TAXATION: A BRIEF OVERVIEW
Tax is a compulsory payment payable to the national, local, or regional government for the purpose of undertaking the activities and works for the public welfare. Australian law dictionary defines tax as ‘an invariable sum of money assessed as payable by a particular individual or other entity in accordance with the relevant legislation’.
On the other hand, A dictionary of law defines tax as ‘a compulsory contribution to the state’s funds. It is levied either directly on the taxpayer by means of income tax, capital gains tax, inheritance tax, and corporation tax or indirectly through tax on purchases of goods and services and through various kinds of duty such as road tax, duties on betting and game etc’.
The law governing the taxes is known as taxation law and the system of levying tax is known as taxation. As per Section 51 of the Australian Constitution, the power to impose taxes and to make laws regarding the collection and administration of taxes lies with the Commonwealth. The primary objective of taxation is to provide funds to the governmental activities. Adam Smith in his work ‘The Wealth of Nations’, provided for some of the features for a well-designed effective tax system. These are:
- Equality
- Certainty
- Convenience
- Efficiency
This blog aims to acquaint you with the basics of taxation law prevalent in Australian legal system.
SOURCES OF TAXATION LAW
Prior to the era of 1901, the primary source of revenue for the Australian colonies was the customs duties and the excise taxes. However, post World War II, the Commonwealth gained the power of income tax in their hands and ultimately retained this power with themselves. The most prominent case laws in the history of taxation law in Australia are: South Australia v. Commonwealth, (1942) 65 CLR 373 (also called as ‘First Uniform Tax Case’) and Victoria v. Commonwealth, (1957) 99 CLR 575 (also called as ‘Second Uniform Tax Case’).
The sources of taxation law in Australia are as follows:
- The primary source of taxation law is the legislations. Legislation is a law enacted through the will of the legislature. Taxation law is contained in the some of the following legislations:
- Income Tax Assessment Act, 1997.
- Income Tax Assessment Act, 1936.
- A New Tax System (Goods and Services Tax) Act, 1999.
- Fringe Benefits Tax Assessment Act, 1986.
- Second source of taxation law is the judicial system of the country. The Courts are entrusted with the responsibility of interpreting the law. From time to time, judges make the new law where existing legislations or precedents are inadequate.
- Another source of taxation law is the doctrine of precedents. It is a practice where the Courts are obliged to follow the decisions given by the superior courts in a similarly situated situation.
BASIS OF TAXPAYERS IN AUSTRALIA
Taxpayers in Australia can range from being natural persons to artificial entities such as companies to deemed non-entities such as partnerships, trusts etc. Taxpayers are generally categorized by the following features:
- Entity type (for example, individual or corporate)
- Size (for example, small businesses)
- Industry (for example, banking or primary production)
- Relationship to other entities (for example, corporate groups, family members, settlors etc.)
- Residency
CONCLUSION
Taxation system is the backbone of the financial system of any country and Australia is no exception to it. Effective taxation system helps in the adequate generation of revenue which in turn helps the government to work for the welfare of the public effectively and efficiently in the country.
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