Chapter 2 — Tax

Tax is yet another subject that everyone can relate to – as they say, “there is nothing more certain than death and taxes.”

There is an incredible amount of misinformation being perpetrated regarding tax and the Australian Taxation Office, and most of that is spread around by the ATO themselves and the many registered accountants that, ultimately, work for them.

Let’s see if we can clear up some of that miscommunication and direct you to the truth about taxation in this country.

Firstly, do you know the history of taxation? Do you realise that personal income tax was brought in to pay for the debt associated with the Second World War? It was supposed to be repealed after the war ended, but that never happened, because the Government was, of course, by that point, hooked on all the extra revenue it was generating from it.

 Companies have an obligation to pay tax on money that they earn after expenses, otherwise known as profit. However, when it comes to individuals, the same does not apply. You see, the original taxpayers’ charter clearly says that personal tax is voluntary. It works on a system of voluntary compliance. The wording of that original document – like many early documents – has been corrupted and re-written but, you can still find a reference to your tax obligations being ‘voluntary’ in section 6 of the “Your Tax Obligations section, which you can find on page 23 of this document.

Even today, if you look on the ATO website – in particular, on this page, under the headings “Compliance Effectiveness Methodology” and “Strategies to Address the Cash Economy” - you will find three specific references to improving or promoting ‘voluntary compliance’.

Now, of course, most people are never told this and believe that they must pay tax when, in fact, they do not have to. Instead, most people are tricked into volunteering to pay tax that they simply are not required to. If you want to find out more about this, we recommend that you go to You Tube and type in ‘Income Tax is Voluntary’ and you will find a number of videos in which the IRS (Internal Revenue Service in the USA) has specifically and publically declared that paying personal tax is voluntary. Those basic principles apply here in Australia in the same way as the US cases that we quoted in the previous chapter also apply here.

As you will discover when you read through the remaining chapters of this e-book, the ATO is actually just an agent for the IRS, and you can refer to any IRS rulings when dealing with the ATO, and you can also lodge any IRS paperwork with the ATO if they don’t have their own specific form for a particular purpose.

One of the fundamental reasons that personal tax is voluntary is because no-one can determine what you would be paying tax on. If we go back to the corporate or company argument, you can clearly see that a company makes sales, they have expenses associated with those sales and, depending on the company, they would also have wages, which they pay to individuals in return for their hours, their efforts and their energy. Everyone would agree that it is fair and reasonable for someone to be compensated for their time, effort and energy.

So, in regards to a company, it's fairly simple to work out what they are paying tax on - they take their sales, or their "income"; they deduct their expenses, including wages; and they pay tax on any "profit" that they make, which is an increase for the company.

After all, once the expenses and wages have been covered, there is no effort on behalf of the company itself to earn or make that profit - the company, which is just a paper entity, registered with ASIC, makes it for nothing, so why shouldn't it pay a portion to the government? Again, most people would agree that this is fair.

However, when it comes to an individual, things aren't as clear. As we just explained, whether you are a PAYG employee or you run your own business, you put in certain hours for your job. You expend energy, effort and thought, and most of you would also have some kind of experience or expertise that you also provide, and you should be justly compensated for all of that.

So, what do you value your time, effort and energy at? If it just so happens that you value it at the current rate you are being paid - or more - then you have not personally made any "profit".  There has been no ‘increase’, as you have simply exchanged your time for money, and there should be no obligation to give anyone a part of that - which, as we mentioned before, is actually the case.

So, how does the tax office get around this? They issue your ALL CAPS name with a TFN (Tax File Number) and treat you like a company. This opens up another whole argument about the difference between you - the flesh and blood man or woman - and the corporate ALL CAPS name that the government created for you, which is something that we will cover in more detail in the Strawman chapter.

It's interesting to note, though, that when you ring the tax office they say: "We are authorised to request your TFN, but you are not required to give it to us.” That's because the TFN only applies if you work for the ATO - which most of us don't - and, because you don't, you don't have to give them that number.

Then, to really pull the wool over your eyes, they ask you to voluntarily fill out an income “Tax return for individuals” form.  There are a couple of issues with this.  The first is that you are not an ‘individual’: you are a man or woman.  Black’s Law Dictionary defines “individual” as: “Noun: this term denotes a single person as distinguished from a group or class, and also, very commonly, a private or natural person as distinguished from a partnership, corporation, or association; but it is said that this restrictive signification is not necessarily inherent in the word, and that it may, in proper cases, include artificial persons.  See Bank of U.S. v State, 12 Smedes & M. (Miss) 400; State v Bell Telephone Co.,  30 Ohio St. 310, Am. Rep. 583; Pennsylvania it. Co. v Canal Comm’rs, 21 Pa. 20.”

If you want to see the legal definition of a “person”, please refer to the Strawman chapter which provides detailed definitions from John Bouvier’s Law Dictionary 6^th Edition, Ballentine’s Law Dictionary, as well as Australia’s definition as part of A New Tax System (Goods and Services Tax) Act 1999.  Suffice to say, a “person” refers to a corporation, not a flesh and blood woman, so you are neither a “person” nor an “individual”.

Please note that we have a ‘Law Dictionaries’ CD available on our Products page which contains all of the above legal dictionaries, plus many more. That CD is a fantastic resource for anyone wanting to really get into the nitty gritty and look up the true definitions of specific words to use in their arguments.

The second issue is that the ATO cannot actually define the word “income”!

The Income Tax Assessment Act 1997 (Cth) is a monumental document that refers to terms such as ‘assessable income’, ‘statutory income’, ‘ordinary income’, ‘exempt income’, ‘non-assessable, non-exempt income’ - all these crazy terms, but not a single, simple definition of ‘income’.

Remember, with the company example we gave earlier, the income is the money from sales and then they deduct expenses and pay tax on profit. Well, where is the profit for a man or woman? The only way a man or woman can make a profit is if they value their time at, say $50 an hour, but actually get paid at $75 an hour - then they would make a profit of $25 an hour - but why would anyone do that?

The reality is that the ATO works on the assumption that your ALL CAPS name has no expenses, so all of your ‘income’ - whatever that may be - is actually profit to that paper entity, and that's how they justify it.

Furthermore, Black’s Law Dictionary defines ‘income tax’ as “A tax on the yearly profits arising from property, professions, trades and offices.”  Once again, there is no reference to men or women trading time for money.

We challenge you to write to the ATO and explain to them that you are considering voluntarily filling out an income tax return statement but, before you can do so, you need them to define the word “income” for you, and just see what they come back with. Depending on what they say, you might then want to follow that up with a letter asking them to simply direct you to the section of the Income Tax Assessment Act 1997 (Cth) that specifically defines the word "income".

A number of our founding members have done just that and the ATO has actually written back with what they refer to as an ‘attachment’ that has numerous definitions on it. One of those definitions is that of a ‘taxpayer”, which is how they refer to everyone that they write to. The definition states that a ‘taxpayer’ is “defined in the Income Tax Assessment Act 1936 as a ‘person deriving income or deriving profits or gains of a capital nature.’”

Firstly, as we have alluded to already, you are not a ‘person’ and, secondly, even if you were, how have you derived profits or gains of a capital nature by simply swapping your time for money???

There is a very powerful case form the US that also addresses this point brilliantly and, again, it can be referred to here in Australia if you are dealing with the ATO on this point. The case of Long v Rasmussen, 281 F. 236, at 238 states that, “The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to non-taxpayers. The latter are without their scope. No procedure is prescribed for non-taxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws.”

This case clearly dictates that if you are a non-taxpayer – which, by definition, you as a man or woman must be – then the tax laws do not apply to you!

Yet another issue is that the ATO will claim that you must pay tax on what you ‘earn’, but what happens if you earn chickens, for example?  Does the ATO expect you to deliver x number of chickens to their offices? You can read this brilliant article that expands on that concept in much greater detail than we have time for here.

Furthermore, there is the additional argument that many people aren't aware of, which is the fact that the ATO - or the Australian Taxation Office - is not actually a legal entity. This has been established very clearly in an irrefutable High Court case in the matter of Moeliker v Chapman B8/2000 [2000] HCA Trans 242 (17 May 2000). It’s quite a lengthy case so you can download a copy that has the relevant statements already highlighted, specifically pages 12 through 15.

Yet another strategy that has been suggested to us is to write to the ATO and ask them for a specific breakdown of all GST (Goods and Services Tax) that you have paid during the year so that you can correctly complete your income tax statement. There is simply no way that they can provide that, and we have heard some positive responses from people who have tried that strategy.

Please note that we’re certainly not suggesting everyone should rush off and stop paying tax, but we definitely recommend looking into these principles and strategies for yourself and, once you understand them fully, you can make informed decisions at that point about what is the best course of action for you.

Those of you reading this who are a little more advanced, may be interested in finding out how to completely eliminate any personal tax obligations by operating privately under a private foundation. If so, be sure to refer to the Financial Protection chapter in this e-book.

It is important to understand that Taxes exist only in commerce, and the Abolition of Slavery Act 1833 states that, “May it please your Majesty that it may be declared and enacted, and be it enacted, that from and after the passing of this Act, the king and Parliament of Great Britain will not impose any duty, tax, or assessment whatsoever, payable in any of his Majesty’s Colonies, Provinces, and plantations in North America or the west Indies, except only such duties as it may be expedient to impose for the regulation of commerce.”

This means that all taxes relate to commerce, not just personal tax. For example, as we covered in the previous chapter, the reality is that speeding tickets, for example, are an excise tax: first they convert your right to travel into a privilege, and then they ‘excise tax’ you for the privilege of travelling over the speed limit.  Black’s Law Dictionary 4^th Edition states that an ‘excise tax’ is often used synonymously with ‘privilege’ or ‘licence tax.’

Hopefully this chapter has given you some great strategies on challenging any and all forms of ‘tax’ that the powers-that-be are asking you to voluntarily part with.

Go back to Chapter 1 or go on to Chapter 3.