Well, it’s the End of Financial Year, and most of us are gearing up for another tax return. Unless you’re a tax accountant, it’s not a particularly festive time of the year. For today’s fun fact — did you know that the federal personal income tax was introduced in 1915 as a temporary measure to meet the growing costs of the First World War?
Prior to this, each state imposed a tax on personal income, which tended to be quite low. For example, Queensland imposed a rate of 2.5% for personal income above £150 (around $19,000 in today’s currency), or 5% tax for income from property. People earning less than £100 ($12,600) only had to pay a flat rate of 10 shillings ($63), while those earning between £100-150 were charged £1 ($126) in tax.
With shrinking coffers combined with increasing demand for income support during the Great Depression, the Australian Government introduced a “wholesale sales tax” in 1930. This was seen to be more palatable than increasing personal taxes – as both state and federal governments were simultaneously charging personal income tax during this period.
Faced again with ballooning costs during the Second World War, the Federal Government took control of the states’ personal income tax powers, centralising all income tax in Canberra. Income taxes more than tripled during the course of the war. This was also intended to be a temporary measure, but as you can probably guess — it turned out to be a long-term fixture.
Today, personal income tax makes up 52% of the federal government tax revenue. Certainly, these funds have allowed us to create some great initiatives as a country. But I suspect that many of us wouldn’t mind going back to the “good old days” of 2.5% income tax!
– The Editor
Read more here: https://www.pbo.gov.au/about-budgets/budget-insights/budget-explainers/tax-mix/brief-history/1901-to-1950
