australian tax law · australian tax law slides. australia’s taxation system, sources of law,...

Australian Tax Law

Slides

AUSTRALIA’S TAXATION SYSTEM, SOURCES OF LAW, INCOME TAX FORMULA, TAX vs ACCOUNTING

WU November 2018AUSTRALIAN TAXATIONslide set 1

Professor Rick Krever |

Email: rick.krever@uwa.edu.au

LECTURER

SELECTED ISSUES

0123456789

What aspects of Australian tax have wider application?Why we have taxes?Core concepts: Precedent, legal relations with no entities (Partnerships, Trusts)Equity and Common LawIncome and CapitalRevenue and CapitalSource of Australian lawCapital Gains Tax issues: loss quarantining, concession, family home, transitional, rolloversFringe benefits taxation; principle-based drafting; principle-based designGAARs and TreatiesTraditional vs Modern VAT

SELECTED ISSUES

5,30 EUR – Vienna22,21 EUR – Melbourne

0123456789

Services PE: The term “permanent establishment” also encompasses: (b) The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue within a Contracting State for a period or periods aggregating more than 183 days in any 12-month period commencing or ending in the fiscal year concerned.

The European Convention on Human Rights guarantees the fundamental rights, such as the right to life, the prohibition of torture, the right to liberty and security, the right to a fair trial, the right to respect for private and family life, freedom of expression, and the prohibition of discrimination.

WHY DO WE HAVE TAXES?

A tax is generally defined as a “compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered”– See, Matthews v Chicory Marketing Board (1938)

WHAT IS A TAX?

0123456789

We use taxes to transfer economic power to the government to pay for four government functions:– public goods– counter cycles– address market failures– redistribution

WHY DO WE TRANSFER ECONOMIC POWER TO THE GOVERNMENT?

Goods needed for functioning of a nation and its economy that cannot be effectively provided by the private sector

Examples:– defence– legal system: courts, police, laws– diplomatic service

PUBLIC GOODS

Many supplies that were once thought to be public goods (only the government could provide them) are now privatised– road– public transport– airports– ports– utilities: electricity, gas, water– communication: telephone, broadband, postal services

If they are a monopoly and privatised, prices are regulated

Cross-subsidisation may also be required (e.g., phone rates)

CHANGING VIEWS ON WHAT ARE PUBLIC GOODS

0123456789

A market economy can produce far more wealth than a planned economy

COUNTER CYCLES

Market economies operate in cycles, with quick growing “heated” economies followed by recessions or depressions with unemployment and hardship

Governments intervene to smooth out the cycles

COUNTER CYCLES

Market economy is the most efficient at allocating resources and creating growth and wealth

But sometimes there are failures and governments need funds to address the failures

Types of market failures:– information failure– competitive market failure– negative externalities

ADDRESS MARKET FAILURES

0123456789

Consumers cannot research to make a good choice– E.g., in hospital with a heart attack cannot compare

quality of doctors

So we rely on government to check for us with standards for doctors

INFORMATION FAILURES

For market to work there must be free competition in the marketplace (to compete companies produced better goods for less cost)

But businesses may create monopolies (buy all competitors) or make anti-competitive deals with competitors

Government has to intervene to fix the market failure; needs resources to do this

COMPETITIVE MARKET FAILURE

Market prices fail to reflect full social cost of consumption– Example: the price of cigarettes does not reflect the

social costs that follow the inevitable cancer from smoking

NEGATIVE EXTERNALITIES

0123456789

Market economies create far more wealth than centrally planned economies

But the income is distributed unequally

Market economies use progressive taxes (taxes that are higher on high income persons than on low income persons) to redistribute some income from high income to lower income persons

REDISTRIBUTION

DOCTRINE OF PRECEDENT

0123456789

Precedents as the basis for law

Civil Law: Justinian Code; Napoleonic CodeCommon law: doctrine of precedent and hierarchy of courtsmodern commercial law: statute, but interpreted using the doctrine of precedentECJ and precedent in civil law

Transplanted categories

also common in civil lawexample: “employee” from labor code or tort law (vicarious liability)example: “capital gain” and “capital expense”

EU treaty and ECJ understanding of tax

imputation; GFCc-efficiency of VAT

0123456789

PARTNERSHIPS

Partnerships

obligation and rightsagreement to own and operate jointly, joint entitlement to profits and joint liability for debtsno entity is created; the relationship is based entirely on agreed rights and obligationsoriginally no written agreement requiredmodified by Partnership Act, but fundamentals are the same

Taxing a partnership

there is nobody to tax – only a set of rights and obligationsbut would be terribly complex to pro-rate every joint transaction and attribute to each partnerso net income (or loss) is calculated at the partnership level as if there were an entity and then attributedproblem with capital assets: two approaches

0123456789

Taxing a partnership

US / Canada approach: treat assets as partnership assets and attribute capital gains or lossesAustralia / UK approach: pro-rate the cost and consideration for each capital assetwhat happens if a partner joins or leaves? paid-off or paying-in for retained profits and capital assets

TRUSTS

What is the most important company law court in the world?

0123456789

Origins of equity: feudalism and ecclesiastic courts

• feudalism: God – king – nobles• tenure of land is not absolute; property is simply a bundle

of rights• today: expropriation is called “resumption” in many Anglo

jurisdictions

Dual Courts

court system started with appeals to the kingking allowed chancellor to hear appealsresult: two court systems

king’s courts: common law courtsecclesiastic (church) courts: courts of equity

Remedies

common law courts:• - damages

equity courts:• - specific performance• - injunction

0123456789

two courts today

• 1870s in almost all common law jurisdictions, common law courts and equity courts combined

• exception: the most powerful commercial court in the world

• company law is based on equity principles(directors’ fiduciary or trust-like duties to shareholders)

remedies

• king’s court: – damages (financial compensation)

• equity court: – injunction and specific performance– applied to person with contempt punishment

Which court to use

libel• equity court: stop before publication• king’s court: damages after publication

business contract• equity court: • not here (damages are sufficient)

0123456789

king’s court: not here – land is unique and damages are not sufficient

Trust (use)

• knights off to war, left estate with another knight for the benefit of wife and children (heir)

• holder of the property had legal title• wife and children sought rights against title holder

0123456789

• legal title: trustee• beneficial interest: beneficiaries

NO ENTITY OR LEGAL PERSONALITY- only a legal owner with obligations and beneficiaries with

rights

Taxing trusts

• is simply a collection of obligations (trustee) and rights• there is no “trust” to tax• have to find someone else

0123456789

Types of trusts

fixed trusts (unit trusts)• to wife for life, then children; or• ½ to Wendy and ½ to Rick

discretionary trust• to my grandchildren if they complete an accounting

degree• to grandchildren when they reach 21 but earlier if they

need it for studies

Who to trust

• if beneficiary is known: beneficiary• if beneficiary is unknown or uncertain: trustee

Trusts today

• wills• disabled persons, accident victims• pension funds (superannuation funds)• collective investment vehicles

(instead of mutual funds) – Singapore, Hong Kong, Australia, UK

• de facto relationships

0123456789

RATES, LEVIES & CHARGES,ORDINARY CONCEPTS OF ORDINARY INCOME & INCOME FROM PERSONAL SERVICES

CONSTITUTIONAL ASPECTS:POWER TO TAX

0123456789

TAX BASES

SOURCES OF LAW

0123456789

Income Tax Assessment Act 1936 Income Tax Assessment Act 1997

Income Tax Rates Act 1986

Income Tax Act 1986

Tax Administration Act 1953 (Cth)

SOURCES OF LAW:LEGISLATION FOR INCOME TAX

SOURCES OF LAW:CASE LAW & RULINGS

0123456789

INCOME TAX FORMULA

ACCOUNTING AND JUDICIAL CONCEPTS OF INCOME

ACCOUNTING PROFIT AND JUDGES’ CONCEPTS OF INCOME

0123456789

ORDINARY INCOME AND STATUTORY INCOME 1915-1985

0123456789

STATUTORY INCOME: CAPITAL GAINS

ACCOUNTING vs TAX LAW

0123456789

ACCOUNTING STANDARDS VS TAX ADVICE

likely

ACCOUNTING STANDARDS VS TAX LEGISLATION

ACCOUNTING INCOME vs TAX LAW INCOME

0123456789

DIFFERENCES BETWEEN TAX LAW AND ACCOUNTING

0123456789

Taxpayer incurs $1,000 for legal fees to defend title to an asset

Taxpayer incurs $1,000 for legal fees to fight an application by a competitor to open nearby

income

0123456789

expenses

EXEMPT INCOME AND NON-ASSESSABLE NON-EXEMPT INCOME

0123456789

DEDUCTIONS:GENERAL AND SPECIFIC DEDUCTIONS

Income Tax Rates Act 1986

INCOME TAX FORMULA:TAX RATES

LEVIES AND CHARGES

0123456789

LEVIES AND CHARGES:MEDICARE LEVY

LEVIES AND CHARGES:MEDICARE LEVY SURCHARGE

LEVIES AND CHARGES:REPAYMENTS OF HIGHER EDUCATION DEBTS

0123456789

ORDINARY CONCEPTS OF ORDINARY INCOME

Income Tax Assessment Act

Scott v Commissioner of Taxation

WHAT IS ORDINARY INCOME?

PREREQUISITES OF ORDINARY INCOME

0123456789

Tennant v Smith FCT v Cooke and Sherden

Payne v FCT

PREREQUISITES OF ORDINARY INCOME:CASH OR CASH CONVERTIBLE

PREREQUISITES OF ORDINARY INCOME:REAL GAIN

FCT v Myer Emporium

CHARACTERISTICS OF ORDINARY INCOME

0123456789

Keily v FCTAnstis v FCT

FCT v Dixon

CHARACTERISTICS OF ORDINARY INCOME:REGULAR / PERIODICAL RECEIPTS

Eisner v Macomber

CHARACTERISTICS OF ORDINARY INCOME:FLOW – THE CONCEPT

Eisner v Macomber

CHARACTERISTICS OF ORDINARY INCOME:FLOW – THE CONCEPT

0123456789

CHARACTERISTICS OF ORDINARY INCOME:FLOW – IMPORTANT TRAITS

CHARACTERISTICS OF ORDINARY INCOME:COMMONLY RECOGNISED CATEGORIES

Federal Coke Co Pty Ltd v FCT

Bohemians Club v Acting FCT

CHARACTERISTICS OF ORDINARY INCOME:COMMONLY RECOGNISED CATEGORIES

0123456789

INCOME FROM PERSONAL SERVICES AND EMPLOYMENT

A GAIN FROM PERSONAL SERVICES AND EMPLOYMENT

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS

0123456789

Brent v FCT

Kelly v FCT

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS: CLEARLY ESTABLISHED

Laidler v Perry Calvert v Wainwright

FCT v Dixon

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS: UNCERTAIN (VOLUNTARY PAYMENTS)

Scottv FCT

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS: UNCERTAIN (GIFTS)

0123456789

Scott v FCTFCT v Blake

Scott v FCT

Scott v FCT; Hayes v FCT Scott v FCT; Hayes v FCT

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS: UNCERTAIN (GIFTS)

Case 37

Kelly v FCT

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS: UNCERTAIN (PRIZES)

0123456789

Payne v FCT

ORDINARY INCOME – REWARD FOR SERVICES:NON-CASH BENEFITS

CAPITAL RECEIPT OR PERSONAL EXERTION

Bennett v FCT AAT Case 7,752

CAPITAL RECEIPT OR PERSONAL EXERTION:CHANGES TO ENTITLEMENTS

0123456789

Higgs v OlivierFCT v Woite

Hepples v FCT

CAPITAL RECEIPT OR PERSONAL EXERTION:CHANGES TO ENTITLEMENTS

Pickford v FCT

CAPITAL RECEIPT OR PERSONAL EXERTION:SIGN-ON FEES

STATUTORY INCOME:SERVICES AND EMPLOYMENT (s 15-2 ITAA97)

0123456789

STATUTORY INCOME:SERVICES AND EMPLOYMENT (s 15-2 ITAA97)

0123456789

INCOME FROM PROPERTY AND BUSINESS, TAX ACCOUNTINGWU November 2018AUSTRALIAN TAXATIONslide set 3

INCOME FROM PROPERTY

RECALL THE ORDINARY INCOME FLOW CONCEPT

0123456789

Riches v Westminster Bank Ltd

INTEREST

DIVIDENDS

Dividend

Dividend assessed asstatutory income:

s 44 ITAA36

DIVIDENDS FOR RESIDENT TAXPAYERS:GROSS UP AND TAX OFFSET MECHANISM

0123456789

Adelaide Fruit and Produce Exchange Co v DCT

RENTAL AND LEASE INCOME:RENT

RENTAL AND LEASE INCOME:LEASE PREMIUMS

Kosciusko Thredbo Pty Ltd v FCT

Dickenson v FCT

RENTAL AND LEASE INCOME: NOT FULFILLING LEASE OBLIGATIONS TO REPAIR PROPERTY

0123456789

McCauley v FCT

ROYALTIES

Egerton-Warbuton v DCT

ANNUITIES

INCOME FROM BUSINESS

0123456789

GAINS FROM BUSINESS ACTIVITIES:INTRODUCTION

GAINS FROM BUSINESS ACTIVITIES:PROCESS TO CHARACTERISE GAINS

ORDINARY INCOME FROM BUSINESS ACTIVITIES:STEP 1: CARRYING ON A BUSINESS

0123456789

Ferguson v FCT

STEP 1: CARRYING ON A BUSINESSINDICATORS OF A BUSINESS ACTIVITY

Stone v FCT

FCT v JR Walker

Thomas v FCT

STEP 1: CARRYING ON A BUSINESSINDICATORS OF A BUSINESS ACTIVITY (COURTS)

Ferguson v FCT

Thomas v FCT

STEP 1: CARRYING ON A BUSINESSINDICATORS OF A BUSINESS ACTIVITY (COURTS)

0123456789

Trautwein v FCT Evans v FCT

STEP 1: CARRYING ON A BUSINESSHOBBY OR BUSINESS - GAMBLING

Stone v FCT Spriggs v FCT Riddell v FCT

STEP 1: CARRYING ON A BUSINESSHOBBY OR BUSINESS - SPORTSPEOPLE

STEP 1: CARRYING ON A BUSINESSHOBBY OR BUSINESS – INVESTMENT ACTIVITIES

London Australia Investment Co Ltd v FCT

AGC (Investments) Ltd v FCT

0123456789

Softwood Pulp and Paper Ltd v FCT

FCT v Osborne

STEP 1: CARRYING ON A BUSINESSCOMMENCEMENT OF A BUSINESS

Business commencement

Preliminary expenses incurredNot deductible under s 8-1

Operating expensesDeductible under s 8-1

STEP 2: NORMAL PROCEEDS OF A BUSINESS

Memorex Pty Ltd v FCT

STEP 2: NORMAL PROCEEDS OF A BUSINESS:NATURE OF THE BUSINESS

GP International Pipecoaters v FCT

FCT v Merv Brown Pty Ltd

0123456789

Memorex

FCT v Merv Brown Pty Ltd

STEP 2: NORMAL PROCEEDS OF A BUSINESS:NATURE OF THE BUSINESS

FCT v Cooke and Sherden

STEP 2: NORMAL PROCEEDS OF A BUSINESS:NON-CASH BUSINESS BENEFITS

TAX ACCOUNTINGFOR RECEIPTS

0123456789

TAX ACCOUNTING: ACCOUNTING FOR INCOME TAX PURPOSES FINANCIAL ACCOUNTING

Henderson v FCT

DERIVATION OF INCOME:CASH VS ACCRUALS METHODS

Arthur Murray (NSW) Pty Ltd v FCT

DERIVATION OF INCOME:PREPAYMENTS AND “LAY-BY” SALES

Prepayment by customer

30 June 20X1

Servicesrendered

0123456789

BHP Billiton Petroleum v FCT

DERIVATION OF INCOME:DELAYS BECAUSE OF A DISPUTE

0123456789

EXTRAORDINARY & ISOLATED TRANSACTIONS, COMPENSATION RECEIPTSWU November 2018AUSTRALIAN TAXATIONslide set 4

EXTRAORDINARY AND ISOLATED TRANSACTIONS

0123456789

EXTRAORDINARY AND ISOLATED TRANSACTIONS:ORDINARY INCOME

FCT v Myer Emporium

California Copper Syndicate v Harris

EXTRAORDINARY AND ISOLATED TRANSACTIONS:FORMS A BUSINESS ITSELF

Scottish Australian Mining Co Ltd v FCT

FCT v Whitfords Beach Pty LtdStevenson v FCT

Statham v FCT Casimaty v FCT

0123456789

FCT v Whitfords Beach Pty Ltd

or Myer Emporium

Myer Emporium

EXTRAORDINARY AND ISOLATED TRANSACTIONS:TWO STRANDS OF FCT V MYER EMPORIUM (1987)

Myer Emporium

EXTRAORDINARY AND ISOLATED TRANSACTIONS:FIRST STRAND OF MYER EMPORIUM

0123456789

FCT v Cooling

Westfield Ltd v FCT

Myer Emporium

Henry Jones (IXL) Ltd v FCT

EXTRAORDINARY AND ISOLATED TRANSACTIONS:SECOND STRAND OF MYER EMPORIUM

0123456789

EXTRAORDINARY AND ISOLATED TRANSACTIONS:STATUTORY INCOME

EXTRAORDINARY AND ISOLATED TRANSACTIONS:STATUTORY INCOME: CAPITAL GAINS TAX

FCT v Whitfords Beach Pty Ltd

EXTRAORDINARY AND ISOLATED TRANSACTIONS:STATUTORY INCOME: SECTION 15-15

0123456789

COMPENSATION RECEIPTS DERIVED BY A BUSINESS

FCT v Dixon

REPLACEMENT PRINCIPLE

COMPENSATION FOR BUSINESS LOSSES

0123456789

COMPENSATION FOR BUSINESS LOSSES:BREACH OF CONTRACT

Heavy Minerals Pty Ltd v FCT

Allied Mills Industries Pty Ltd v FCT

California Oil Products Ltd (in Liq) v FCT

COMPENSATION FOR BUSINESS LOSSES:LOSS OF A BUSINESS ASSET

Glenboig Union Fireclay v IR Commissioner

Ensign Shipping Co Ltd

0123456789

COMPENSATION FOR BUSINESS LOSSES:COMPENSATION BY WAY OF INSURANCE

McLaurin v FCT

COMPENSATION FOR BUSINESS LOSSES:COMPOSITE CLAIMS

0123456789

GENERAL DEDUCTIONS,CAPITAL DEDUCTIONSPERSONAL EXPENSESWU November 2018AUSTRALIAN TAXATIONslide set 5

deduct

GENERAL DEDUCTION PROVISION

0123456789

GENERAL DEDUCTION RULE:POSITIVE LIMBS

INTRODUCTION

0123456789

GENERAL DEDUCTION RULE:NEGATIVE LIMBS

EXAMINING THE POSITIVE LIMBS

Charles Moore & Co (WA) Pty Ltd v FCT

LOSS OR OUTGOING

0123456789

Ronpibon Tin No Liability v FCT

TO THE EXTENT

NilsenDevelopment Laboratories Pty Ltd v FCT

RACV Insurance Pty Ltd v FCT

INCURRED

Amalgamated Zinc (De Bavay’s Ltd) v FCT

GAINING OR PRODUCING ASSESSABLE INCOME

FCT v Payne (2001); FCT v Day (2008)

Must be sufficient and necessary that the loss or outgoing is:1.Productive of assessable income; or

2.Expected to produce assessable income

0123456789

GAINING OR PRODUCING ASSESSABLE INCOME:IS THERE A SUFFICIENT NEXUS?

Softwood Pulp and Paper Ltd v FCT

Lunney v FCT; Hayley v FCT

Application to travel expenses

Lunney v FCT; Hayley v FCT

FCT v Collings

FCT v Wiener Re Hill v FCT

FCT v Vogt

0123456789

FCT v Maddalena

Spriggsv FCT; Riddell v FCT

Business related cases

Charles Moore & Co

W Nevill and Co Ltd v FCT

Herald and Weekly Times v FCT (1932) and FCT v Snowden v Willson Pty Ltd

Magna Alloys & Research Pty Ltd v FCT

FCT v La Rosa

0123456789

Employment related cases

FCT v Day

FCT v Payne

Application to self-education expenses

FCT v Studdert FCT v Hatchett

Application to self-education expenses (continued)

FCT v Finn

0123456789

FCT v Anstis

PlacerPacific Management v FCT

FCT v Jones

Loan drawn down

Business ceases

Interest accruing & payablenexus still maintained

Ronpibon Tin No Liability v FCT

Europa Oil (NZ) Ltd v CIT (NZ) (No 2)

AMOUNT OF DEDUCTION:REASONABLE VS. ACTUAL EXPENSE

0123456789

Ure v FCT

AMOUNT OF DEDUCTION:SUBJECTIVE PURPOSE

EXAMINING THE NEGATIVE LIMBS

CAPITAL EXPENSES

0123456789

any one

GENERAL DEDUCTION RULE:NEGATIVE LIMBS

CAPITAL OR CAPITAL IN NATURE

Vallambrosa Rubber Co Ltd v Farmer

British Insulated and HelsbyCables Ltd v Atherton

CAPITAL OR CAPITAL IN NATURE:JUDICIAL TESTS

0123456789

Sun Newspapers Ltd and Associated Newspapers v FCT

CAPITAL OR CAPITAL IN NATURE:JUDICIAL TESTS

MODEL TAX TREATMENT

RECOGNITION OF CAPITAL EXPENSES IS A “RELIEF”

0123456789

DEPRECIATION FOR WASTING ASSETS

DEPRECIATION TIMING

BLACK HOLE EXPENSES

0123456789

BLACK HOLE EXPENSES

RECOGNISING CAPITAL EXPENSES:2017

0123456789

DEPRECIATION

CLAIMING A DEDUCTION:2. DECLINE IN VALUE

0123456789

Year 1:

Year 2:

Year 3:

Year 1:

Year 2:

Year 3:

0123456789

BALANCING ADJUSTMENTS

PRIVATE OR DOMESTIC

FCT v Cooper

Lodge v FCT

Fullerton v FCT

PRIVATE OR DOMESTIC

0123456789

Westcott v FCT

PRIVATE OR DOMESTIC: APPLICATION TO CLOTHING & DRY CLEANING EXPENSES

FCT v Edwards

Mansfield v FCT .

Morris v FCT

PRIVATE OR DOMESTIC: APPLICATION TO CLOTHING & DRY CLEANING EXPENSES

FCT v Munro

Steele v DCT

PRIVATE OR DOMESTIC: INTEREST EXPENSES

0123456789

PRIVATE OR DOMESTIC: HOME OFFICE EXPENSES

FCT v Faichney

Interest and tax minimisation

Ure v FCT

PRIVATE OR DOMESTIC: INTEREST EXPENSES

DEDUCTION DENIALS

0123456789

INCURRED IN GAINING / PRODUCING CERTAIN TYPES OF INCOME

Income:Assessable

Expenses:Deductible

Income:Not assessable

Expenses:Not deductible

DENIED DEDUCTIONS

La Rosa

DENIED DEDUCTIONS:REIMBURSEMENTS

0123456789

GENERAL DEDUCTIONS (CONT); SPECIFIC DEDUCTIONS: REPAIRS

AGENDA

SPECIFIC DEDUCTIONS: REPAIRS

0123456789

REPAIRS:KEY ISSUES

Lurcott v Wakely and Wheeler

Case J47

MEANING OF REPAIR

INCOME-PRODUCING PURPOSES

0123456789

CAPITAL

Law Shipping Co Ltd v Inland Revenue Commissioners

W Thomas & Co v FCT

CAPITAL:INITIAL REPAIRS

CAPITAL:IMPROVEMENT

0123456789

FCT v Western Suburbs Cinemas Ltd

CAPITAL:IMPROVEMENT

Samuel Jones & Co (Devondale) Ltd v IRC

W Thomas & Co Pty Ltd v FCT

CAPITAL:REPLACEMENTS

0123456789

LOSSES, SUBSTANTIATION MORE DETAILS ON CAPITAL ALLOWANCESWU November 2018AUSTRALIAN TAXATIONslide set 6A

SPECIFIC DEDUCTIONS:CAPITAL ALLOWANCES

INTRODUCTION

0123456789

DEPRECIATION DEDUCTIONS

Depreciatingasset acquired

Decline in value deduction

End ofeffective life

DEPRECIATING ASSET

0123456789

CLAIMING A DEDUCTION

CLAIMING A DEDUCTION:1. HELD

0123456789

Year 1:

Year 2:

Year 3:

Year 1:

Year 2:

Year 3:

0123456789

BALANCING ADJUSTMENTS

less less

0123456789

BALANCING ADJUSTMENTS:ASSET USED FOR NON-TAXABLE PURPOSE

CAPITAL WORKS DEDUCTIONS

0123456789

CAPITAL WORKS DEDUCTIONS:CONSTRUCTION EXPENDITURE

CAPITAL WORKS DEDUCTIONS:RATE OF DEDUCTION

BLACKHOLE EXPENSES

0123456789

BLACKHOLE EXPENSES:BUSINESS-RELATED COSTS

OTHER DEDUCTIONS

TAX-RELATED EXPENSES

0123456789

BAD DEBTS

FCT v Payne

directly

TRAVEL BETWEEN WORKPLACES

0123456789

FCT v McPhail

PRIOR YEAR LOSSES & PROVISIONS THAT LIMIT DEDUCTIBILITY

PRIOR YEAR LOSSES

0123456789

PRIOR YEAR LOSSES:ILLUSTRATION

Assessable income: $20,000Deductions: $45,000= Tax Loss: $25,000

Assessable Income: $60,000Deductions: $20,000

Exempt income: $10,000

PRIOR YEAR LOSSES:CORPORATE TAXPAYERS

NON-COMMERCIAL LOSSES

0123456789

NON-COMMERCIAL LOSSES:EXEMPTIONS

NON-ARM’S LENGTH PRICES BETWEEN ASSOCIATED PARTIES

SUBSTANTIATION

0123456789

SPECIFIC DEDUCTIONS, PROVISIONS LIMITING DEDUCTIBILITYWU November 2018AUSTRALIAN TAXATIONslide set 7

GENERAL DEDUCTION PROVISION

0123456789

BAD DEBTS

0123456789

BAD DEBTS

CHARITABLE GIFTS

FCT v McPhail

0123456789

CARRIED-FORWARD LOSSES

PRIOR YEAR LOSSES

0123456789

PRIOR YEAR LOSSES:ILLUSTRATION

Assessable income: $20,000Deductions: $45,000= Tax Loss: $25,000

Assessable Income: $60,000Deductions: $20,000

Exempt income: $10,000

PRIOR YEAR LOSSES:CORPORATE TAXPAYERS

0123456789

NON-COMMERCIAL LOSSES:EXEMPTIONS

DOMESTIC TRANSFER PRICING

0123456789

NON-ARM’S LENGTH PRICES BETWEEN ASSOCIATED PARTIES

PASSIVE LOSSES (NEGATIVE GEARING)

PASSIVE LOSSES

0123456789

PASSIVE LOSSES

0123456789

CAPITAL GAINS TAXWU November 2018AUSTRALIAN TAXATIONslide set 8

OVERVIEW

NET CAPITAL GAIN

0123456789

CAPITAL GAINS AND LOSSES

KEY ISSUES

CGT EVENTS

0123456789

CGT EVENTS

CGT EVENT A1

0123456789

CGT EVENTS C1 AND C2

CGT EVENTS D1

CGT ASSETS

0123456789

CGT ASSETS:COLLECTIBLES

CGT ASSETS:PERSONAL USE ASSETS

CGT: THE TRANSITIONAL RULE

0123456789

CGT ASSETS:SEPARATE CGT ASSETS (EXAMPLES)

Post CGTPre-CGT

Building constructedLand acquired

CGT ASSETS:SEPARATE CGT ASSETS (EXAMPLES)

CGT ASSETS:TIME OF ACQUISITION

Date when purchasertaken to have acquired

CGT asset

0123456789

EXEMPTIONS AND EXCEPTIONS

EXEMPTIONS AND EXCEPTIONS: DISREGARDED GAINS AND LOSSES ON CERTAIN ASSETS

EXEMPTIONS AND EXCEPTIONS: LOSS DENYING TRANSACTIONS AND ANTI-OVERLAP PROVISIONS

0123456789

EXEMPTIONS AND EXCEPTIONS:MAIN RESIDENCE EXEMPTION

0123456789

CALCULATING A CAPITAL GAIN OR CAPITAL LOSS

GENERAL POSITION

CAPITAL PROCEEDS

0123456789

CAPITAL PROCEEDS: MODIFICATION 1: MARKET VALUE SUBSTITUTION RULE

CAPITAL PROCEEDS: MODIFICATION 2: APPORTIONMENT

Building constructedLand acquired

Capital proceeds (one amount)

CAPITAL PROCEEDS: MODIFICATIONS 3 TO 6

0123456789

COST BASE

COST BASE:EXCLUDED EXPENDITURE

COST BASE:MODIFICATIONS

0123456789

COST BASE:APPORTIONMENT

COST BASE:INDEXATION

11.45am on 21 September 1999

Indexation of cost base: Indexation of cost base:

COST BASE:INDEXATION - FACTORS

0123456789

COST BASE:INDEXATION – WORKED EXAMPLE

COST BASE:CAPITAL LOSSES AND THE REDUCED COST BASE

NET CAPITAL GAIN

0123456789

RECALL: NET CAPITAL GAIN

REDUCTION OF CAPITAL GAIN

Indexation of cost base: Indexation of cost base:

CGT event must occur after 21/9/99CGT asset can be acquired pre or post 9/99

REDUCTION OF CAPITAL GAIN:DISCOUNT CAPITAL GAINS

0123456789

NET CAPITAL LOSSES

RESIDENTS AND NON-RESIDENTS

TAXABLE AUSTRALIAN ASSETS

0123456789

ENTRY AND EXIT

ROLLOVERS

0123456789

ROLLOVERS

0123456789

ROLLOVERS

0123456789

ROLLOVERS

0123456789

TAX OFFSETS

INTRODUCTION

INTRODUCTION:OFFSET AGAINST INCOME TAX LIABILITY

0123456789

TYPES OF OFFSETS

TYPES OF OFFSETS:RECOGNITION OF TAXES ALREADY PAID

RECOGNITION OF TAXES ALREADY PAID:DIVIDEND TAX OFFSETS

0123456789

RECOGNITION OF TAXES ALREADY PAID:DIVIDEND TAX OFFSETS

RECOGNITION OF TAXES ALREADY PAID:INCOME SUBJECT TO FOREIGN TAX

CONCESSIONAL TAX OFFSETS

The value of a deduction depends on the taxpayer’s tax rate

Tax offset is subtracted from income tax payable

0123456789

CONCESSIONAL TAX OFFSETS:COMMON OFFSETS

COMMON CONCESSIONAL OFFSETS: DEPENDANT (INVALID AND CARER)

0123456789

COMMON CONCESSIONAL OFFSETS: DEPENDANT (INVALID AND CARER)

COMMON CONCESSIONAL OFFSETS: PRIVATE HEALTH INSURANCE

0123456789

ORDER OF TAKING OFFSETS

0123456789

GOODS AND SERVICES TAXWU November 2018AUSTRALIAN TAXATIONslide set 10

THE DESIGN OF A GST

TAX BASES

0123456789

CONSUMPTION TAXES

TWO MODELS FOR TAXING CONSUMPTION

TWO MODELS FOR TAXING CONSUMPTION:NO TAX WORLD

0123456789

TWO MODELS FOR TAXING CONSUMPTION:RETAIL SALES TAX

TWO MODELS FOR TAXING CONSUMPTION:GOODS AND SERVICES TAX

Net Payable = $10

RST or VAT

0123456789

TWO MODELS FOR TAXING CONSUMPTION:RETAIL SALES TAX and VAT

RST v VAT

0123456789

TAXABLE SUPPLY:OVERVIEW

TAXABLE SUPPLIES (OUTPUTS)

0123456789

TAXABLE SUPPLY:CHARGING PROVISION

supply

consideration;

enterprise;

connected with Australia (“the indirect tax zone”);

registered

TAXABLE SUPPLY:CONSEQUENCES

0123456789

TAXABLE SUPPLY:CALCULATING THE TAX

WHAT IS A SUPPLY?

0123456789

supply

consideration;

enterprise;

registered

FCT v Reliance Carpet Co Pty Ltd (2008), FCT v Qantas Airways Ltd (2012), FCT v MBI Properties (2014)

TAXABLE SUPPLY:ELEMENT 1 – SUPPLY (s 9-10)

0123456789

WHAT IS CONSIDERATION?

supply

consideration;

enterprise;

registered

TAXABLE SUPPLY:ELEMENT 2 – CONSIDERATION (s 9-15)

0123456789

TAXABLE SUPPLY:ELEMENT 2 – CONSIDERATION (s 9-15)

WHAT IS AN ENTERPRISE?

0123456789

supply

consideration;

enterprise;

registered

enterprise

"business "

TAXABLE SUPPLY:ELEMENT 3 – ENTERPRISE (s 9-20)

0123456789

supplysupply

0123456789

Consideration

CONSIDERATION

enterprise

"business "

CONNECTED TO AUSTRALIA (“THE INDIRECT TAX ZONE”)

0123456789

supply

consideration;

enterprise;

registered

TAXABLE SUPPLY: ELEMENT 4 – CONNECTED TO THE INDIRECT TAX ZONE (AUSTRALIA) (9-25)

TAXABLE SUPPLY: ELEMENT 4 – CONNECTED TO THE INDIRECT TAX ZONE (AUSTRALIA) (s 9-25)

0123456789

REGISTERED

supply

consideration;

enterprise;

registered

0123456789

TAXABLE SUPPLY: ELEMENT 5 - REGISTRATION

0123456789

REGISTERED VS. UNREGISTERED BUSINESSES

REGISTERED VS. UNREGISTERED

0123456789

BUNCHING

TAXABLE SUPPLIES: PASSIVE SUPPLIES?

0123456789

taxable supply

GST-FREE SUPPLIES

GST-FREE SUPPLY

0123456789

GST-FREE SUPPLY

GST-FREE SUPPLY:FOOD

GST-FREE SUPPLY:HEALTH

0123456789

INPUT TAXED SUPPLIES

INPUT TAXED SUPPLY

South Steyne Hotel Pty Ltd v FCT

INPUT TAXED SUPPLY:RESIDENTIAL PREMISES

0123456789

MIXED AND COMPOSITE SUPPLIES

TYPES OF SUPPLIES

0123456789

FCT v Luxottica Retail Australia Pty Ltd

ACQUISITIONS (INPUTS)

CREDITABLE ACQUISITIONS

0123456789

CREDITABLE PURPOSE (s 11-15)

0123456789

CREDITABLE ACQUISITIONS:CONSEQUENCES

LIABILITY FOR GST & ATTRIBUTION

LIABILITY FOR GST & NET AMOUNT

0123456789

NET AMOUNT:ADJUSTMENTS

TAX PERIODS

ACCOUNTING METHODS

0123456789

TAX INVOICES

0123456789

INTERACTION OF GST & INCOME TAX

INTERACTION WITH INCOME TAX

SPECIAL RULES AND PROBLEMS

0123456789

SECOND-HAND GOODS

0123456789

DEPOSITS

0123456789

SPECIAL RULES:DEPOSITS (DIV 99)

DEPOSITS FOR UNDELIVERED SUPPLIES

0123456789

Société thermale d’Eugénie-les-Bains v Ministere de L’Économie, des Finances et de L’Industrie

Federal Commissioner of Taxation v Qantas (2012)

Air France-KLM, anciennement Air France Hop!-Brit Air SAS, anciennement Brit Air contre Ministère des Finances et des Comptes publics

SPECIAL RULES:DEPOSITS (DIV 99)

VOUCHERS

0123456789

LOYALTY SCHEMES

SPECIAL RULES:VOUCHERS (DIV 100)

LOYALTY SCHEMES

0123456789

FRINGE BENEFITS TAXWU November 2018AUSTRALIAN TAXATIONslide set 11

HOW ARE RECEIPTS FROM PERSONAL SERVICES AND EMPLOYMENT TAXED?

Fringe Benefits Tax Assessment Act 1986 Fringe Benefits Tax Act 1986

FEATURES OF THE FBT REGIME

employer

0123456789

DEFINITION OF A FRINGE BENEFIT

DEFINITION OF A FRINGE BENEFIT:‘BENEFIT’ AND ‘PROVIDED DURING THE YEAR OF TAX’

DEFINITION OF A FRINGE BENEFIT: BY AN EMPLOYER, ASSOCIATE OR THIRD PARTY

0123456789

J & G Knowles & Associates Pty Ltd v FCT

Starrim Pty Ltd v FCT

DEFINITION OF A FRINGE BENEFIT: IN RESPECT OF THE EMPLOYMENT OF THE EMPLOYEE

EXCLUSIONS

EXCLUSIONS:ALLOWANCE VS. REIMBURSEMENT

0123456789

DETERMINING THE TAXABLE VALUE OF A FRINGE BENEFIT

CATEGORIES OF FRINGE BENEFITS

CATEGORIES OF FRINGE BENEFITS:CAR FRINGE BENEFITS

0123456789

CATEGORIES OF FRINGE BENEFITS:LOAN FRINGE BENEFITS

CATEGORIES OF FRINGE BENEFITS:DEBT WAIVER FRINGE BENEFITS

0123456789

CATEGORIES OF FRINGE BENEFITS:EXPENSE PAYMENT FRINGE BENEFITS

CATEGORIES OF FRINGE BENEFITS:PROPERTY FRINGE BENEFITS

CATEGORIES OF FRINGE BENEFITS:MEAL ENTERTAINMENT FRINGE BENEFITS

0123456789

CATEGORIES OF FRINGE BENEFITS:MEAL ENTERTAINMENT FRINGE BENEFITS

REDUCTIONS IN TAXABLE VALUE

0123456789

REDUCTIONS IN TAXABLE VALUE:RECIPIENT’S CONTRIBUTION

REDUCTIONS IN TAXABLE VALUE:OTHERWISE DEDUCTIBLE RULE

EXEMPT FRINGE BENEFITS

0123456789

EXEMPT FRINGE BENEFITS

EXEMPT FRINGE BENEFITS:MINOR BENEFITS

primarily in the employee’s employment

EXEMPT FRINGE BENEFITS:WORK-RELATED ITEMS

0123456789

EXEMPT FRINGE BENEFITS:MEMBERSHIP FEES, SUBSCRIPTIONS & TAXI TRAVEL

CALCULATING FBT LIABILITY

0123456789

STEP 1:TYPE OF FRINGE BENEFIT

STEP 2:FRINGE BENEFITS TAXABLE AMOUNT

STEP 3:FRINGE BENEFITS TAX LIABILITY

0123456789

FBT LIABILITY EXAMPLE

INTERACTION WITH OTHER TAXES

INTERACTION WITH INCOME TAX

0123456789

INTERACTION WITH GST

0123456789

INTERNATIONALWU November 2018AUSTRALIAN TAXATIONslide set 13

0123456789

RESIDENCY AND SOURCE

WU Novmeber 2018AUSTRALIAN TAXATIONslide set 14

GENERAL JURISDICTIONAL RULESIN SECTION 6-5 ITAA97

WHEN IS A TAXPAYER A TAX RESIDENT OF AUSTRALIA?

0123456789

Miller v FCT

INDIVIDUALS:RESIDES TEST

Miesagaes v Commissioners of Inland Revenue

IRC v Lysaght

Levene v IRC

INDIVIDUALS:RESIDES TEST - FACTORS

Domicile Act 1982:

INDIVIDUALS:DOMICILE TEST

0123456789

permanent place of abode outside Australia

FCT v Applegate

INDIVIDUALS:DOMICILE TEST

INDIVIDUALS:183-DAY TEST

Re Koustrup v FCT

INDIVIDUALS:183-DAY TEST & WORKING HOLIDAY VISAS

0123456789

INDIVIDUALS:SUPERANNUATION

PERIOD OF RESIDENCE

CorporationsAct 2001

COMPANIES:PLACE OF INCORPORATION TEST

0123456789

COMPANIES:CENTRAL MANAGEMENT AND CONTROL TEST

Malayan Shipping Co Ltd v FCT

Koitaki Para Rubber Estates v FCT

COMPANIES:CENTRAL MANAGEMENT AND CONTROL TEST

COMPANIES:CONTROLLING SHAREHOLDERS TEST

0123456789

Nathan v FCT

SOURCE OF INCOME:OVERVIEW

SOURCE OF INCOME:CATEGORIES OF INCOME

FCT v French FCT v Efstathakis

Spotless Services v FCT

EsquireNominees Ltd v FCT

0123456789

TAXATION OF FINANCIAL ARRANGEMENTS (TOFA)WU November 2018AUSTRALIAN TAXATIONslide set 15

CANCELLATION OF DEBT

0123456789

DEEP AND SHALLOW DISCOUNTS

0123456789

FOREX GAINS AND LOSSES

INSTALMENT SALES

0123456789

INSTALMENT SALES

DISSECTED DEBT: MYER SCHEME

0123456789

MYER SCHEME

SALES FOR CONTINGENT PAYMENTS

0123456789

australian tax law · australian tax law slides. australia’s taxation system, sources of law,...

Documents

czech tax law

australian law

australian construction law newsletter - acln · 2...

tort law australian contemporary

tax forum presentation - clayton utz - a leading australian...

diploma of australian taxation law · 3 - the tax institute...

australian carbon tax

australian pharmacy law & practice

income & sales tax department income tax law -...

taxa2001 blw32 introduction to australian tax law openunis...

snapshots of australian corporate tax history · pdf...

australian tax law bulletin - tax issues for digital...

australian school of business taxation and business law...

sin tax law

70616 australian constitutional law

diploma of australian taxation law · financial planners...

australian construction law - allens

tax tips for australian students

australian consumer law

balakina z.v . , ural state law university (ll.m. tax &...