Tax reality in Australia

[Francesco]

Knowledge is important, but the right attitude and application of the knowledge separates the successful from the wannabees. A nugget of wisdom came from Kerry Packer:

"That's why in 1991, across the lounge rooms of Australia, we rose as one and cheered when Kerry Packer served it up to the Senate Inquiry.

He said:
'I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra.'

Packer spoke on all our behalf."

The extract is taken from Verne Gowdie's article The Federal Budget: Get What You Can While You Can

The article well worth a read for those approaching retiring from a financial perspective.

 

[cadence]

Knowledge is important, but the right attitude and application of the knowledge separates the successful from the wannabees. A nugget of wisdom came from Kerry Packer:

"That's why in 1991, across the lounge rooms of Australia, we rose as one and cheered when Kerry Packer served it up to the Senate Inquiry.

He said:
'I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra.'

Packer spoke on all our behalf."

The extract is taken from Verne Gowdie's article The Federal Budget: Get What You Can While You Can

The article well worth a read for those approaching retiring from a financial perspective.

Check out the video footage on YouTube
Hilarious

 

[Mush]

Recently met a local MP at a business gathering.
There was an American girl there who caught his attention as we were talking.
He enquired as to what part of America she was from and then proceeded to discuss his MANY holidays in America over the last few years.

I haven't had a holiday in many a year and couldn't help but wonder how much effort he and his ilk actually put in to running our country......

 

[JohnMichael]

Well I guess it's all about if the country uses the tax dollars well.

Many scandinavian countries such as Sweden etc pay about 80% tax in the highest bracket, and are consistently rated as amongst the happiest populations in the world.

I asked a rich Swedish person about this and he said "My children go to great schools for free, i get paid maternity leave, I can get sick anywhere in the world and the government of sweden pays the bill, I get plenty of holidays to travel everywhere, I drive a BMW, my wife drives a BMW... what else would I spend my money on?"

 

[Ausprop]

what else would I spend my money on?"

an SS Commodore?

 

[Francesco]

Well I guess it's all about if the country uses the tax dollars well.

Many scandinavian countries such as Sweden etc pay about 80% tax in the highest bracket, and are consistently rated as amongst the happiest populations in the world.

I asked a rich Swedish person about this and he said "My children go to great schools for free, i get paid maternity leave, I can get sick anywhere in the world and the government of sweden pays the bill, I get plenty of holidays to travel everywhere, I drive a BMW, my wife drives a BMW... what else would I spend my money on?"

I used to think this too until I read that the highest combination of local and national tax is about 50% (2013), not 80%. The national tax is nil up to a threshold about $80k AUD! Most Swedes would have paid the local tax (28.89%), if there is no nil threshold, and not the national tax. This makes sense to me - we all need and should pay for roads, sewage, schools, hospitals, etc more cogently than defense, international diplomacy, etc. If I have read rightly the tax net in Sweden catches more fully than in Australia.


https://sweden.se/society/why-swedes-are-okay-with-paying-taxes/

 

[JohnMichael]

^ Yeah perhaps I'm thinking of another Scandivanian country with the 80% example (I think it was 78% actually). But Swedes have historically paid high taxes, and I think the answer from the Swedish business I talked to was therefore still on point

 

[Francesco]

^ Yeah perhaps I'm thinking of another Scandivanian country with the 80% example (I think it was 78% actually). But Swedes have historically paid high taxes, and I think the answer from the Swedish business I talked to was therefore still on point

From the available online information, Sweden as a country is competitive in the tax environment. The corporations tax is 22% compared with Australia's 30%. The personal tax rate is higher than in Australia. The individual shoulders a lot of tax to support local government, giving leeway for reduced tax for their corporations.

http://www.tradingeconomics.com/sweden/personal-income-tax-rate

Historically, Sweden's corporation tax rate was as high as 60%. The casual observer was praising a regime of high tax rate and great eco-social outcome in 2008, eg

http://www.theguardian.com/money/2008/nov/16/sweden-tax-burden-welfare

However, the individual tax rate in Sweden seems to be comparable with Australia. It is not easily comparable as Australia has the GST.

Since 2004, the rest of Europe has generally been making tax policies with the aim of having less corporation tax and more inclusive individual tax. In Australia we have exemptions, so many individuals pay 10% in GST or less. I assume in Sweden, most earning people are captured by at least 28.89% local tax rate.

http://siguientecap.com/swedish-corporate-tax-rate/

In summary, your Swedish business acquaintance was rightly happy from the perspective of corporation tax (compared to Australia). If he was in the higher tier of tax payers he would also be comparatively happy as people of lower tax tiers were also contributing their share for local services.

 

[JohnMichael]

Thanks for the expansion on that Franscesco. It's obviously much more complicated than flat rates of tax. Interesting stuff

 

[Tillie]

However, the individual tax rate in Sweden seems to be comparable with Australia. It is not easily comparable as Australia has the GST

http://siguientecap.com/swedish-corporate-tax-rate/

In summary, your Swedish business acquaintance was rightly happy from the perspective of corporation tax (compared to Australia). If he was in the higher tier of tax payers he would also be comparatively happy as people of lower tax tiers were also contributing their share for local services.

On the top of local and national income taxes Sweded has also GST. It's called VAT (value added tax) and applied for the most goods and services. Swedens VAT is 25% compared to Aussie 10% GST.

 

[Francesco]

On the top of local and national income taxes Sweded has also GST. It's called VAT (value added tax) and applied for the most goods and services. Swedens VAT is 25% compared to Aussie 10% GST.

Thanks for the information, Tillie. Swedish VAT has exemptions also for food, entertainment admission fees and domestic travel concessions of 6%. I get the impression that the 'poor' pay more tax in Sweden as their nil tax applies only for income less than $4k AUD! Also, the rich and the corporations tend to shoulder less tax burden compared with Australia.

http://en.wikipedia.org/wiki/Taxation_in_Sweden