There is Federal Government in Australia. Hence, all matters related to taxes and transfers are handled by different levels of the government. All the national, state and local levels of the government are linked with each other and considered as a single tax transfer system that has several components. An Australian citizen needs to contact with the Australian tax-transfer system, the state tax-transfer system and also the one at the local level to get his work done. Also, any business in Australia needs to interact with the government at multiple levels of the different states and local governments, along with the national tax-transfer system.
It has been seen that the national Australian tax transfer system works with four elements of tax- personal income tax, taxes levied on goods and services, transfers like cash payments and superannuation. Whereas on the state level we can see that the tax transfer system is more restricted and contains property and indirect taxes. The tax transfer system has its effect on both businesses and individuals residing in Australia. There are a number of taxes present in Australia presently at the national, state and local levels of the government. The tax-transfer system of Australia is present at all levels of the government and the entire structure of the tax system is too complex and complicated at delivering multiple objectives.
There are quite a few multiple policy objects that Australian tax-transfer system is trying to achieve in the years to come in order to enhance their social and economic outcomes. Some of the policy objects are as follows:
Generally Australians choices are very independent who likes to make choices about investing in education, how much money to be spend on what goods and services and how much money needs to be saved and to be invested. Now the Australian tax transfer system would have an impact on these choices through many channels. If we see the Federal system of government then we can notice that transfers and taxes are managed by several levels of government. All the State and local government systems are inter-linked and can be considered as one tax-transfer system with multiple components. Individuals interact with the tax transfer systems which reside with the State and local government. For individuals it is still manageable but for company and persons doing business it is a bit difficult. Since a company is doing business across several States and they tend to interact with multiple state tax systems and even many local governments in addition the Australian Government system. This shows that there is so much conflict and confusion between the State, Local and Central Government regarding the tax transfer system All the tax laws are interlinked and so when a company is dealing in transactions with several States then many a times there is a conflict between the laws. In such cases Court needs to intervene and solve the case. (Treasurygovau, 2016)
The role of Australian Government is much greater than the State and local government. Many a times they overlap each other since taxes and transfers handled by them differ. But if one can see the tax and transfer laws in Canada, both the Federal Government and States deals with same or similar taxes and transfers. But unfortunately same is not followed in Australia, due to which so many complications and confusions have been created. (Anueduau, 2016)
Now we will know how the Australian government handles taxes. Australian Government deals with four elements of the tax transfer system which are Superannuation, personal income tax, taxes on goods and services and transfers. These taxes are mainly dealt by individuals and they also interact with company tax as well. But when it comes on the State side then individuals generally deals with more restricted transfer system and a wide range of indirect and property taxes. If an individual is working in a company then company will also deduct tax if the income is more than the tax limit. Most of the tax which is collected by the government is paid by companies. Companies are also liable to pay fringe benefit tax and superannuation guarantee payments for their employees. Apart from this company also deals with the tax transfer system for their own right like payment of GST tax, payroll tax, and various other taxes which are levied on the company. Hence by this it can be concluded that companies which are operating in more than one State needs to deal with multiple Australian and State government tax systems. (Victoriaacnz, 2016)
As we have seen in the above paragraph the current tax system is very complicated and over-burdened. Taxes and transfers followed by both the Federal Government are not same or similar. The big problem lies is with the Central Government, so many types of taxes are involved that it becomes difficult for the company to do any business over Australia. (Aifsgovau, 2016) If any outside company wants to do any business in Australia then it would get confused with the tax system followed. Instead of doing business in Australia they would rather start a new business in any other country where tax system is much better placed. Australia’s tax level is relatively lower than most of the OECD countries. The tax level is below than the OECD average and even below than the countries like Canada and New Zealand. Even in the case of transfer system, Australia has a mixed transfer system of private and public support for retirement. Apart from this it also has the system of both voluntary and compulsory superannuation which are generally funded by employees, employers and also by the persons who are self-employed. (Bettertaxgovau, 2016)
If we see the retirement income process of Australia, then it is also a very complicated and a lengthy process. It has a three pillar retirement income system where the first pillar is a tested age pension which is treated as a universal minimum income safety net. While the second pillar includes compulsory contributory scheme which is only based on employee earnings. And lastly the third pillar includes tax advantaged voluntary saving which is generally derived through superannuation funds. (Sagovau, 2016)
As we have seen above that the current tax and transfer system is very complex and complicated, it has become necessary to change the entire tax and transfer system of Australia. To have an ideal tax system it needs to have some features which are discussed below: (Taxreview.treasury.gov.au, 2016)
At present there is dire need for the Australian government to take charge of the tax and transfer system and rationalise it in such a manner that it is enabled to overcome all the present shortcomings. Some of the factors to be taken into consideration by the Australian government are as follows:- (Taxreview.treasury.gov.au, 2016)
Now is the time to bring about changes in the tax and transfer architecture of Australia that is deeply overburdened with all the multiple demands and policy goals. There is dire need to rationalise the tax-transfer system of Australia at present day. (Choicecomau, 2016)
Hence it can be concluded that the entire tax system of Australian needs to be changed to have a transparency in the tax and transfer system. It should follow the system which is followed in Canada. Both Central and State government taxes should be similar to avoid any complexity.
Aifsgovau. 2016. Aifsgovau. [Online]. [26 August 2016]. Available from: https://aifs.gov.au/sites/default/files/publication-documents/changing_the_australia_taxation_system_towards_a_family_income_guarantee_submission_to_the_exonomic_planning_advisory_council.pdf
Alrc.gov.au. (2016). Complexity of the tax transfer system | ALRC. [online] Available at: https://www.alrc.gov.au/publications/7-income-tax/complexity-tax-transfer-system [Accessed 26 August 2016].
Anueduau. 2016. Anueduau. [Online]. [26 August 2016]. Available from: https://taxpolicy.crawford.anu.edu.au/files/uploads/taxstudies_crawford_anu_edu_au/2015-05/ttpi_chapter3.pdf
Bettertaxgovau. 2016. Bettertaxgovau. [Online]. [26 August 2016]. Available from: https://bettertax.gov.au/files/2015/06/Scott_Bernie.pdf
Choicecomau. 2016. Choicecomau. [Online]. [26 August 2016]. Available from: https://www.choice.com.au/money/budget/federal-budget/articles/most-australians-worried-about-2015-federal-budget-210415
Pc.gov.au. (2016). Tax and Transfer Incidence in Australia – Productivity Commission. [online] Available at: https://www.pc.gov.au/research/completed/tax-and-transfer-incidence [Accessed 26 August 2016].
Sagovau. 2016. Sagovau. [Online]. [26 August 2016]. Available from: https://assets.yoursay.sa.gov.au/production/2015/06/18/00_03_49_35_Name_withheld.pdf
Taxreview.treasury.gov.au. (2016). Architecture of Australia’s tax and transfer system. [online] Available at: https://taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_2-01.htm [Accessed 26 August 2016].
Taxreview.treasury.gov.au. (2016). Part 1: Overview – Chapter 1: The need for reform – Australia’s Future Tax System: Final Report. [online] Available at: https://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_1.htm [Accessed 26 August 2016].
The Conversation. (2016). Ideas for Australia: Five ideas to help fix Australia’s tax system. [online] Available at: https://theconversation.com/ideas-for-australia-five-ideas-to-help-fix-australias-tax-system-56272 [Accessed 26 August 2016].
Treasurygovau. 2016. Treasurygovau. [Online]. [26 August 2016]. Available from: https://www.taxreview.treasury.gov.au/content/Paper.aspx?doc=html/publications/papers/report/section_2-01.htm
Victoriaacnz. 2016. Victoriaacnz. [Online]. [26 August 2016]. Available from: https://www.victoria.ac.nz/sacl/centres-and-institutes/cagtr/pdf/smith.pdf
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