When our first Governor, Governor Phillip, arrived in New South Wales in 1788, he had a Royal Instruction that gave him power to impose taxation if the colony needed it.
The first taxes in Australia were raised to help pay for the completion of Sydney's first gaol and provide for the orphans of the colony. Import duties were put on spirits, wine and beer and later on luxury goods.
After 1824 the Government of New South Wales raised extra revenue from customs and excise duties. These were the most important sources of money for the colony's Government throughout the 19th century. Taxes were raised on spirits, beer, tobacco, cigars and cigarettes.
These taxes would vary between States, or colonies as they were then called. Even today, taxes still differ according to which State you live in.
Colonial governments also raised money from fees on wills and stamp duty, which is a tax imposed on certain kinds of documents.
In 1880 the Colony of Tasmania imposed a tax on income received from the profits of public companies. Four years later, a general tax on income was introduced in South Australia, and in 1895 income tax was introduced in New South Wales at the rate of six pence in the pound.
By 1900 all colonies were collecting income tax, often by different methods and at different rates. It wasn't until 1915 that the Fisher Commonwealth Government introduced an act for income tax to be collected by the Commonwealth, although States were still also collecting some income tax. By 1918 income tax amounted to one third of Commonwealth tax revenue and half of State tax revenue.
With Federation in 1901, the power to impose customs and excise duties was transferred to the new Commonwealth Government. The Commonwealth Government only kept one quarter of the money it raised, giving the rest to the States.
In 1910 a land tax was introduced by the Commonwealth Government to provide for the defence of the nation and to prepare for a major increase in migration. The land tax was also introduced to encourage large landholders to subdivide their land and sell it to settlers. Many large landholders were wealthy Englishmen who would rarely visit or use their land. Introducing a land tax encouraged them to sell to settlers who would use the land productively.
At the outbreak of World War I many new taxes were introduced and others increased to help pay for the war effort.
Over time some more unusual taxes have been introduced, many of which lasted only a few years. One such tax was entertainment tax, introduced in 1917, which taxed the price of admission into a place of entertainment. Auditors would attend race meetings, theatre and picture shows to ensure the tax was being paid. This tax was also imposed from 1942 to 1953.
Sales tax was introduced in 1930 on certain goods that were produced or imported into Australia. Sales tax is an example of an indirect tax, as the wholesaler pays the tax and incorporates this amount when setting the retail price.
At the request of the Australian Wool Growers Council, a wool tax was originally imposed in 1936 to raise money to help improve the production of wool and extend the use of wool throughout the world. Money collected from the tax was put into research and breeding and helped Australia to produce some of the best wool in the world.
In 1942 the Commonwealth Government began collecting all income tax on a uniform basis throughout Australia, and granting much of this revenue to the States and Territories. Much of the tax collected by the Commonwealth is then distributed to the States to use. In 1944 the Government introduced a Pay-As-You-Earn (PAYE) system of income tax for salary and wage earners and a 'provisional tax' system for income (other than salary and wages).
As our society and Government change so do our taxes. Some of our more recent changes to taxation have included the Prescribed Payments System (PPS) that was introduced in 1983. PPS covers taxpayers being paid by contract in certain industries such as building and construction.
The Fringe Benefits Tax (FBT) was introduced in 1986. FBT was designed to stop tax avoidance, as people were choosing to have their salary paid in fringe benefits such as cars and stock shares to avoid paying income tax.
Another tax introduced to help stop tax avoidance was the Capital Gains Tax (CGT), introduced in 1985, which taxes the profits made on the sale of certain assets.
The Medicare levy was also introduced in 1986 as part of income tax.
Australia’s taxation system underwent a major overhaul in July 2000 with the implementation of The New Tax System. One of the new taxation measures is a ten per cent Goods and Services Tax (GST) on most goods, replacing Wholesale Sales Tax.
The New Tax System was introduced to assist:
- individuals – about 80 per cent of Australians pay a tax rate of 30 cents in the dollar
- small businesses – taxes paid once a quarter using just one form
- pensioners – a four per cent rise for pensions and allowances, and
- country Australia – for heavy transport in rural/regional areas, a reduction in the cost of diesel.
A system of collecting income tax from employees is known as Pay-As-You-Go (PAYG). PAYG brings together income tax instalments and withholding obligations as one system, providing a single set of due dates for business tax obligations.
Taxes, like our society, continue to change and evolve. Following consultation with business and accounting groups, the Government recently introduced measures to improve the new PAYG system and GST payment and reporting arrangements for small businesses.
2001 has certainly been a period of reflection for ATO staff due to the continuing implementation of tax reform and the commemoration of the ATO’s 90 year anniversary.
Only time will tell what sort of taxation system will be in place in 100 years. The only certainty is that there will be taxes, for they are necessary for our society to survive and move forward.
Last Modified: Monday, 7 April 2003
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