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Chapter 1: What is the main topic discussed in this episode?
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Welcome to the Australian Finance Podcast, a podcast for people who want to learn more about their personal finances and get the most from their money. This series is hosted by Kate Campbell from HowToMoney and Owen Raskovich from Rask Finance.
The Australian Finance Podcast is provided for educational purposes only. The information is general in nature and does not take into account your needs, goals or objectives. What that means is the information does not apply to you specifically. So consider getting the advice of a licensed and trusted professional before acting on the information.
Kate, welcome to this episode of the Australian Finance Podcast where we talk tax.
Yes, so the two certainties in life, we've got death and taxes, but today we'll just talk about one of those. But that's a good episode idea for the future.
What's that, death?
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Chapter 2: Why do we pay taxes?
The creation of the Mikey system.
Yeah. Here in Melbourne, you got Mikey. Everywhere else in Australia seems to have public transport down pat.
You've got... But libraries, public schools, like healthcare is one of the biggest things we spend... Like your tax goes into this massive pool and healthcare is massive. So all the public hospitals and all Medicare, defense is a big area of spending and education and aged care as well. Yeah, aged care is huge.
Which is growing. When you see like the government sometimes will send you when you do a tax return, a thing on the back and it's like a pie chart and it has all these different columns for where your money is put. And people see social security as like this big thing and they're like, oh my God, all these people that we're spending money on because they don't have a job, et cetera.
What they don't realize is most of that is actually made up of pensioners. And so like before you go pointing the finger at people like quote unquote doll bludgers, it's actually part of the welfare system that we have pensioners who've worked very hard to get the country where it is. So we're paying for them now.
Yeah, so you've put in your tax during your whole career and then you're living off the government following that.
Yeah, and just to your point about the Nordic countries and Sweden earlier on, the reason we have taxes is so we can support the country and individuals during times when they need support. It keeps the country moving forward. Okay, anyway, we've digressed. Australia, has it always had taxes? Yes.
Um, yeah, so I was doing some research on the ATO and they've actually got this 400 page history book on tax and in Australia. Now I didn't read through that, but I wrote the summary. And so pretty much prior to 1901, each colony, so States and territories had its own tax system and the revenue was gained from customs.
Cause we had a lot of people coming in and out of the country and different taxes. So, and there was no free trade between the colonies.
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Chapter 3: What historical context is there for tax collection?
So... World War I. And then it's just sort of gone from there and then... Governments have got a taste of what it's like to collect revenue. So suddenly we all started coming together as a whole collective country.
I did some Googling today before the show and ever reliable Google tells me that Australia generates a lot more tax from individual tax returns than we do from corporate or enterprise or business. And I think it's over $200 billion a year collected in tax for individuals. And that was 2017, 2018. So it's gone back a little while.
It gives you an idea of sort of the volume that's going through the ATO. And we've talked about the ATO, so just so we can be clear what that means, it's the Australian Tax Office. So they're responsible for tax, monitoring the revenue of the government.
And we'll get to it in a minute, but the way the tax system works in Australia, which is different to some countries overseas, is that, and this is from people that obviously have just arrived here, but everyone will know that you report your own taxes to
And the ATO takes it as provided unless they do an audit or unless it raises a flag with their supercomputer that checks everyone's profiles and goes, Oh, if you seem out of the ordinary because you're spending $5,000 on dry cleaning. Yeah, exactly. That's going to raise a flag in the algorithms and then it's going to pop up and then someone at the tax office is going to look at that.
So, you know, that's why, you know, you might think that you can get away with certain things, but if you push it too far, you're going to get an audit and you don't want that in your life because they can go back and check things for many, many years.
Yeah, and also a lot of this stuff is coming through automatically to the ATO now. So all the banks and all companies and investments, they're all pushing the data straight to the ATO because they have to. So the ATO already knows how much you got paid that year. It knows all your investments on the side. It knows what you earned.
So all this stuff's tracked now with your tax file number or your business number or your Australian company number. So they definitely keep tabs on you.
So you've just mentioned something, the tax file number, TFN, right? TFN. What does that do?
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