History of tax in Australia

Question 1 of 1

A brief tax history

Taxes have changed and evolved over time. Prior to 1901 taxes varied between the colonies and even today some taxes still differ according to the state and territory in which you live. After Federation in 1901, the Commonwealth Government gained control over some of the taxes and introduced others. Changing needs, technology and world events have all had an impact on the Australian tax system.

Timeline: tax history

Date

Tax event

Background information

Prior to 1901

Taxes imposed by each colony

Each colony (later state and territory) had its own tax system. Most of their revenue was gained from customs and excise duty. There was no free trade between the colonies. Income tax in various forms was introduced to Tasmania in 1880, South Australia 1884, New South Wales and Victoria in 1895 and Queensland in 1902.

1901

Federation

Under the Commonwealth of Australia Constitution Act 1900 (UK)the states and territories gave up the right to levy customs and excise duties. This meant a removal of all duties on goods traded between the states and territories. The states and territories gave up a number of other powers to the Commonwealth Government.

1915

World War I

The Commonwealth Government introduced a personal income tax and a tax on retained company profits to help pay for war expenses. The states were also still collecting income taxes. By 1918 income tax revenue provided one-third of Commonwealth tax revenue and half of state tax revenue. The name of the Land Tax Office, established in 1910, was changed to the Taxation Office to reflect its wider tax administration and collection roles.

1942

World War II

The Committee on Uniform Taxation recommended that the Commonwealth Government become the single income taxing body for the period of World War II. Much of the tax collected was then distributed to the states for their use.

1942

PAYE tax

The pay as you earn (PAYE) tax system where employees had their tax deducted periodically by their employer was introduced for wage and salary earners. A provisional tax system was introduced for non-wages and salary income.

1983

Contractor payments

The Prescribed Payments System was introduced to cover taxpayers paid by contract in certain industries such as building and construction.

1984

Medicare levy

The Medicare levy was introduced.

 

1985 Capital gains tax The capital gains tax (CGT) is a tax on the profits made on the sale of certain assets.

1986

Fringe benefits tax

The fringe benefits tax (FBT) taxes businesses that pay employees in fringe benefits such as cars and shares.

The CGT and FBT were introduced to widen the tax base and are designed to stop tax avoidance.

1997

Simplifying the Income Tax Act

The Commonwealth Government tried to simplify the Income Tax Assessment Act 1997 by introducing a new act and rewriting the provisions.

2000

GST

A New Tax System (ANTS) introduced major changes to the Australian taxation system. The changes included a 10% goods and services tax (GST) on the sale of most goods and services, changes in tax rates for individuals, and introduction of the business activity statement (BAS).

2006

Closing of tax havens

Project Wickenby, a multi-agency taskforce, was established with the aim of protecting the integrity of Australian financial and regulatory systems. It aimed to prevent taxpayers from participating in the use of secret tax havens.

2008

Proposed reform of tax system

The Review Panel on Australia's Future Tax System, known as the 'Henry Review', looked into a comprehensive reform of the tax system.

Source: Reinhardt, S and Steel, L 2006, 'A brief history of Australia's tax system', a paper that was presented to the 22nd APEC Finance Ministers' Technical Working Group Meeting in Vietnam, 01_Brief_History.pdf

  • Fact 12

    The expenses of World War I were so great that the Commonwealth Government introduced three new taxes in 1917: an entertainment tax, a wartime profits tax and a bachelor tax that raised such a bitter protest that it was never put into operation.

Franked dividend

A share of a company's distribution paid to a shareholder on which tax has been paid by the company.

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