Personal Income Tax (PIT)

Regular tax affairs are increasingly simple to navigate, partly due to pre-filling and other administrative initiatives. Complex filers may require additional data/evidence and use of a tax agent/accountant.

Somewhat connected to the economic cycle, predominately held up by salary and wages growth. Swings in the share market can introduce volatility unrelated to the ‘real’ economy.  

When average taxation levels are high it results in more excess burden on individuals due to the broad tax base. Differences in marginal tax rates enable tax planning strategies, distorting decisions.

Vertically, subject to progressive taxation system. Horizontally, complex. For the well-informed taxpayers, they have more opportunity for tax planning & minimisation strategies.

Company Income Tax (CIT)

Quite complex due to a range of different income types, deductions, offsets and rebates. Options for substituted accounting periods. Maintenance of Franking Accounts for dividends.

Quite stable for most sectors (banking and large retailers) but subject to normal business cycle and domestic and international economic conditions. Mining sector is subject to volatility via global commodity prices.

Corporate taxes can distort economic activity by affecting future investment decisions.

The secondary small business rate makes the system somewhat more progressive. However, company tax is ultimately passed onto Australian shareholders as a franking credit.

Foreigners will often pay tax both in Australia and in their own country for the same income.

Goods and Services Tax (GST)

No complexity for consumers. Some complexity for businesses owing to exemptions and reporting requirements. 

Directly connected to the economic cycle, responds rapidly to economic shocks partly owing to exemptions since the GST is approximately a tax on discretionary spending.

Broad stable consumption tax factored into pricing over time. 

Some distortion from exemptions.

Generally neutral. Essential spending such as fresh food, health and education are exempted.

Superannuation

Relatively complex with different rules applying for certain ages and superannuation balances. 

Contributions are generally consistent. Investment earnings are volatile as they are dependent on economic conditions.

Due to the nature of the superannuation system, changes in tax rules, rates and timing can have a greater negative excess burden.

Somewhat inequitable. Those with more income have a greater opportunity to gain tax benefits from the superannuation system.

Excise & Customs Duties

Simple for consumers. Some complexity for producers and importers, as the amount of tax is based on production levels, and depending on the use, there are varying rates.

Stable but trending downwards due to behavioural change over time

Has a direct economic distortion effect, as it is a tax on production that is passed onto consumers. It can be used to reduce consumption i.e. for alcohol & tobacco.

Customs duties are now very small, but previously they increased prices for consumers.

Applied equally to all excisable products. Consumers can avoid the tax by changing consumption behaviour. Excise tax typically applies disproportionately to lower income consumers, due to alcohol, tobacco and fuel making up a larger share of their spending. As such the ability to change behaviour to avoid the tax (e.g. electric vehicles and interaction with excise) is not equitable.

Payroll

Simple for wage earners. Levied on larger firms, due to the tax-free threshold exemption, which already have an established payroll process in place.

Quite stable, impacted by business exit and entrance rates.

Can be considered a direct tax on business employment creating economic distortions, though similar to consumption taxes as the costs are passed on. More of an impact in labour intensive industries.

The wage bill threshold may distort business structure decisions.

Applies to all businesses at same rate when above the threshold regardless of ability to pay. Not all employers are impacted the same, exemptions for government and academia.

Stamp Duty 

(property, motor vehicle, insurance)

Simple rate applied to asset transactions based on valuations - variation on rate and bases between jurisdictions 

Highly volatile as based on discretionary spending.

Inefficient as the tax base is mobile and transactions are largely discretionary. Households may choose not relocate even if this is otherwise in their interest.

Mostly equitable, as it is applied on certain transactions. It is generally factored into the price, and applies to those with the capacity of pay. Some exemptions for first home buyers and elderly. 

Land tax/rates

Generally simple but can vary across jurisdictions. Valuation process may be complex.

Very stable and predictable due to land being fixed and immobile.

Highly efficient as tax base is immobile. The exclusion of owner-occupied land joins other policies in encouraging loading saving into owner-occupied housing.

Broadly equitable. Applied to all land and ratepayers equally, with exemptions for owner-occupiers. The rate only varies by jurisdiction.