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August 12, 2003
Strine Politics
This is the third article introducing Australia. You will note that I still haven't got onto the perennial American question (about the kangaroos and schoolbooks) but it will come...
There have been some political posts before but the relevant background was missing and that can make it confusing when you are unaware of the history of the participants. I still have no idea why any political party would use a donkey (or an elephant) as their mascot. Are they trying to imply that one party is stubbornly difficult while the other is lumbering and slow to adapt?
To start you off on this journey of discovery, take a quick visit to A. E. Brain who provides a quick break down of the parties.
OK. In Australia, we have three levels of government (and more politicians per head of population than just about anywhere else on earth): federal, state and local. At the federal level (that covers the whole of Australia, including relationships with other countries), the ruling party is a coalition of Liberal and National parties. In Opposition is the Labor party. There are two houses of parliament: the lower house (house of representatives) which is where the prime minister and government function and the upper house (senate or house of review). The senate is also home to a number of fringe parties including democrats, greenies and independents. In recent times the government has not had a majority in the upper house which means that they have had to negotiate with the fringe parties to get their legislation approved. This has also given small parties a disproportionate say in politics (see comments about GST below). The federal government raises funds via income tax, petrol levies and other exciting duties. Income tax is on a sliding scale where you pay different rates of tax on different parts of your income (see below).
At the state level, there is another dual house government which exists primarily to employ politicians. It does not provide any services of functionality that could not be provided at a federal level (and is not supposed to be able to raise money via taxation, but see this post for a way around that restriction). Really the state governments exist purely as a very expensive historic reminder of the pre-federation days. Ideally the state and local governments should be merged into some intermediate layer - perhaps regional councils. Anyway, the state where I reside is NSW (New South Wales) - and by the way it is REALLY ANNOYING to fill in web forms that assume states have two-letter names. Out postcode system uses three letters for a state plus four digits for the area code (although one of the digits also indicates the state). For those designing web apps, the full list of states AFAIK is: NSW, VIC (Victoria), QLD (Queensland), TAS (Tasmania), SA (South Australia), NT (Northern Territory), WA (Western Australia), ACT (Canberra).
Currently (and for the foreseeable future), NSW has a labor party government. It is an almost unwritten law that the state government of NSW will be the inverse of the federal one. In this case though the opposition (which should be a coalition of liberal and national) is practically non-existent (i.e. they have an insignificant number of seats and are unlikely to win the next election - in fact it would probably take two favorable elections just to make them into a decent opposition). As in the federal system, there is greater diversity in the upper house including at least one genuine redneck. Other splinter parties include australian democrats, christian democrats, shooters, one nation (redneck), greenies and independents. Officially income for the state government comes from the proceeds of the GST (Goods and Services Tax) which is levied by the federal government and then passed to the states. Thanks to the splinter parties at the federal level, who negotiated changes to the GST, the system is both complex and confusing. The original proposal was tax everything (and provide rebates to the deserving). Now it is tax some things but not others unless the moon is blue or it is a Tuesday which just goes to show that the ASA (Australian Society of Certified Practicing Accountants - who can't spell ASCPA) show make really big donations to the splinters....
Finally we have local governments who look after local roads, garbage collection, pre-schools, libraries and at the same provide a training ground for developers, solicitors and real estate agents who want to play with the big boys. This is where they get to practice fiscal incompetence and learn to lie without flinching. Local governments raise money through rates (payable by land owners), leasing of council property and fines (parking, littering, etc). Local councils (at least in NSW) are usually hotbeds of allegations and corruption. On a fairly regular basis, one council or another seems to be suspended and replaced with an administrator by the state government.
I don't know about the breakdown in other countries but some are likely to be different. Public schools are funded primarily at the state level, private schools get funding from the federal and state levels (but less per head than the public system even though the academic results are markedly better in private schools). Police are also state based although there is also a federal police force (I guess like the FBI). Hospitals are state based (but in NSW most people think it is a federal issue thanks to some very clever advertising by the labor party).
No level of government in Australia has to produce audited accounting records. The state government boasts on a regular basis about their 'balanced budget' but it is a complete and absolute crock because they confuse balance sheet entries with a cash flow document. Effectively the 'balanced budget' is a positive cash flow projection formed from the sale of public assets. As any student of Accounting 101 will tell you: that's no way to run a business. Effectively you are sacrificing your asset base to fund recurrent costs which mean long term problems are guaranteed.
As usual any questions are most welcome. I have included an 'Appendix' which explains the income tax rate system a bit more clearly. Note that you still pay tax on goods and services over and above your income tax. I also ignored superannuation (another compulsory tax) and petrol (we pay 90c a litre of which about 60% is taxes and duties of various kinds).
Income Tax
This is the number one question for people coming to work in Australia. Be very careful to make sure you understand this strange system. Start by working out what your taxable income is. You begin with how much your employer paid you and then deduct any 'allowed deductions'. Charitable donations are fairly safe (as long as you keep the receipt) and there may be work related expenses (but these are getting pretty rare). Now add any interest earned (but don't deduct interest paid) and any other income. This new figure (what you were paid less deductions plus other income) is your taxable income. Write this number down because you will need it again in a few moments.
The first $6K is tax free. The next bracket (up to $20K) is 17c in the $. Then 30c up to $50K, 42c up to $60K and 47c for the rest. To make it easier to understand, the tax department provides tables where they calculate the tax at the breakpoints. This means you can just look up your salary the easy way, for an income of $75K (reasonable for a skilled worker but not that generous) you can either calculate it as: (75,000 - 60,000) * 0.47 + (60,000 - 50,000) * 0.42 + (50,000 - 20,000) * 0.30 + (20,000 - 6,000) * 0.17 or use the breakpoint figure of $15,580 + (75,000 - 60,000) * 0.47. The result should be the same ($22,630). Effectively, every dollar you earn over $60K, almost half goes in tax.
Now we need that taxable income figure again. In addition to the income tax you just paid there may be additional levies such as the medicare levy of 1.5%. This is taken against the taxable income, so from your $75K, take away another $1125. You may also have to pay more tax if you have outstanding HECS (student loans) or capital gains. It can also be complicated if you have dividends from shares. Ignoring all that, you would be paying $23,755 in tax (32% of taxable income). If you earned $100K you would pay $35,880 (36%). If you were premier of the state (and we ignore the dodgy tax evasion tactics available to the wealthy) you would pull around $250K and pay $108,630 (43%).
Posted by Ozguru at August 12, 2003 09:08 AM
Comments
Posted by: Peskie at August 12, 2003 09:08 AM
Posted by: ozguru at August 12, 2003 09:08 AM
