Discuss the Accounting for Australian Taxation Office

Introduction

The accounting procedure used for taxation purposes is known as tax accounting. Individuals, firms, and other organizations are all subject to laws when it comes to filing income tax forms. Even those who are not obligated to pay taxes are expected to engage in tax accounting. Taxation is a method of raising money for the state by levying or imposing fees on businesses and individuals of the country.

Principles of taxation

Taxation can be used by the government to stimulate or hinder financial choices in the nation. When the government formulates its tax policy, it implements a set of principles. The first principle is broad-basing, which necessitates that taxes be distributed evenly throughout all areas of the economy and across all individuals. The adequacy principle states that tax revenue must be sufficient to cover the cost of public goods and services (Nethercott, Richardson & Devos 2013). The equity principle states that taxes should be dispersed evenly to persons and companies in similar economic situations. The principle of balance, which stipulates that no economy or individual should be granted an enormous advantage over another, is the last but not least (Sadiq et al, 2014). Taxation is a means of raising income for the government by levying or imposing fees on businesses and inhabitants of the country. Taxation can be used by the administration to stimulate or discourage economic decisions in the economy. When the government formulates its tax policy, it follows a set of rules. The first principle is broad-basing, which mandates those taxes be distributed evenly throughout all sectors of the economy and among all individuals.

The adequacy principle states that taxes collected must be substantial to cover the cost of public goods and services. The equity principle asserts that taxes should be dispersed evenly to persons and corporations in similar financial situations. The principle of neutrality, which stipulates that no sector of the economy or individual should be granted an unfair advantage over the other, will be the last but not least (Hoffman, Raabe, Smith, Maloney, & Young, 2013).Tax accounting relates to accounting rules that are primarily concerned with taxes rather than the preparation of public financial information. The state’s tax body defines the particular standards that individuals and businesses must follow when completing their tax returns, and taxation follows those rules.

The accounting procedure used for tax purposes is known as tax accounting. Individuals, businesses, and other entities are all subject to the rules when it comes to filing income tax forms (Whiteford 2010). Even those who are not compelled to pay taxes are expected to engage in tax accounting. Its goal is to keep track of funds – in and out – related to people and businesses who will pay taxes.There are 2 types of concepts used in tax accounting: tax accounting rules and financial accounting, often known as generally accepted accounting principles. The Australian Accounting Standard Board (AASB), an independent government institution, sets accounting standards in Australia.

The Australian Taxation Office

Australia’s accounting standards are identical to those of the Financial Reporting Standards (IFRS, with the AASB modifying certain of them. Additional interpretations have been established by the AASB in guiding and adapting the country’s unique legislative and economic climate, as well as to meet the accounting needs of various entities, such as charitable groups.

The Australian Taxation Office is the government’s sole regulatory and collection body in Australia. It is in charge of the tax regime, superannuation legislation, and other relevant topics for the Australian government. In Australia, the fiscal year begins on July 1st and ends on June 30th. Individuals and organisations can choose an alternate tax year with the ATO’s permission.

Tax accounting

Individual taxpayers’ tax accounting is focused primarily on their income, permitted deductions, investment gains and losses, and all other operations that affect their tax liability. While a person may use a tax account, it is not a legal obligation. Gains or losses in investment affect a person’s tax liability, which has limited the information required for him to handle a yearly tax return.

In contrast to tax accounting, general accounting entails keeping track of all funds entering and exiting a person’s possession, irrespective of their intended use, including personal purchases that do not affect his taxes. Companies and foreign firm subsidiaries that run the country are taxed in the same way as other businesses (Sadiq et al, 2014). They only pay taxes on income that comes from within the country. Taxes on perks and benefits, land tax, payroll tax, and land tax are all taxable items.

To comply with the accounting and tax process, a massive quantity of data must be reviewed from a marketing perspective. Incoming funds or revenues for the firm must be monitored just as for a person, but there is an additional factor of complication when it comes to outgoing funds for business obligations (Whiteford 2010). This could include money set aside for specific industry expenses as well as money earmarked for investors. Although a company doesn’t need to hire a tax accountant to handle these tasks, it is customary in larger companies due to the complexity of the paperwork involved.

Even if a company is not compelled to pay taxes, tax accounting is still required. This is because all organisations, for-profit and nonprofit, are required to file annual returns, which can include details on any incoming cash, such as grants or donations, as well as how those funds are spent throughout the employee’s performance. The practice ensures that the non-profit organisation follows the laws and regulations that govern its proper operation as an income organisation (Mongrain & Wilson 2018). Accounting for tax reasons is known as tax accounting. Individuals, companies, corporations, and other entities are all influenced. Even people who are not required to pay taxes are required to engage in tax planning. The goal of tax accounting is to be able to track funds linked with corporations and individuals (both inbound and outbound).

More information should be reviewed as part of the tax budgeting process from a business standpoint. While the company’s revenues, or receiving cash, must be tracked in the same manner that a person’s must, any exiting monies directed toward particular corporate commitments adds a layer of bureaucracy. This can comprise both funds earmarked for specific business expenses and funds earmarked for shareholders. Hence, accounting is vital as it ensures that the tax-related finances of the corporation are in conformity to the legal process and this helps in preparing the corporation for the tax clearance. This leads to effective tax management as the focus of the entity is on the tax related issues and this leads to proper evaluation of the finances followed by the annual return.

References

Mongrain, S. and Wilson, J.D. (2018). Tax competition with heterogeneous capital mobility. Journal of Public Economics, vol. 167, pp. 177-189.

Nethercott, L., Richardson, G. and Devos, K. (2013). Australian Taxation Study Manual, Oxford university Press

Sadiq,K., Coleman, C., Hanegbi, R., Jogarajan,S., Krever, R.,Obst, W., & Ting, A. (2014). Principles of Taxation Law. Sydney.

Whiteford, P. (2010). The Australian tax-transfer system: Architecture and outcomes. Economic Record, vol. 86, no. 275, pp.528-537.