ATO Overview
whether you are a sole trader, a businessman, or any other resident of Australia, taxes can be tricky but let’s explore it together by having an overview of ATO that can be helpful for you. On this page, we have tried to explain ATO and the rules of the Australian Taxation Office for different kinds of taxes in Australia in simple words.
What is ATO?
It stands for Australian Taxation Office which is an agency that collects revenue from different organizations, businesses, and individuals in the country who are entitled to pay taxes in Australia on behalf of the Australian government such as income tax, goods and services tax and other taxes. The government uses this revenue in different public services. Each person and business must lodge their tax if they are entitled to pay tax to the Australian Taxation Office.
Brief history of ATO
It was formed in 1953, by the expanding duties and responsibilities of the Commonwealth Taxation Office in Australia, as a result, It was converted into an Australian Taxation Office. ATO undergoes many reforms and changes for the development of a better taxation system in Australia.
Key responsibility of ATO
It is responsible for managing taxes all over the country which is utilized in many support and social services and for other developments in Australia. It ensures that individuals, trusts, companies, and other entities lodge their tax returns. It is advised to hire a tax agent for the lodgement of taxes because they are well aware of the taxation laws of the country. To pay taxes such as GST, you must have an Australian Business Number.
It manages different kind of tax systems some of which are as follows
- Income tax
- Goods and services tax (GST)
- Fringe benefit tax (FBT)·
- Excise tax
Tax rates for Residents and Nonresidents
ATO has set different criteria for the main two types of residents. It works on the criteria of self-assessment; and will charge more tax on more taxable income.
Non Residents for tax purpose
Non-residents also known as foreign residents are the People who don’t live in Australia and are non-residents as per the residency criteria of ATO. They will pay tax to the Australian Taxation Office for their Australian-based income only. Generally, the non-residents do not benefit from the tax-free threshold. They are also not liable to pay medical levy which is 2 percent of their taxable income.
| TAXABLE IMCOME | TAX ON THIS INCOME |
|---|---|
| 0 – $120,000 | 32.5c for each $1 |
| $120,001 – $180,000 | $39,000 plus 37c for each $1 over $120,000 |
| $180,001 and Above | $61,200 plus 45c for each $1 over $180,000 |
Residents for tax purpose
People who live in Australia and meet the residency criteria of the Australian Taxation Office are considered to be residents for tax purposes. They will pay tax on their worldwide income.
| TAXABLE INCOME | TAX ON THIS INCOME |
|---|---|
| 0 – $18,200 | Nil |
$18,201 – $45,000 | 19c for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
$120,001 – $180,000 | $29,467 plus 37c for each $1 over $120,000 |
$180,001 and over | $51,667 plus 45c for each $1 over $180,000 |
Medical Levy on taxable income
In addition to this tax, Australian residents will pay a medical levy to the Australian Taxation Office, which is 2 percent of their taxable income.
Tax rates for backpackers
Besides these two basic categories, there is another type of tax rate for working holidaymakers. They can be eligible for superannuation if they meet certain criteria. Their tax bracket will be as follows:
| TAXABLE INCOME | TAX ON THIS INCOME |
|---|---|
| 0 – $45,000 | 15c for each $1 |
| $45,001 – $120,000 | $6,750 plus 32.5c for each $1 over $45,000 |
| $120,001 – $180,000 | $31,125 plus 37c for each $1 over $120,000 |
| $180,001 and over | $53,325 plus 45c for each $1 over $180,000 |
ATO Role in building economy of Australia
The Australian Taxation Office plays a significant role in building a strong economy in the country. It manages different kinds of taxes by enforcing tax laws throughout the country and helps individuals by offering online services and providing them guidance for their tax returns.