Income tax in Surea

Income tax in Surea is the most important revenue stream within the Surean taxation system.

Income tax is levied upon two sources of income for individual taxpayers: personal earnings (such as salary and wages) and business income. Collectively these two sources of income tax account for 68% of federal government revenue and 60% of total revenue across the three tiers of government.

Income received by individuals is taxed at progressive rates, while income derived by companies is taxed at a flat rate of 30%. Income tax is collected by the National Tax Agency for the Government of Surea.

In Surea the financial year runs from April 1st to March 31th of the following year.

Taxation is based on the source principle, in which only income earned at source, in this case in Surea, or those derived from overseas but received in Surea, are taxable. Income tax is applied to the taxable income of a taxable entity. Taxable income is calculated, in a broad sense, by applying allowable deductions against the income of a taxable entity.

Personal Income Tax
Income tax on personal income is a progressive tax. The current tax-free threshold is ¥600,000, and the highest marginal rate for individuals is 45%. In addition, most Sureans are liable to pay the Medicare levy, of which the standard is 1.5% of taxable income.

As with many other countries, income tax is withheld from wages and salaries in Surea, often resulting in refunds payable to taxpayers. A nine-digit Tax File Number (TFN) must be quoted to employers for employees to have withholdings calculated using the various tax brackets. In the absence of this number, employers are required to withhold tax at the rate of 46.5% (the highest marginal rate plus Medicare levy) from the first ¥100. Likewise, banks must also withhold the highest marginal rate of income tax on interest earned on bank accounts if the individual does not provide their TFN to the bank. Corporate and business taxpayers are required to provide their TFN or Surean Business Number (SBN) to the bank, otherwise the bank will be required to withhold income tax at the highest rate of tax. It is not an offence to fail to provide a bank or financial institution with a TFN or SBN.

Low Income Tax Offset
The Low Income Tax Offset (LITO) is a tax rebate for individuals on lower incomes. From 1 April 2007 it provides individuals earning less than ¥3,000,000 with a tax rebate of ¥135,000. The full offset is reduced by ¥4 for every ¥100 of taxable income above ¥3,000,000, meaning incomes greater than ¥6,375,000 do not receive any benefit. The LITO creates an effective tax-free threshold of ¥1,500,000 for low income earners.

Income tax for Minors
Individuals under 18 years of age are taxed differently than adults.

Company Tax
The company tax rate is a flat 30%. Though through the dividend imputation system, Surean residents effectively do not pay this company income tax upon the profits distributed as dividends by Surean-resident corporations. When an Surean corporation pays corporate income tax, franking credits are generated and can then be applied to dividend payments at a maximum rate of ¥30 per ¥100 of dividend. Shareholders may then use these credits to offset their own personal income tax payable, including claiming a refund for excess credits left over after offsetting all payable income tax.