries wages business income and investment income deductions are job or business related expenses that you've paid for and can provide a receipt or invoice as proof you can find a list of claimable deductions on the ATO website which you can review yourself to see if any apply to you I'll leave a link down in the description Australia operates under a progressive tax system which means the more you earn the more tax you'll pay here are the current tax rates based on income you're not taxed on the first $188,200 that you earn however any income Beyond this is subject to to a progressive tax scale with the percentage increasing as your income Rises the tax rate starts at 19% and can go up to 45% if you earn over $180,000 most Australians fall into the middle bracket taxed at 32.5% please note these rates could change every year so it's important to check the current rates if you're watching this video in the future in Australia nearly everyone is charged a Medicare Levy this is an additional tax used to fund some of the cost of Australia's Public Health Care System known as Medicare since Medical Care is largely free in Australia everyone is expected to contribute a portion of their income to help fund it the Medicare Levy is 2% of your taxable income Medicare Levy search charge individuals who earn above a certain threshold and do not have Private Hospital cover may have to pay an additional Medicare Levy search charge depending on how much you exceed the income threshold by you may have to pay an extra 1% or more here is the current threshold and rates to avoid paying this search charge completely you can take out an appropriate level of Private Hospital cover from an eligible health insurance provider usually it makes more financial sense to buy Private Hospital cover since the cost will be less than the tax you would have to pay capital gains tax you'll need to pay capital gains tax if you profit from selling something that has increased in value such as shares or an investment property for example if you purchase shares worth $3,000 and sell them when their value Rises to $5,000 the capital gain or profit is $2,000 this amount will be added to your accessible income if you have shares that paid let's say $1,000 in dividends for the Year this is also taxable and will be added to your accessible income even if you have chosen to automatically reinvest it though it's not considered a capital gain but rather investment income I thought I would mention it here since we're talking about shares please note your family home also known as your principal place of residence is typically exempt from capital gains tax this is because you don't earn income from living in your own house I'll now use an example to illustrate how to calculate income tax payable our friend Tom here wants to calculate how much tax he has to pay for the year he has a $70,000 salary gained $2,000 from selling shares and received $1,000 in dividends from his shares portfolio he also has $5,000 in tax deductions to calculate his taxable income we add his salary capital gains and dividends which equals $73,000 after subtracting his $55,000 deductions we get $68,000 let's use this special tax calculator to find out his income tax payable so let's enter $68,000 and ing to the calculator his income tax payable is $2,567 and the breakdown is as follows no tax for income up to $18,200 19% tax for this portion of his income 32.5% tax for this portion of his income which gives us the initial total in addition to this a 2% Medicare levy on his total taxable income of $668,000 amounts to $1,360 adding the income tax payable a Medicare Levy gives us the total tax Tom owes for the financial year once this is subtracted from his taxable income we get Tom's income after tax and the Medicare Levy and this is how much income Tom has remaining after taxes see it's not that hard right I'll include a link to the tax calculator in the description below for your convenience goods and services tax GST Australians also have to pay goods and services tax or GST for short while not income tax the GST is a value added tax of 10% on most goods and services in Australia it's collected by businesses but ultimately it's paid by us consumers the Aussie government uses this money to pay for things like schools roads and hospitals so whenever you buy something just know a little bit of that money goes towards helping the country super annuation Australians have compulsory superannuation contributions where a portion of your income is paid into a retirement savings account known as a super annuation account usually this will be automatically taken from your salary and wages at work these super funds invest your money for you for your future retirement please note these contributions are taxed at a concessional rate which is lower than the regular tax rates therefore some people take advantage of this by contributing more than the minimum requirement which is known as salary sacrificing if you want to learn more about salary sacrifice I'll leave a link down below there are other taxes and levies in Australia that you may encounter such as property taxes stamp Duty and various excise duties on certain Goods like tobacco and alcohol the role of the ATO the Australian tax office or ATO is responsible for ensuring individuals and businesses declare all their taxes every year by lodging what's known as a tax return the Australian Financial year starts on the 1st of July and ends on the 30th of June the following year usually you'll need to Lodge your tax return by the 31st of October and if you use a tax agent you can usually delay it until 15th of May the following year a tax return can be lodged for the financial year by yourself online or through a registered tax agent if you have a business it's recommended that you go through a tax agent to ensure you have declared all your income correctly and you have included all your eligible deductions by the way if you're enjoying this video or found it use for comment the word Kangaroo Down Below so I know who you are and if you're new around here what are you waiting for mate hit that subscribe button and join this wonderful Community also please consider signing up to my free newsletter Aussie money Club where once a week I'll send you some money tips major news in the market or any cool life updates from me and if you're interested to learn how to maximize your Australian tax return this year check out this video on screen and as always thank you for watching I appreciate you and I'll see you in the next video [Music]