Tort law refers to the set of laws that provides remedies to individuals who have suffered harm by the unreasonable acts of another. The law of tort is based on the idea that people are liable for the consequences of their actions, whether intentional or accidental, if they cause harm to another person or entity.15 A person who is the claimant in a tort may sue for damages or other relief.
Torts can be committed by an individual or by an organisation or business. Some examples of torts are:
- Negligence where a person suffers harm because another party fails to take proper care
- Negligent misrepresentation is where a person's reputation and standing in the community are affected, which causes financial loss.
- Defamation is when another party publishes untruthful statements that damage a person's reputation.16
Examples
How tort law may affect bookkeepers or accountants
Incomplete Records
Bookkeepers are responsible for capturing all the data related to business revenue and expenses, verifying the accuracy of the entries and monitoring the accounts. The bookkeeping entries form the basis for generating financial statements and should be complete records. However, clients sometimes submit incomplete documentation if they do not have certain receipts, invoices or purchase orders. As a bookkeeper, you cannot fabricate records and should not submit incomplete records. Doing so may expose you to legal action if a client sues.
Regulatory Oversight
Australia has laws that regulate business recordkeeping. Since bookkeepers input data and prepare interim financial statements, they are subject to these laws and standards. The universal accounting standards in Australia are the Generally Accepted Accounting Principles (GAAP), which guide all bookkeepers and accountants on how to treat business revenues and expenditure transactions.11 There are also standards that the Australian Accounting Standards Board (ASSB) set to establish a uniform accounting framework. Bookkeepers are expected to be familiar with these and to perform their duties accordingly. Failure to do so under ASSB and GAAP may lead to failure to exercise a duty of care as a bookkeeper or accountant.
Legal Changes
The law relating to financial recordkeeping and reporting changes in line with evolving business needs and socio-economic concerns. For example, there have been recent changes to employing and payrolling staff due to COVID-19 or the annual change to superannuation guarantee charges. Bookkeepers, therefore, must stay updated to avoid incurring legal liability for failing to comply with the law.11
A failure of duty of care towards a client may lead to a charge of negligence.
Negligent conduct is conduct that, in the court's opinion, falls below an acceptable standard. You are negligent if you fail to do something that a reasonable person would do or do something that a reasonable person would not do, and as a result, you cause harm to someone else.
For a person to be found negligent, the case will be heard in a civil court because it is a matter of common law. Many cases of negligence are settled out of court by the legal. The parties agree on how much money will be paid to satisfy the plaintiff.17
To claim negligence, the plaintiff must show:
- That the defendant owed the plaintiff a duty of care
- That the defendant breached that duty of care
- As a result of the breach, the plaintiff suffered damages.
Duty of Care
A duty of care is the duty that one person owes to another person to avoid causing reasonably foreseeable harm to that person. However, every person does not owe a duty of care to every other person. There must be a sufficient relationship of proximity or closeness between two people for a duty of care to exist. Examples of relationships that give rise to a duty of care include:
- Supplier and consumer
- Bookkeeper and client
- Directors and Company
Owing a duty of care to someone makes a person responsible for taking reasonable steps to avoid harm being caused to that other person. Negligence only arises when one person owes a duty of care to another. A person cannot be liable for negligence unless they owe a duty of care to another person.
The most commonly cited test to establish whether a duty of care exists is the “neighbour principle” in the case of Donoghue v Stevenson. The video below
Breach of a Duty of Care
Once it is established that a duty of care was owed by one party to another party, the court will then consider what specifically the duty of care required to be done or not done.
Generally, the standard of care to be expected is that of a reasonable, ordinary person. In assessing this, the court will consider what an ordinary, normal and reasonable person would likely have done in the defendant's position. This standard is higher in cases involving allegations of professional negligence. These cases involve relationships where one party owes a duty to another under their professional qualifications and expertise. For example, an accountant or bookkeeper with a qualification owes their client a higher standard of care than an ordinary person would.
If a person has failed to meet the standard of conduct by doing something less than would be expected of either a reasonable person or a relevant equivalent professional, they will have breached their duty of care.
Causation of Damages
To successfully allege negligence, the claimant must have suffered damage as a direct cause of that breach. The claimant must establish that they would not have sustained the damage “but for” the defendant’s breach.
Remedies for Negligence
The primary remedy for negligence is damages, which are financial payments. This aims to put the claimant back into the position they would have been in had the negligence not occurred. Damages are awarded for both economic and non-economic losses.18
Examples of accounting negligence could include:
- Bad advice
- Incorrect tax liability assessment
- Failure to identify tax exemptions
- Decision-making without considering your interests
- Financial malpractice
- Unreasonable accounting errors
Case Law
Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997): This case involved a negligence claim against an accounting firm for failing to detect fraud during an audit. The engagement between the parties included a disclaimer of liability clause, which attempted to limit the accountants' liability for negligence. The court held that the disclaimer clause was ineffective because it was not brought to the client's attention before the engagement, and the firm was found liable for the losses suffered by the client due to their negligence.
A claim for negligent misstatement is a type of legal claim used to recover financial losses caused to a person who has relied upon advice or a statement, either written or verbal, that is negligent.19 Hedley Byrne v Heller established the legal criteria for claims to recover losses from negligent statements.
Accountants and bookkeepers often advise clients about their finances or ways to optimise financial outcomes for their businesses. If this advice is incorrect and the person or business to whom it was given loses money, they may seek compensation due to the tort of negligent misstatement. Liability depends on whether a duty of care is owed by the accountant or bookkeeper (known as the defendant in a court action) to the client (known as the plaintiff in a court action) who claims to have suffered financial loss because of the advice. Liability in negligence also depends on whether the defendant has fallen below the required standard of care, measured against professional standards and regulations as a minimum, and whether the defendant's negligent advice caused the financial loss to the plaintiff.
Case Law
Simic v New South Wales Land and Housing Corporation (2016): This case involved a negligent misstatement claim against an accountant who provided incorrect financial advice to a client. The accountant was found liable for negligent misstatement as they had not taken reasonable care in providing accurate advice, leading to financial loss for the client.
The Australian Consumer Law (ACL) is a national law that protects consumers and applies to anyone who runs a business in Australia. The Australian Competition and Consumer Commission (ACCC) state and territory consumer protection agencies jointly administer the ACL. The ACL includes:
- a national unfair contract terms law covering standard form consumer and small business contracts;
- a national law guaranteeing consumer rights when buying goods and services;
- a national product safety law and enforcement system;
- a national law for unsolicited consumer agreements covering door-to-door sales and telephone sales;
- simple national rules for lay-by agreements and
- penalties, enforcement powers and consumer redress options.20
Visit the Australian Consumer Law's website to learn more.
The Office of Fair Trading (OFT) deals with consumer claims in Australia. It has responsibility for:
- providing a safe and fair marketplace for businesses and consumers
- advising consumers about their legal rights when it comes to guarantees, refunds and warranties
- assist consumers in negotiating a resolution to a complaint
- investigating complaints and taking enforcement action against businesses that break consumer law
- investigates and educates the community about scams
- enforcing safety standards for household goods, toys, electrical goods and overseeing product safety
- issues licences to people employed in a range of industries to ensure professional standards are maintained
Consumer Warranties
There are basic inferred warranties for consumers. This means that all goods and services purchased must be:
- of a reasonable quality
- fit for the job the seller said they would do or that they were advertised to do
- match the description or sample given
- have no defects
- have spare parts or be able to be repaired unless the consumer is otherwise advised.
Resolving complaints against a business
If there is a complaint, the business that sold the product or provided the service must do what it can to resolve the complaint. If the complaint cannot be resolved, the OFT will mediate the complaint. Mediation by the OFT is free, which may mean there is no need for legal action. If mediation does not result in a resolution, the OFT can advise taking the complaint to court.
For consumer claims, there is a range of civil, administrative and criminal enforcement remedies available to the OFT to:
- stop unlawful behaviour by businesses
- fix any harm caused by a business’s conduct
- make sure businesses comply with laws in the future
The following video explains customer rights under Consumer Law.
The following video demonstrates the ACL's power in its action against Telstra, which resulted in Telstra being issued the second-largest fine in Australian consumer law history.
A contract is a promise or set of legally binding promises. Without enforceable contracts, business could not exist. Individuals and businesses are constantly entering into them when they buy and sell goods and services. For example, when a client agrees to engage you as a bookkeeper, you enter into a contract with your client. Certain criteria must be met for a contract or legal agreement to be formed.
In Australia, this requires that there be:
- An Offer made by one party. An offer is a verbal or written communication, amounting to a promise to do something or not do something. The offer is not considered an offer until the offeree receives it. An offer can be made by:
- Letter
- Newspaper
- Website
- Fax
- Behaviour
- Acceptance of the offer by another party. Acceptance is a statement, oral, written or by conduct, by the person accepting the offer. An offer may only be accepted by the person to whom it is directed and must be a valid acceptance by promising to do or not do something in exchange.
- Consideration for the offer. Consideration is a payment given in exchange for the promise or the price paid for the offer. The common law requires that, for an agreement to be binding, the offer and acceptance must provide consideration for the promise they have received.
- Intention to create a legal relationship between the parties. Usually, the presence of consideration will provide evidence of this. However, there are certain categories with a presumption that the parties do not intend for their agreement to be a contract. This includes families and some social relationships.
One of the most famous cases that set precedence for contract law is the Carlill v Carbolic Smoke Ball Co. Watch the video below to learn where the court interpreted contract law in this 1893 court case. - Capacity to contract. Certain people and classes cannot enter into a contract. This makes the contract not enforceable against them. These include the following people:
- A person with a mental disorder
- An intoxicated person
- A drug-affected person
- A bankrupt person
- An older person lacking the capacity
- Minors (person under the age of 18)
The following video explains the principles of contract law.
Express and Implied Contract Terms
In contract law, an agreement can be formed in writing through a discussion by the parties or implied.
Express contract terms - If a contract is written down, it often contains express terms (words) that set out the details of the contract. Express contract examples are:
- mobile phone contracts
- a contract to buy a new car
- employment contracts
Implied contract terms can be determined by fact, law, dealing, custom or usage. Implied contracts examples are:
- ordering food at a café
- hailing a taxi to take you home after your meal at the café.
The first examples above imply that the food will be delivered promptly and edible and that you will pay for it before leaving the café. In the second example, it is understood that you will pay the taxi driver once you arrive home.
Australian Securities and Investments Commission (ASIC)
ASIC is an independent Australian Government body set up under the Australian Securities and Investments Commission Act 2001 (ASIC Act) to regulate the Corporations Act.
ASIC's role is to: iii
- maintain, facilitate and improve the performance of the financial system and entities in it
- promote confident and informed participation by investors and consumers in the financial system
- administer the law effectively and with minimal procedural requirements
- receive, process and store efficiently and quickly information we receive
- make information about companies and other bodies available to the public as soon as practicable
- take whatever action we can, and which is necessary, to enforce and give effect to the law.
Who ASIC Regulates
ASIC regulates companies, financial markets and financial services and enforces the following legislation:
- Business Names Registration Act 2011
- Corporations Act 2001 (Corporations Act)
- Insurance Contracts Act 1984
- National Consumer Credit Protection Act 2009 (National Credit Act).l
Real-life Example: Common Law in the Financial Services Industry
Negligence Case – ASIC v Brighton Hall Securities Pty Ltd (in Liquidation)
ASIC commences proceedings against Perth financial services business 43
Wednesday 7 October 2009
ASIC has applied for leave in the Federal Court in Perth to commence proceedings against Brighton Hall Securities Pty Ltd (in Liquidation). This action, which will seek damages on behalf of several Westpoint investors who were clients of Brighton Hall Securities, is one of 19 civil actions ASIC is now taking to recover funds for the benefit of Westpoint investors.
ASIC will allege that Brighton Hall Securities was negligent in investigating Westpoint products and its subsequent recommendations to its clients to invest in Westpoint products.
Brighton Hall Securities carried on a financial services business from Applecross and South Perth in Western Australia before entering into liquidation in September 2007. ASIC’s proposed claim against Brighton Hall will seek to recover compensation of $14 million. However, given Brighton Hall’s liquidation, the funds available to satisfy this claim are anticipated to be limited to any available insurance proceeds.
ASIC has filed this application following negotiations with the relevant parties to prevent the need to commence litigation. ASIC uses its power under section 50 of the ASIC Act, which enables it to begin and carry on civil proceedings for damages for investors where it appears to ASIC that such proceedings are in the public interest.
Approximately 170 investors could benefit from the action should the application for leave to file succeed. An investor’s entitlement to benefit from the action will depend on the product type and the investor’s circumstances. The matter will return to the Court on 16 November 2009.
Property law governs the various forms of ownership and tenancy in real property (land as distinct from personal or movable possessions) and personal property within the common law legal system.
Australian Property Law
Australian property law, or property law in Australia, is the system of laws regulating and prioritising the Property law rights, interests and responsibilities of individuals about "things". These things are a "property" or "right" to possess or own an object.
The main legal property rights are:
- the right of possession,
- the right to control,
- the right of exclusion,
- the right to derive income and
- the right of disposition.
There are exceptions to these rights, and property owners have obligations and rights.
What is ‘property’?
The idea of property is multi-faceted. The term ‘property’ is commonly used to describe real and personal property types. ‘Real’ property encompasses interests in land and fixtures or structures upon the land. ‘Personal’ property encompasses tangible or ‘corporeal’ things—chattels or goods, like a car or a table. It also includes certain intangible or ‘incorporeal’ legal rights, ‘choices in action, such as copyright and other intellectual property rights, shares in a corporation, beneficial rights in trust property, rights in superannuation and some contractual rights, including, for example, many debts. Intangible rights are created by law. Tangible things exist independently of law, but law governs rights of ownership and possession in them—including whether they can be ‘owned’ at all.
For more information, check out ALRC – Australian Law Reform Commission.
Fair Work Act 2009
The Fair Work Act 2009 is the place to refer to for all matters concerning Australian employment laws. The Fair Work Commission (FWC) is a national tribunal charged with dispute resolution regarding the Fair Work Act 2009.
From its inception, the purpose of the legislation was to create a national workplace relations system for employees.
The key components of the Fair Work Act are the National Employment Standards (NES). The ten minimum entitlements of the NES are:
- Maximum weekly hours
- Requests for flexible working arrangements
- Parental leave and related entitlements
- Annual leave
- Personal carers leave and compassionate leave
- Community service leave
- Long service leave
- Public holidays
- Notice of termination and redundancy pay
- Fair Work Information Statement20
Awards
Awards are instruments that specify the minimum terms and conditions of employment for all classes of employees. Federal and state industrial tribunals create these awards. No employer can negotiate the minimum conditions of the award.
Equal employment
business.gov.au describes in detail Equal Employment and all that it covers. According to them, national and state laws cover equal employment opportunity and anti-discrimination in Australia. All employers are required by these laws to create a workplace free from discrimination and harassment. Employers must understand your rights and responsibilities under human rights and anti-discrimination laws. By putting effective anti-discrimination and anti-harassment procedures in place in the business, productivity and efficiency can improve.21
Privacy act
According to the Office of the Australian Information Commissioner - The Privacy Act 1988 (Privacy Act) is an Australian law regulating individuals' personal information handling. This includes the collection, use, storage and disclosure of personal information and access to and correction of that information.
The Privacy Act includes…
13 Australian Privacy Principles (APPs) that apply to the handling of personal information by most Australian and Norfolk Island Government agencies and some private sector organisations.
- Credit reporting provisions that apply to the handling of credit-related personal information that credit providers are permitted to disclose to credit reporting bodies for inclusion on individuals’ credit reports
The Privacy Act also…
Regulates the collection, storage, use, disclosure, security and disposal of individuals' tax file numbers
- Permits the handling of health information for health and medical research purposes in certain circumstances where researchers are unable to seek individuals' consent
- Allows the Information Commissioner to approve and register enforceable APP codes that have been developed by an APP code developer or developed by the Information Commissioner directly
- Permits a small business operator, who would otherwise not be subject to the Australian Privacy Principles (APPs) and any relevant privacy code, to opt-in to being covered by the APPs and any relevant APP code
- Allows for privacy regulations to be made15
Superannuation is money put aside by an employer over employees' working lives so that employees have funds to live on when they retire from work. Superannuation is important because the more money a person has in super, the more they will have in retirement.
You can only withdraw your super money in certain circumstances – for example, when you retire or turn 65. iv
Your employer must pay a minimum amount based on your ordinary time earnings' current super guarantee rate into your nominated superannuation fund. This is set to rise gradually over the coming years. The rate is currently 11%. Ordinary time earnings are what you generally earn for ordinary work hours, including over-award payments, certain bonuses, allowances, and some paid leave. Payments for overtime hours are generally not included in ordinary time earnings.
You can also add your money to your super savings; sometimes, the Australian Government puts money in.
As an accountant or bookkeeper, you must understand what you need to do when paying super for employees super fund choices, including requesting super fund details, making super contributions using SuperStream or the Small Business Superannuation Clearing House (SBSCH) and the penalties that apply if you fail to pay employees super to their chosen super fund on time.
For more information on Superannuation, check out the ATO website.
What is Australian taxation law?
Section 51(ii) of the Australian Constitution grants the Commonwealth the power to impose taxes and laws regarding the collection and administration of taxes. However, since 1942, only the Commonwealth has imposed income tax, which is by far the largest source of revenue for the Commonwealth Government.
Jurisdiction to tax
The Federal Government of Australia has jurisdiction to tax Australian residents on income from worldwide sources and non-residents on only Australian-sourced income. Australian legislation contains specific rules relating to residency to determine whether an individual or company is a resident for tax purposes. Australia also has a system for determining whether an income amount is sourced in Australia or another country. Generally, income is sourced in the place of employment or the fixed place of business.
International transactions are often sourced according to where the relevant contract is made, although these broad rules often vary depending on the circumstances. The risk associated with the residence and source rules is that one amount of income may be taxed in two different countries. To avoid this, Australia has entered into many double tax agreements with other countries, which will prevail over domestic law to ensure that taxation is only imposed once on any given income.
In addition, Australia also operates a system of foreign tax credits under which tax credits are given to Australian residents who pay foreign tax on foreign income. These credits are then used to offset against Australian tax paid on the same amount, ensuring income is only taxed once.
The Australian taxation system is complex and constantly changing. In Australia, there are approximately 125 taxes. Some of them apply to accountants and bookkeepers, as explained below. You must familiarise yourself with the taxes that impact your role and apply them correctly.44 The video below will give you an overview of the Australian tax system.
Taxes on income
Taxable income is generally an entity’s total assessable income, less allowable deductions. If a loss is incurred, it may be carried forward to future years, provided the loss carry forward tests are.44
Taxation of individuals and business entities
Individuals
Individuals are taxed on income and capital gains according to the abovementioned rules. As stated, Australian resident and non-resident individuals can be subject to income tax and CGT depending on the source of the income.
Australia uses a progressive tax scale system to tax individuals. Under this system, the rate of tax payable increases as taxable income increases. Tax rates are subject to change.44 The tax tables below are current as of December 2023.
See the ATO website for the current year's tax rates for Australian Residents.
| Taxable income | Tax on this income |
|---|---|
| 0–$18,200 | Nil |
| $18,201–$45,000 | 19 cents for each $1 over $18,200 |
| $45,001–$120,000 | $5,092 plus 32.5 cents for each $1 over $45,000 |
| $120,001-$180,000 | $29,467 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 |
The above rates do not include the Medicare levy of 2%.
| Taxable income | Tax on this income |
|---|---|
| 0–$120,000 | 32.5 cents for each $1 |
| $120,001–$180,000 | $39,000 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $61,200 plus 45 cents for each $1 over $180,000 |
For the current year's tax rates for Foreign Residents, see the ATO website.
Companies
A company in Australia is a distinct entity that is separate from its shareholders. Income received by a company is taxable to the company after applying residency and source rules similar to those that apply to individuals.
Unlike individuals, however, company profits are taxed at different rates.44
| Income year | Aggregated turnover threshold | Tax rate for base rate entities under the threshold | Tax rate for all other companies |
|---|---|---|---|
| 2023-24 | $25m | 25.0% | 30.0% |
| 2022-23 | $25m | 25.0% | 30.0% |
| 2021–22 | $50m | 25.0% | 30.0% |
| 2020–21 | $50m | 26.0% | 30.0% |
| 2018–19 to 2019–20 | $50m | 27.5% | 30.0% |
Note: This includes corporate limited partnerships, strata title bodies corporate, trustees of corporate unit trusts and public trading trusts.
Dividends companies pay to their shareholders are included in the shareholders’ assessable income and are subject to a ‘dividend imputation system’. The purpose of this system is to pass on a ‘credit’ to shareholders for the tax that the company has paid on the profits from which dividends are paid. This system, therefore, ensures that dividends are ultimately taxed at each shareholder’s applicable income tax rate. Access to credits, however, only applies to Australian resident shareholders.
A tax consolidation regime also applies for 100% owned group companies, allowing them to consolidate income for the entire group and ignore transactions within the group for income tax.44
Capital Gains Tax (CGT)
CGT is imposed on gains realised from the sale of assets, with special rules applicable to the valuation of capital gains.
The assets subject to CGT are very broad for taxation and include tangible and intangible assets.
Certain assets, such as motor vehicles, personal use assets and one’s main residence, are subject to exemptions, while foreign residents are subject to capital gains on only a limited range of assets, such as real property.
Capital gains are included in taxpayers’ assessable income and, therefore, taxed at each taxpayer’s applicable income tax rate (see below, Taxation of Individuals).
If the capital asset is held for longer than 12 months, Australian residents are entitled 50% discount for taxation purposes. The CGT rules have recently been amended so that non-residents can no longer access the 50% discount. Any capital loss incurred can be offset only against capital gains.
The aim of this guide is to provide a broad introduction to the framework of Australia’s tax system. The Australian tax system is a mix of direct and indirect taxes levied by both the Commonwealth and State governments, depending on the type of tax. The Commonwealth is Australia’s federal (or national) level government, which can impose taxation on all Australian taxpayers.
Various tax incentives for capital investment and inbound investments to Australia may apply in certain circumstances for a limited period of time.44
The following video explains capital gains tax.
To read more on Capital Gains Tax, visit the ATO website.
Goods and Services Tax (GST)
GST is a broad-based consumption tax (similar to the Value Added Tax in other countries) imposed on selling most goods and services in Australia and those imported into Australia.
It is levied at a flat rate of 10%. Some supplies, such as food, exports, education, and health care, are excluded from GST. All consumers are required to pay GST when making a purchase.
Australian businesses with an annual turnover of $75,000 must register for GST. If a business has a lower turnover, they are not required to register but may choose to do so. Only businesses registered for GST are required to charge their customers GST. These businesses may either be liable to the ATO or entitled to a refund each year depending on the balance of the amount of GST collected through sales compared to any tax credits received from GST paid on goods and services purchased in the course of carrying on their business.
As a bookkeeper, you must perform general tasks, such as data entry, recordkeeping, and coding transactions into bookkeeping software. Therefore, you must understand GST legislation and how it is applied to income and expenses. If you are running your own business and working for clients, you are registered for GST; you must be a registered BAS agent or supervised by a BAS agent. If, as a bookkeeper, you are reckless or deliberately do the wrong thing, you may be sued for professional negligence.44
The following video explains GST in Australia.
To read more about GST, visit the ATO website.
Transfer pricing
Australia has transfer pricing rules that need to be considered where goods or services are bought or sold between Australia and other countries.
The transfer pricing rules have particular relevance to transactions between related parties in a corporate group for the supply of goods, services or finance that are not priced on terms comparable to those charged between parties transacting at arm’s length.
If an international transaction does not occur at arm’s length or is not supported by an acceptable pricing methodology, then market prices may be substituted into the transaction for Australian taxation purposes to ensure an appropriate level of tax is paid.
For an intra-group cross-border transaction to be deemed to have occurred at arm’s length, the Australian Taxation Office (ATO) requires that companies appropriately document the transaction itself and the pricing methodologies used when entering into the transaction.
Other factors that may be taken into account by the ATO include, amongst other things, the commercial justifications for the transaction, any applicable review processes and whether any alternatives were considered.44
Other taxes and levies
Fringe Benefits Tax (FBT)
FBT is imposed on the value of non-cash benefits provided by employers to employees.
Generally, benefits must be connected to the employee’s employment to be taxable, although certain fringe benefits are either specifically subject to FBT or expressly excluded under Australian law.
FBT is levied on the provider of the benefit at a flat rate of 46.5% and may be deductible against the employer’s taxable income.44
Medicare Levy and Medicare Levy Surcharge
Medicare is Australia’s public health insurance scheme. It receives contributions through the Medicare Levy and the Medicare Levy Surcharge, taxes imposed on Australian residents’ taxable incomes.
The Medicare Levy is imposed at a flat rate of 2% of an individual’s taxable income, although exemptions may be given to low-income earners and foreign residents.
The Medicare Levy Surcharge is an additional flat rate of 1-1.5% imposed on high-income earners who do not have private hospital insurance.44
Superannuation Guarantee Charge
In Australia, every employer must pay its employees a minimum level of superannuation (known as the superannuation guarantee) to ensure that they have money set aside for their retirement.
On 1 July 2021, the superannuation guarantee rate increased from 9.5% to 10%, with further increases of 0.5% per year from 1 July 2022 until it reaches 12%. If an employer fails to provide the minimum level of superannuation, they become liable to pay the Superannuation Guarantee Charge (SGC), which includes the amount of the shortfall in superannuation payments plus interest and administrative charges.
However, in practice, most companies will contribute the minimum level of superannuation to avoid the SGC. Also, there are statutory limits to how much employers or employees can contribute to superannuation funds. If contributions are made more than these limits, a penalty charge may apply.44
Luxury Car Tax
The luxury car tax is a flat rate of 33% imposed when a luxury car is sold or imported into Australia. Certain rules specify what amounts to a luxury car and under what circumstances it will attract the luxury car tax, although it generally applies to cars valued over approximately $60,000 or $75,000, depending on the fuel consumption of the vehicle.44
