We know we get taxed, but did you ever wonder when our taxation began? Before Australia was federalised in 1901, the six colonies had their own tax system. The decision to unite the colonies was primarily based on trade. There were tariffs placed on goods that were transported between the colonies. As you can imagine, this created confusion and raised tempers. The first income tax was imposed in 1884 by South Australia, which was a general tax on income. Then, in 1895, New South Wales imposed their own tax.
Right after the federal government was formed, the Australian Taxation Office was created. A two-tier system was created – state and federal. The first federal tax laws began as three tax acts:
- Bank Notes Tax Act — Passed by Parliament of Australia, this act imposed a tax on banknotes issued by banks. It was enacted by the Fisher Labour Government, which gave Parliament the power to legislate and tax. It ended private currency in Australia and imposed a 10% tax on the banknotes issued by any bank in the Commonwealth. This was done in response to the Australian Notes Act (1910), where the Australian currency (the Australian pound) was introduced.
- Land Tax Act — Created by Fisher Labour Government and regulated by the tax office under the rule of the Commissioner of Land Taxation, the aim of this act was to break up estates secured during colonial times. It was a progressive land tax on the “unimproved” land, and the rate varied whether the land had an absentee or non-absentee landlord. Landowners submitted a valuation of their land, which was often rejected by the tax office.
- Land Tax Assessment Act — This act expanded the Land Tax Act by giving definitions of absentee and non-absentee as well as the duties of the Commissioner of Land Taxation.
In 1915, the income tax collected was used to fund Australia’s part in World War I. It is interesting to note that state governments have not imposed income taxes since World War II, when the federal government took over collecting all taxes. Before World War II, income tax was levied at the state and federal levels. This made income tax inequitable across the states. Also, payroll tax was introduced in 1941. As you are aware, there have even more changes to the taxation system, with new taxes introduced in the twentieth century, such as capital gains tax and fringe benefits tax.