Australian taxation law notes 澳大利亚税法概要

Topic 2 Ordinary Income

1.Assessable income = ordinary income + statutory income (s. 6-1(1))

Taxable income = assessable income - deduction (s. 995-1(1) & s. 4-15)

2.Ordinary income: a. Periodicity, recurrence & regularity (Harris, Dixon)

b. Income must be money or convertible into money

c. Receipts from income producing activities will be regarded as ordinary income &

income earning activity (Harris, Dixon)

3.Income earning activities: a. Personal exertion (personal services, employment, one-off services)

b. Property (interest, rent, dividend)

c. Carrying on a business (sales, services)

4.S. 21A enables value of benefit, non-cash benefit, to be assessed as ordinary income under s. 6-

5.

FCT v Cooke & Sherden

5.S.21A does not operate in an employment relationship. If employment, the benefit is taxed under FBT.

6.Non-cash benefit: property or services provided wholly or partly in respect of a business relationship,

or for or in relation directly or indirectly to a business relationship. S. 21A(5)

7.S. 21A(3): the value of the benefit is reduced to the extent that the taxpayer would have been entitled

to a once only deduction if the taxpayer had incurred the cost.

8. Entertainment is non-deductible per s. 32-5.

9. If a receipt is ordinary income under s. 6-5, a receipt that substitutes for it will also be ordinary income under s. 6-5.

FCT v Dixon 10.Receipts generally not considered as ordinary income include capital, windfall gains, hobby receipts

and mutual receipts.

11.Purely gift from friend or family cannot be treated as ordinary income.

FCT v Harris 12.The compensation for the cancellation of business contracts is income.

Heavy Minerals Pty Ltd v FCT 13.Amount received for the sterilisation of assets are treated as capital (loss of use of asset or income

producing capacity).

Glenboig Union Fireclay Co Ltd v IRC

14. Payments received for entering into restrictive agreements are capital.

Dickenson v FCT 15. Compensation for loss of trading stock is considered as income.

CIR v Newcastle Breweries Ltd 16. Sales of knowledge or ‘know-how’ are income.

Rolls-Royce Ltd v Jeffrey 17.Sale or assignment of income streams should be treated as income, and the lump sum is assesable

under s. 25(1).

Myer Emporium 18.Undissected lump sum, where lump sum amounts comprising both income and capital, but without

dissection into their actual components, should be treated as capital.

Mclaurin v FCT

19. Lottery prize are not income in the Australian jurisdiction.

20. Gambling wins will only constitute deduction and assessable income, if they may be seen as proceeds

of a business.

Trautwein v FCT

21. Receipts form gambling wins are not assessable. (Martin v FCT)

22.No liability to tax arises where a person participates casually in a competition and wins a prize.

However, a professional quiz player regular appearances on quiz programs the prizes may constitute assessable income.

Case T14 23.Receipts or proceeds form hobbies, as distinguished from business, are deemed not to be assessable

income. Also, expenses and losses from hobbies are not deductibel.

https://www.360docs.net/doc/6a9714773.html,anizations have no identity separate from their members, thus subscriptions and other

contributions form members cannot be treated as income, they are mutual in character.

The Bohemians Club v Acting FCT 25. Income from illegal activities are assessable.

Partridge v Mallandaine 26. Profits arising from ultra vires actions of company directors may be assessable of the company.

England v Webb

Topic 3 Derivation of Income

1.S 6-5(2) & (3): assessable income include ordinary income derived during the income year.

2.The cash basis: used mostly by individuals, eg salary or wage earners

The accruals basis: generally used in business

3.Cash basis: income is derived when the cash is received.

Brent v FCT Accruals basis: the income is derived when it has been earned, when an invoice has been issued.

J Rowe & Son v FCT 4. Large chartered accounting firm should use accruals basis, because the income is not personal services income, it is the result of many accountants.

Henderson v FCT 5. The income derived by a solicitor in sole practice with one secretary should be treated as personal

services income and cash basis appropriate.

FCT v Firstenberg 6.Services can be provided by many people - Accrual

Services provided by one person - Cash

Selling shoes by one or many people - trading business - Accrual

Income from rental property - Cash

7.For a business selling goods or supplying services, amounts received in advance are not regarded as

income.

Arthur Murray v FCT 8.S. 6-5(4): the case where the taxpayer, though he has not received the money itself, has had the benefit

of it, or of something which is substantially equivalent to it. (cash basis only)

9. Brent v FCT: Wife of the Great in not in business instead providing personal services - Cash basis

S. 6-5(4) did not apply, and only the money actually received was derived.

10. Asking for a cash payment to be delayed is not dealing with the income. (cash basis only)

Brent v FCT

Topic 4 Statutory Income and Exempt Income

1.Dividends paid by a company to a shareholder are included in the shareholder’s assessable income

under s. 44(1).

2.Tax paid on the profits from which a dividend was paid and passed onto the shareholder is also

assessable under s. 207-20(1), which is called ‘franking’.

从税后利润付股利给股东，这部分利润所含的已交公司所得税称为franking credit。股东应申报（股利＋franking credit）为总股利，按照自己的税率，再减去franking credit，就是这部分收入应交的个人所得税。

3.S. 15-2(1): includes the value to the taxpayer of allowances, gratuities, compensations, benefits, bonuses and premiums provided, directly or indirectly, with respect to employment or services.

4.S. 15-2(2): does not have to be in the form of money.

5.S. 15-2(3)(d): if the allowance etc is ordinary income under s. 6-5, then s. 15-2 will not operate.

6. S. 6-25(2): cannot assess income twice.

7. S. 15-3: payments only made to induce a resumption of work are included in assessable income.

8. S. 15-10: your assessable income includes a bounty or subsidy that is paid a government to assist in the carrying on of a business, where the amount is not ordinary income assessable under s. 6-5.

9.S. 15-15: profits arising form the carrying on or carrying out of a profit-making undertaking or plan is included in assessable income, except where the profit is ordinary income assessable under s. 6-5.

10. Due to capital gain, s. 15-15 often not apply, there just in case.

11. Ordinary meaning of ‘Royalties’: 为行使某种权利而支付的费用，并且有数量上的规定。

McCauley v FCT 12. S. 15-20: your assessable income includes an amount that you received as or by way of royalty within

the ordinary meaning of ‘royalty’ and is not ordinary income under s. 6-5(1).

13.S. 15-30: any amount you received by way of insurance or indemnity for the loss of an amount is

included in assessable income, and the amount received is not ordinary income assessable under s.

6-5.

14. S. 15-35: If a taxpayer overpays their tax, interest paid on that tax by the ATO is assessable.

15. S. 15-70: reimbursement for car expenses on a cents per kilometer basis will be assessable.

This is different from a ‘car allowance’ which is ordinary income under s. 6-5(1).

Here, the employee is given extra money from employer to pay for car expenses.

16. S. 83-10: unused annual leave paid out as a lump sum on termination of employment is assessable.

17. S. 83-70: long service leave paid out is assessable.

18. S. 23L(1): income derived via a fringe benefit is not assessable as ordinary income.

19. S. 23L(2): non-cash business benefits within the meaning of s. 21A that are valued at less than $300 is

exempt.

Topic 5 Residence and Source

1.S. 6-5(2): if you are an Australian Resident, your assessable income includes the ordinary income you

derived from all sources.

2.S. 6-5(3): if you are a foreign resident, your assessable income includes ordinary income derived

directly or indirectly from all Australian sources, and other ordinary income that a provision

Includes.

4.Dictionary definition of ‘Reside’: To dwell permanently or for a considerable time, to have one’s

settled or usual abode, to live in or at a particular place. Residence of individual

5. Three tests: a. a person who resides in Australia. (Common Law Test)

b. a person whose domicile is Australia, unless the Commissioner is satisfied that they

have a permanent place of abode outside Australia. (Domicile Test)

c. a person who satisfies the 183 day rule.

6. From Levene v IRC: a. A person may leave their residence from time to time for business or pleasure.

Pechey v FCT

b. A person who visit another country without setting up an establishment is not a

resident there.

c. A person may reside in more than one place. (Gregory v DFCT)

7. Domicile is a legal concept and refers to the legal relationship a person has with a state.

Henderson v Henderson 8. A place of abode is a man’s residence, where he lives with his family and sleeps at night.

R v Hammond

9. Permanent does not equal forever, less than forever, but more than just holiday.

10. Permanent means more than simply temporary or transitory, but less than everlasting

FCT v Applegate 11.Under Domicile Test, a person will be a resident of Australia, if his domicile is Australia, unless his

permanent place of abode is outside Australia.

12. Permanent place of abode outside Australia:

a. Intended and actual length of stay, greater than 2 years suggests non-residency.

b. Establishment of a home outside Australia.

c. Durability of association with Australia.

13. 183 day rule: will be a resident for tax if have a presence in Australia for more than half of the

income year, either continuously or intermittently. (mainly applicable to people coming

into Australia)

14.Second limb of 183 day rule: a person will not be a resident of Australia Under this test, if the

Commissioner is satisfied that the taxpayer has a permanent place of abode

outside Australia.

Residence of companies

15. Three tests in para (b) of the definition of resident in s. 6(1): (only one need to be satisfied)

a. Incorporation test

b. Central management and control test

c. Controlling shareholder test

16: Incorporation test: a company is an Australian resident for tax, if it is incorporated in Australia. 17.Central management and control test: a company is an Australian resident for tax, if it carries on

business in Australia, and has its central management and

control in Australia.

Malayan Shipping v FCT 18.The central management and control of a company will usually be where the directors exercise their

powers of management.

De Beers Consolidated Mines v Home 19.If there is more than one place of management, the central management and control will be where the

‘superior or directing authority’ of the company is located.

Koitaki Para Rubber Estates Ltd v FCT 20.Controlling shareholder test: a company will be a resident of Australia for tax, if it carries on

Business (trading activity only) in Australia, and has its voting power

controlled by shareholders who residents of Australia.

Source of income

21.Payment for services - generally where the work was performed, but in Mitchum v FCT where the

place of signing a contract for services was decisive.

22.Dividends - the source is the same as the source of the company’s profits.

Nathan and Esquire Norminees 23.Interest - generally where the agreement to pay the interest is made.

Studebaker v C of T 24.Royalties - the source is usually where the persons with the know-how or who supply the services

reside.

FCT v United Aircraft Corporation 25.Business or trading income - the place where the agreements are made and the transactions entered

into.

Tariff Reinsurances v DCT

Topic 6 Capital Gains Tax (CGT)

1. The net capital gain is assessable under s. 102-5(1).

2. Meaning of CGT asset S. 108-5(2): a. Part of, or an interest in, any kind of property or legal right.

b. Goodwill

c. An interest in an asset of a partnership.

d. Partnership interests not covered by the abov

e.

3. Exemptions: a. S. 118-5: cars & motor cycles; decorations for brave conduct(奖章), unless bought.

b. S. 118-12: asset used to produce exempt income.

c. S. 118-25: trading stock (never capital, it is asset)

d. S. 104-10(5)(a): assets acquired before September 1985.

e. S. 118-24: depreciable assets with 100% taxable use.

4.Three category of CGT assets: a. CGT assets

b. Collectables

c. Personal use assets

5. Collectable s. 108-10(2): a. Specific items listed (jewelry, art work, first day cover coins)

b. Kept mainly for personal use and enjoyment

c. Exempt from GST if acquired for $500 or less under s. 118-10(1)

6.Personal use assets s. 108-20(2): a. A CGT asset, except a collectable, that is mainly for personal use

and enjoyment.

b. Does not include land and buildings or units (s. 108-20(3))

c. Exempt if acquired for $10,000 or less under s. 118-10(3)

7. Capital loss from personal use assets are disregarded under s. 108-20(1).

8. S. 108-10(4): Capital loss from collectables can only be offset against gains from other collectables.

9. S108-15(2): Sets of collectables are taken to be a single collectable.

10. CGT event A1- disposal of a CGT asset: s. 104-5

A. The event occurs if you disposal of a CGT asset (s. 104-10(1))

B. Disposal is a change of beneficial ownership (s. 104-10(2))

C. Capital gain = capital proceeds - cost base (s. 104-5 & s. 104-10(4))

D. Capital loss = reduced cost base - capital proceeds (s. 104-5 & s. 104-10(4))

11.Timing of event A1: CGT event A1 occurs when you enter the contract for disposal, or;

If there is no contract, when the change of ownership occurs.

S. 104-5, S. 104-10(3) & S. 109-5(2) 12.Capital proceeds s. 116-20(1): the money received or receivable, and the market value you have

received or entitled to receive.

13.Cost base s. 110-25: a. The amount paid (s. 110-25(2))

b. Incidental cost of disposal (s. 110-25(3))

c. Capital expenditure to upgrade the asset that relates to installing or moving

asset (s. 110-25(5))

14. Incidental cost: a. Cost of surveyor, value, broker (s. 110-35(2))

b. Cost of transfer (s. 110-35(3))

c. Stamp duty印花税or similar duty (s. 110-35(4))

d. Cost of advertising for selling and buying (s. 110-35(5))

e. Cost of obtaining a valuation (s. 110- 35(6))

f. Search fees (s. 110-35(7))

15.Indexation cost base (s. 960-275(2)) = Index number at quarter ending 30 Sept 1999 (always 68.7)

Index number at quarter of purchase (check index table)

Table of index numbers: Taxation Law, p. 327 16.Discounting: a. Available only to individuals, trusts and superannuation funds. Not available to

companies (s. 115-10）

b. Available for assets purchased after 21/9/1999 and held for more than 12 months (s.

115-15, s. 115-25)

c. The net capital gain is reduced by 50% for individuals and trusts (s. 115-100(a)) Summary

17. If disposed of asset on or before 21/9/99:

A. Held asset > 12 months: indexation s. 114-1 & s. 114-10(1)

B. Held asset ≤ 12 months: indexation not available s. 114-10(1)

C. Discounting not exist before 21/9/99

18. If disposed of asset after 21/9/99 and asset was acquired on or before 21/9/99:

A. Held asset < 12 months: no indexation s. 114-10(1), no discounting s. 115-25(1)

B. Held asset ≥ 12 months: can choose indexation s. S.114-1 & s. 114-10(1), or discounting

s. 115-15 & s. 115-25(1)

C. Company cannot discount at all (s.115-10)

19. If asset was disposed of and acquired after 21/9/99:

A. Held asset >12 months: discount available s. 115-15 & s. 115-25(1)

B. Held asset ≤ 12 months: no discount s. 115-25(1)

C. Indexation not available at all s. 114-1

D. Company cannot discount at all (s.115-10)

20.Often discounting will be better, but not when there are large carry forward losses, and company can

only index (if available)

21.Steps in calculation: a. CGT asset? S. 108-5, disposal of asset event A1

b. Exemptions?

c. Type of CGT asset?

d. If you have a gain, consider the concessions: Indexation s. 114-1 & s. 114-10

Discounting s. 115-5,-10,-15,-20

c. Calculate the gain/loss

Topic 7 Fringe Benefits Tax (FBT)

1.FBT is only relevant for non-cash employment benefits. Non-cash business benefits are dealt with

under s. 21A and still assessed under s. 6-5(1).

Step 1 - a fringe benefit?

2.Employment relationship: for a benefit to be a fringe benefit, it must be provided in respect of the

employment of the employee, not because of other relationship. (most

important, cannot employ yourself)

3. Benefit: includes real or personal property and the rights to use such property.

4. Provided in FBT year: in the period 1 April to 31 March 2014.

5. Provider of the benefit: employer, associate or arranger.

6. Recipient: employee; current, past, or future employee; associate of the employee.

Step 2 - a car benefit?

7.S. 7(1)(a): A. provided due to employment;

B. held by an employer, associate or third party;

C. applied for private use;

D. available for private use

8. Definition of a car: s. 136(1) FBTAA86 & s. 995-1(1) ITAA97

A. Motor vehicle (except motorcycle or similar)

B. Designed to carry less than 1 tonne and less than 9 passengers

9. Applied for private use: s. 7(2) & (3)

A. Private use can be deemed if the car is available for private use.

B. If the car is garage at or near a place of residence of the employee, it is considered

available for private use (s. 7(2)(b)), and

C. Use that is not in the course of producing assessable income of the employer

(s. 7(3)(c)(i) & s. 136(1))

10.Exempt car benefits: a. Taxis, panel vans, utes or other motor vehicles where the private use is of a

minor, infrequent and irregular (s. 8(2))

b. Unregistered cars that are used mainly in connection with the business of the

Employer (s. 8(3))

Step 3 - calculating taxable value

11. Statutory formula s. 9(1): ABC - E

D

A = Base value of the car (cost price s. 9(2)(a)(i))

The sum of Expenditure incurred (exclude registration cost and cost of transfer), and

Additional expenditure incurred in relation to fitting non-business accessories.

B = Statutory fraction

C = Number of days benefit provided in a year

D = Number of days in tax year

E = Recipient’s contribution to the benefit

12. If the car is leased: base value = leased car value (s. 9(2)(a)(ii))

13. Leased car value s. 136(1): a. The cost price to the lessor if the person began leasing the car at the

same time as the lessor bought it.

b. The amount that the person could reasonably be expected to pay to

purchase the car from the owner under an arm’s length transaction. 14.Cars owned by employer: the base value is reduced to 2/3 of the original value in the year after the 4th

anniversary of purchase (s. 9(2)(a)(i))

15. Cars leased by employer: the base value is reduced to 2/3 of the original value in the year after the 4th

anniversary of purchase (s. 9(2)(a)(ii))

16.Recipient’s contribution s. 9(2)(e): this come in the form of the employee paying for some petrol,

repairs, etc. or just making a cash contribution.

17. Operating cost formula s. 10(2): C × (100% - BP) - R

C = total of all operating costs during the FBT year

BP = business use percentage

R = recipient’s contribution

18.Car is owned, operating costs are:

A. Car expenses eg. petrol, oil, servicing paid for s. 10(3)(a)(i)

B. Registration and insurance s. 10(3)(a)(ii)

C. Deemed depreciation s. 10(3)(a)(iii)(A)

D. Deemed interest s. 10(3)(a)(iii)(B)

19.Car is leased, operating costs are:

A. Lease fees s. 10(3)(a)(v)(A)

B. Car expenses (petrol, oil, servicing, repair paid for) s. 10(3)(a)(i)

C. Registration and insurance s. 10(3)(a)(ii)

20. Recipient’s contribution: same as the definition in the statutory formula, but section is different here

(S. 10(2) & s. 10(3)(c))

21 Deemed depreciation = ABC s. 11(1A), 11(1), 11(1AA) & s. 12

D only relevant if the car is owned

A = cost price or depreciated value

B = currently 25% depreciation rate (subsection 1AA)

C = number of days owned in the FBT year

D = number of days in the year of tax

22. Deemed interest = ABC s. 11(1B) & s. 11(2)

D only relevant if the car is owned

A = cost price or depreciated value

B = statutory interest rate (6.45% for 2013/14)

C = No. of days owned in the FBT year

D = Number of days in the year of tax

23. Calculate both statutory and operating, choose the lowest one.

24. Employer can elect between statutory and operating under s. 10(1).

25. If elect operating cost and the statutory provide lower FBT, s. 10(5) provides that the election be

disregarded.

Topic 8 General Deductions

1. S. 4-15(1): Taxable income = Assessable income - Allowable deductions

2. You can deduct any loss or outgoing under s. 8-1(1): (positive limbs)

A. It is incurred in gaining or producing assessable income, or

(a vailable to all taxpayers, but generally applied to employees)

B. It is incurred in carrying on a business for the purpose of gaining or producing

your assessable income.

(only applicable to business taxpayer)

3. You cannot deduct a loss or outgoing under s. 8-1(2): (negative limbs)

A. The loss or outgoing is capital in nature s. 8-1(2)(a)

B. The loss or outgoing is private or domestic in nature s. 8-1(2)(b)

C. The loss or outgoing was incurred whilst gaining exempt income

*Any one of above satisfied, you cannot be deducted

4. Outgoing = expenditure paid or liability incurred

Loss = same as outgoing

Amalgamated Zinc v FCT 5.Employees were lobbed whilst going to the bank to deposit the day’s taking, the loss by robbery was

incurred in carrying on a business for producing assessable income, it’s deductible (存钱被抢).

Charles Moore & Co v FCT First Positive Limb

6. Expenditure may be deductible, if it will reduce future expenses (裁员所付的赔偿金).

W Nevill & Co 7. Expenditure may relate to income from preceding or future years.

AGC Ltd v FCT Second Positive Limb

8. Costs incurred before a business starts are not usually deductible.

Softwood Pulp & Paper 9. Costs in establishing a new part of a business are not deductible.

Griffin Coal Mining

10. Expenditure after cessation of a business may not be deductible.

Amalgamated Zinc v FCT

11.If the loss could be related back to an earlier income activity, the expenditure may be deductible after

a business has ceased.(旧公司被收购后，旧公司在旧业务中导致的亏损，新公司可以申请抵税)

AGC Ltd v FCT 12.Interest payment that incurred on a loan after the sale of the business in respect of which the loan was

taken out as a deduction is deductible.

(公司停业后，其停业之前用作收购业务的贷款所需支付的利息可以抵税）

FCT v Brown 13.Provided the occasion for the loss or outgoing is to be found in the business operations directed to

gaining or producing assessable income, the loss will be deductible unless it is of a capital nature. (公司在停业之前因业务问题给客户造成的损失而导致的法律纠纷，其法律纠纷所付的钱可以抵税)

Placer Pacific v FCT Judicial Test

14. Incidental and relevant test: The occasion of the loss or outgoing should be found in whatever is

productive of the assessable income or, if none be produced, would be expected to produce

assessable income.

(该结论在Charles Moore中应用）

Ronpibon Tin 15. Essential character test: two taxpayers’ claims for travel costs from home to work were denied.

(上班的车费是derive income 的先决条件，并没有实际导致derive income,不能抵税)

Lunney v FCT 16.S. 25-100: to allow a deduction to an individual taxpayer from the 2001-2002 year for direct travel

between two places of work.

17.S. 25-100(3): a deduction is not allowed under this section if one of the work places is also the

taxpayer’s residence.

Apportionment

18.Apportionment allows a deduction for the expenditure that is not private or capital or not used to

produce exempt income.