Accessible transcript - Tax and you

Accessible transcript - Tax and you

This is the accessible text transcript for Tax and you.

Introduction

This interactive will help you to understand how tax affects you personally – now and in the future.

Tax in your life today

Whether you know it or not, tax is already affecting many aspects of your life, providing goods, services and infrastructure that you probably use every day. Tax is collected in various ways. Some things incur tax, allowing the government to collect money or revenue. The collected revenue is then used by the government to subsidise (partially pay for) certain goods, services and public infrastructure.

Your task

Examine the items in your bedroom and consider which things that you think may be affected by taxation.

For each item, decide whether it:

  • has incurred tax (ie you paid tax on it when you purchased the item), or
  • was subsidised by tax revenue (ie the cost of the item was partly paid for by the government), or
  • was not affected by taxation.

1. Internet access

Millions of Australians buy a computer and access the internet via a vast network of copper and fibre optic cabling.

Internet access

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1 and 2.

A portion of Australia's tax revenue is used to maintain and expand infrastructure such as copper cabling and fibre optic networks. Goods and services tax (GST) of 10% is also charged on the supply of most goods and services, including your access to the internet. This means that your access to the internet is both subsidised by tax revenue and subject to tax.

2. Travel card

Purchase of this yearly concession travel pass entitles you to cheaper travel on public transport.

Travel card

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1 and 2.

A portion of Australia's tax revenue is used to assist various members of our community to cover the cost of public transport. These include students, certain public servants, politicians, senior citizens and people with disabilities. In Australia, goods and services tax (GST) is charged on the supply of most goods and services, including the purchase of your concession travel pass. The GST rate is set at 10%. This means that your yearly concession travel pass is both subsidised by tax revenue and subject to tax.

3. Ventolin inhaler

This Ventolin inhaler was prescribed to you by your local doctor to help treat your asthma.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.
 

The correct answer is: 2.

A portion of Australia's tax revenue is used to help citizens meet the cost of healthcare. This includes funding hospitals, clinics, ambulances and medication.
This means that your Ventolin inhaler is subsidised by tax revenue.

4. Hockey stick and local sports facilities

You recently purchased a new hockey stick, and your neighbourhood has a number of public sports facilities including a hockey pitch where you play hockey with your friends. There's also a football field and a swim centre.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1 and 2.

A portion of Australia's tax revenue is used to develop and maintain public facilities such as sports grounds, parks and recreation centres. Goods and services tax (GST) of 10% is also charged on the supply of most goods and services, including the purchase of a hockey stick. This means that your local hockey pitch is subsidised by tax revenue and the purchase of the hockey stick is subject to tax.

5. Glass of water

Clean water is provided to most Australians via government-owned agencies at a state and territory, or local level.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 2.

A portion of Australia's tax revenue funds the agencies that are responsible for public services and utilities such as water. This means that the water running out of the tap is subsidised by tax revenue.

6. Electricity

The Australian Government assists the fossil fuel industry to reduce the cost of electricity for the general public.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.
 

The correct answer is: 1 and 2.

A portion of Australia's tax revenue funds the provision of services and utilities such as electricity. In this specific case, the Australian Government subsidises the fossil fuel industry to bring down the cost of electricity for the general public. Goods and services tax (GST) of 10% is also charged on the supply of most goods and services, including the purchase of electricity. This means that the electric light in your room is both subsidised by tax revenue and subject to tax.

7. Your house

Your mum bought this house using the First Home Owner Grant, a government grant that helps Australians to buy their first home. She also paid stamp duty to the state government at the time of the purchase.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.
 

The correct answer is: 1 and 2.

Houses are subject to taxes such as stamp duty, but they can also be subsidised through tax-funded initiatives such as the First Home Owner Grant. This means that your house is both subject to tax and subsidised by tax revenue.

8. Income pay slip

When you started your first job, you quoted your tax file number (TFN). Your employer deducts tax from your pay each fortnight and sends it to the ATO.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1.

One of the ways tax revenue is collected in Australia is through personal income tax. If you earn over $18,200 in a financial year, you'll pay personal income tax. This is a direct deduction from your pay according to set rates. The more you earn, the greater the percentage deducted. This means that the income from your part-time job is subject to tax.

9. Stereo

You saved up for six months to buy this $1,500 stereo system. It was made in Korea and then imported by an Australian store.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1.

One of the ways tax revenue is collected in Australia is through import duties. When overseas goods arrive in Australia, a tax is charged based on their value. Goods valued at less than $1,000 are exempt from import duty. This tax is paid by the business who imported the goods and forms part of the final sale price in an Australian store. Goods and services tax (GST) of 10% is also charged by the Australian Customs and Border Protection Service on many goods imported into Australia.

Even if you had imported the stereo yourself, you would still have to pay both the import duty and GST. This means that your $1,500 Korean stereo system was subject to tax.

10. T-shirt

You picked up this T-shirt last Saturday from the local shopping centre.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1.

One of the ways tax revenue is collected in Australia is through a national goods and services tax, also known as GST. In Australia, GST is charged on the supply of most goods and services, including clothing. The GST rate is set at 10%. This means that your T-shirt was subject to tax.

11. Collectable toy

You bought this collectable toy from an American online store for $150.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 1.

One of the ways tax revenue is collected in Australia is through import duties. When overseas goods arrive in Australia, a tax is charged based on their value. Goods valued at less than $1,000 are exempt from this tax.

Goods and services tax (GST) of 10% is charged by the Australian Customs and Border Protection Service on many goods imported into Australia. This means that your $150 collectable toy was subject to tax.

12. Apple

Your parents always buy loads of fresh fruit and vegetables when they go to the supermarket.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 3.

One of the ways tax revenue is collected in Australia is through a national goods and services tax, also known as GST. In Australia, GST is charged on the supply of most goods and services. The GST rate is set at 10%. However, most basic food for human consumption is GST free. This includes food and beverages such as fruit, vegetables, meat, bread, cheese, sugar and milk. This means that your apple was exempt from tax.

13. World Vision sponsor child

Last year your family started sponsoring Baakir. He's eight years old. Each month, your mum makes a $43 donation to the charity that runs the program. You put in $10.

How is this item affected by tax?
Note: There may be more than one correct answer.

  1. It incurred tax.
  2. It was subsidised by tax revenue.
  3. It is not affected by tax.

The correct answer is: 3.

Donating to charity is a worthwhile act and is encouraged by the Australian Government. All donations to approved organisations are exempt from tax, and may even be claimed as a tax deduction by the donor if they are $2 or more in value. This means that your family's World Vision sponsorship is exempt from tax.

Well done – you've finished Part 1!

It's surprising how many everyday things are affected by the tax system. Taxation, and the distribution of tax revenue, has a huge impact on our society.

What future impacts do you think the tax system will have on you personally? What happens when you leave school, and beyond that?

Tax in your life tomorrow

Say hello to your future.
Soon you'll leave school. Will you go on to further study, or get a job? Perhaps you'll start a family, or launch your own business. This activity will help you think about the choices you will make in the years ahead and to understand how tax will affect you and the people you know.

Your task
Imagine you have just left school. As you move through life, different choices will be presented to you. Your responses are up to you – the only goal is to live the life you want. Along the way you'll be asked to predict how your choices will affect your relationship with tax. Keep in mind that past decisions will shape future choices!

Examine the pathways below and then make your choice by selecting one of the options presented. You may select pathways in any order.

1. Further study

How will the decision to do further study change your relationship with tax?

  1. I can apply for a student loan to help fund my studies.
  2. I should apply for an Australian business number (ABN) to quote when I buy my textbooks.
  3. I will need to lodge a form with the ATO to get back the goods and services tax (GST) on my course fees.
  4. I will have to start paying company tax. I can apply for a student loan to help fund my studies.

The correct answer is: 1.

There are a number of ways the Australian Government assists students. You may be eligible for a student loan that you can repay over time through the taxation system.

You only need an ABN if you are conducting a business enterprise, not to buy your textbooks.

You won't pay GST on your course fees and you can't claim a GST refund from the ATO on any private goods and services you purchase.

You cannot claim back GST on study-related items such as books though these may be deductible via your income tax return.

Unless you set up a company, you are not going to have to pay any company tax.

2. Get a job

How will the decision to get a job change your relationship with tax?

  1. I will have to start lodging business activity statements (BAS).
  2. I will have to lodge a tax file number (TFN) declaration form.
  3. I will have to start paying fringe benefits tax (FBT).
  4. I need to keep receipts for all my lunches so I can claim a tax deduction. I will have to lodge a tax file number (TFN) declaration form.

The correct answer is: 2.

When you start a new job, your employer will ask you to complete a tax file number declaration form.

You will not need to lodge a business activity statement, as you are not conducting a business enterprise.

You will not need to pay fringe benefits tax.

Your lunches are a private expense and are not tax deductible.

Go to the ATO website for more information about what happens when you start a new job.

3. Start a family

How will the decision to start a family change your relationship with tax?

  1. I need to see a financial planner to set up a family trust.
  2. I need to register with the ATO to claim back the GST on my childcare fees.
  3. I may be able to claim certain tax offsets in my income tax return.
  4. I will have to start lodging business activity statements (BAS).

The correct answer is: 3.

The Australian Government provides a range of benefits that you may be eligible for to help you when you start a family. You may be able to claim a tax offset in your tax return which will reduce the amount of tax you have to pay.

While a family trust may be something you consider, you don't need to set up a family trust just because you are starting a family.

Childcare fees are GST free, and you can't claim a GST refund from the ATO on any private goods and services you purchase.

You will not need to lodge a business activity statement, as you are not conducting a business enterprise.

4. Start your own business

How will the decision to start your own business change your relationship with tax?

  1. I will need to lodge a business plan and a budget with the ATO.
  2. I won't have to pay tax at all.
  3. I will have to apply for an Australian business number (ABN).
  4. I will need to set up a new Facebook account.

The correct answer is: 3.

When you start a business, you should apply for an Australian business number (ABN). An ABN is a single identifier for all your business dealings with the ATO.

If you don't have an ABN, other businesses will usually need to deduct withholding tax from your payments and you will not be able to register for GST.

Preparing a business plan and budget will give your business the best chance of success, but is not a tax requirement.

While you might consider promoting your business via Facebook, you do not need to have a Facebook account for your business.

The Australian Government provides a wide range of assistance to help new businesses. The ATO offers personal assistance visits, small business seminars and there is information available on the ATO website to help you.

5. Buy a house

How will the decision to buy a house change your relationship with tax?
Note: There may be more than one correct answer.

  1. I will pay stamp duty on the house purchase.
  2. I will begin to pay rates for local services.
  3. I will need to register an ABN for the house.
  4. Because it's my home, I will get a refund of the GST paid when it was built.

The correct answer is: 1 and 2.

State and territory governments impose stamp duty on the purchase of properties.
Local councils charge rates to help pay for the many services they provide including parks, recreational facilities and rubbish collection.

You do not need to register for an ABN when you buy a house.

You can't claim a GST refund from the ATO on any private goods and services you purchase, including your house.

People you know

Income tax

In Australia, anyone earning over $18,200 in a financial year pays income tax. This money is used by the Australian Government to fund a wide range of services throughout the community. Let's take a closer look at how some of this income tax revenue has been spent.

Your older brother has driven from interstate to visit you. Along the way he noticed how major roadworks have been completed along what used to be a series of notorious blackspot locations, making the journey much safer.

Your brother also benefited from several new bypasses, allowing him to skip small country towns and the seventeen sets of traffic lights that used to hold him up!

All of these improvements were subsidised by income tax collected throughout Australia, producing a safer, faster and more fuel-efficient journey for your brother.

Tax from business

Tax from businesses such as your shoe store forms an important part of Australia’s taxation revenue. Let's explore how some of the tax from business is being used to help your community.

Meet Rosie, a single mum with two young children.

Rosie's son has breathing difficulties and needs constant medical care, meaning Rosie can't work as much as she needs to.

Up until recently the family could only afford to live in a small two bedroom flat. However today they are moving into a brand-new three bedroom townhouse, provided through the city's public housing initiative.

Additional funding for this initiative was sourced from government revenue. The business taxes collected nationally contribute to this revenue, which is then redistributed by the Australian government to pay for public services. This additional funding allowed more houses to be built, providing Rosie and her young family with a roof over their heads.

Family assistance

Family assistance programs throughout Australia are funded in part through taxation revenue. Let's take a look at how these services will help you and your new family.

Congratulations! It's a girl!

You've chosen to start a family, and to help you on your way the local health clinic and parenting group contacts you to ask about your immediate needs and offer their support.

The local area nurse makes a house call, inspecting your new nursery and offering advice on everything from feeding schedules to bathing techniques for your little girl.

The nurse also makes an appointment for you to have your baby immunised against deadly diseases such as diphtheria, whooping cough, polio and pneumococcal disease – all free of charge thanks to the National Immunisation Program.

Further study

Pursuing further study is an amazingly worthwhile decision, but life as a student can be tough! Luckily a portion of Australia’s taxation revenue is used to assist students and universities, making the decision to study more affordable.

Shaun, your study buddy, worked hard at high school and was awarded a Commonwealth supported place at university. That means that he has to pay part of the cost of his education while the Australian Government pays for the rest.

But Shaun also qualified for a student loan that allows him to defer the cost of the university fees. The Australian Government pays the fees on his behalf, and then he repays the government through the tax system once he graduates and starts earning a wage. Shaun also has a yearly travel concession pass that is subsidised by tax revenue.

Even with the help it's not easy, but at least he gets a chance to fulfil his dream.

Stamp duty and rates

Many people are surprised by the range of important local services that are funded through stamp duty and rates. Let's explore some of the more interesting uses of this tax revenue.

Your local council has just opened a new skate park and recreational hall near your new house. It's a great place to meet friends and play sport, and your nephew and his mates love the half-pipe!

The park is maintained by a local ranger, who ensures all of the equipment is in good order, the benches are clean and the lighting works at night.

All of these services are funded through your local council, using income collected from property rates. The state government has also contributed some of the stamp duty it collects with each property sale.

Retirement

Let's jump ahead to a time in life that nearly everyone will face, but we rarely think about – retirement.

Superannuation is money set aside over your lifetime to provide for your retirement. For most people, super begins when you start work and your employer starts paying super for you. You can also build your super with your own contributions to take advantage of super's favourable tax treatment. It’s important to keep track of your super throughout your life, so if you change your name, address or job, you need to keep your super fund updated.

Hopefully, you’ve built up your super so that you can enjoy the retirement lifestyle you want.

How will retirement change your relationship with tax?

  1. I can rely on the government age pension to pay for all the things I want to do when I retire.
  2. If I take control of my super when I'm young, this will assist me in ensuring that I have the money I need when I retire.
  3. I don't need to think about super until I'm a lot older.
  4. I don't need to worry about super because my employer will look after me.

The correct answer is: 2.

For some people, the government age pension may not be enough to support the lifestyle they desire.

You may spend 20 years or more in retirement and your money will need to last, so make sure you understand how super works.

Because super gives the opportunity to enjoy the benefits of compound interest and is a long-term investment, the earlier you start to manage your super the better. Super could be your largest asset by the time you retire.

You need to make sure that your employer is contributing the right amount of money to your super fund. Also, if you make personal contributions to your super fund, you are able to take advantage of the attractive tax incentives that investing in super offers.

Summary

As you've discovered throughout this task, our choices in life will have a huge impact on how we contribute to and benefit from taxation revenue. You can look at a summary of all the choices presented to you in Parts 1 and 2 of this activity, including those choices you may have skipped along the way.

You left school

In Part 1 of this activity you learnt how many aspects of your life are affected by Australia's tax revenue. Items in your bedroom such as your internet access, travel card, medication, access to public sports facilities, tap water and even the electricity powering the lights were subsidised by tax revenue. Other things such as the income from your part-time job, your stereo, T-shirt and the house you live in were subject to tax. This left your collectable toy, a piece of fruit sitting on your desk, and your World Vision sponsorship, all of which were exempt from tax.

It's surprising how many everyday things are affected by the tax system. Tax, and the distribution of tax revenue, has a huge impact on our society.

Further study

The Australian Government assists students in many ways, including:

  • student loans that can be repaid over time through the tax system
  • subsidised places at university for Australian citizens, reducing the cost of further study
  • subsidised travel costs for students.

Get a job

The income tax paid by employees throughout Australia helps to pay for a wide range of national, state and local services, such as:

  • roads and highways
  • hospitals and healthcare
  • parks and recreation facilities.

Start a family

The Australian Government provides a range of benefits that you may be eligible for to help you when you start a family. Some examples are:

  • paid parental leave
  • special tax deductions for families
  • health clinics and community services
  • immunisation.

Start your own business

The Australian Government provides a wide range of assistance to help new businesses.

The ATO makes information readily available on the ATO website and also offers personal assistance visits and small business seminars to help you. Tax revenue collected from businesses throughout Australia contributes to many of the goods and services used by Australians every day, such as:
  • electricity
  • water
  • emergency services.

Buy a house

Houses are subject to taxes such as stamp duty, but they can also be subsidised through tax-funded initiatives such as the First Home Owner Grant. This means that property purchases are both subject to tax and subsidised by tax revenue.

Retired

In the future, most Australians will rely on their super to pay for their retirement. Super is money set aside over your lifetime to provide for your retirement. For most people, contributing to super begins when you start work and your employer contributes to super for you. You can also build your super with your own contributions to take advantage of super's favourable tax treatment.

If you take an interest in your super when you're young, you will have a better chance to save for the things you most like to do when you retire.

Government goods and services

Throughout your life you also used many other government goods and services. Here we have reproduced a summary of each.

Roads
Tax revenue is used throughout Australia to build, maintain and improve our extensive network of roads, highways and freeways.

Parks
A portion of Australia's tax revenue is used to develop and maintain public facilities such as sports grounds, parks and recreation centres.

Emergency services
Emergency services such as the fire brigade, police and ambulance services are subsidised by tax revenue.

Healthcare
A portion of Australia's tax revenue is used to help citizens meet the cost of healthcare. This includes funding hospitals, clinics, ambulances and medication.

Water
A portion of Australia's tax revenue funds the agencies that are responsible for public services and utilities such as water.

Transport
A portion of Australia's tax revenue is used to assist various members of our community to cover the cost of public transport. These include students, certain public servants, politicians, senior citizens and people with disabilities.

Electricity
A portion of Australia's tax revenue funds the provision of services and utilities such as electricity. For example, the Australian Government subsidises the fossil fuel industry to bring down the cost of electricity for the general public.

  • Fact 3

    'Taxes, after all, are dues that we pay for the privileges of membership in an organised society'. Franklin D Roosevelt

Capital gains tax (CGT)

A tax on the profit made when selling or disposing of an asset such as investment properties, shares and collectables. The net capital gain amount, or the discounted capital gain amount in certain circumstances where a discount applies, is added to assessable income and income tax is then calculated on the taxable income. A person’s main residence (their home) is generally exempt and motor vehicles are exempt from CGT.

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