Australian Taxation Law Notes

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Australian taxation law notes
Taxation (Swinburne University of Technology)
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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
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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.
24. Organizations 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
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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

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Topic 4 Statutory Income and Exempt Income

1. Dividends paid by a company to a shareholder are included in the shareholders 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.
franking credit
franking credit franking credit
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:
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.
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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.

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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 ones
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 mans 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.
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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.
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22. Dividends - the source is the same as the source of the companys 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

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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 above.
3. Exemptions: a. S. 118-5: cars & motor cycles; decorations for brave conduct(), 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))
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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 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
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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.
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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
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C = Number of days benefit provided in a year

D = Number of days in tax year
E = Recipients 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 arms length transaction.
14. Cars owned by employer: the base value is reduced to 2/3 of the original value in the year after the 4 th
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. Recipients 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 = recipients 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:
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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. Recipients 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.
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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
(available 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)
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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 days taking, the loss by robbery was
incurred in carrying on a business for producing assessable income, its deductible ().
Charles Moore & Co v FCT
First Positive Limb
6. Expenditure may be deductible, if it will reduce future expenses ().
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.()
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.
(
FCT v Brown
13. Provided the occasion for the loss or outgoing is to be found in the business operations directed to
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gaining or producing assessable income, the loss will be deductible unless it is of a capital nature.
()
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.
( Charles Moore
Ronpibon Tin
15. Essential character test: two taxpayers claims for travel costs from home to work were denied.
( derive income derive income,)
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
taxpayers residence.
Apportionment
18. Apportionment allows a deduction for the expenditure that is not private or capital or not used to
produce exempt income.
19. Legal rights test (traditional): if the legal right acquired from the loss or outgoing was not related to
a deductible purpose, the loss or outgoing attributable to that right
would not deductible. (old approach, not use now)
( trading stock )
Cecil Bros v FCT
20. Identifiable purpose test (current): concern with the taxpayers purpose in deciding whether an
outgoing was deductible.
( 12.5% 13.5% mainly private,
1%
Ure v FCT
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21. Where you have at least one purpose that satisfies a positive limb, and at least one purpose that
satisfies a negative limb, then apportionment is required.
22. Cash base and accruals base are only relevant for income. Expenses are deductible when incurred for
all taxpayers.
23. Expenditure on the business entity, structure, or organization is capital, eg expenditure on factory.
Sun Newspapers
24. Expenditure on the process by which an organization earns income is deductible, eg expenditure on
maintaining the factory is deductible.
Sun Newspapers
25. Expenditure to protect tangible assets is more likely to be capital.
26. Expenditure to protect intangibles is more likely to be revenue.
27. Private or domestic () expenditure wont satisfy the positive limbs anyway.
FCT v Hatchett
28. Child-minding expenses are not deductible, even if need to expend to earn income.
Lodge v FCT
29. Travel between home and work, even though you need to travel to work to earn money.
Lunney v FCT
30. Amounts set aside as provisions at the end of the year to provide for liabilities which are expected to
be incurred in the future are not deductible.
James Food
31. Advance payments for services will generally be deductible, if the taxpayer becomes contractually
committed to pay amount due and therefore incurs the liability.
FCT v Raymor
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Topic 9 Specific Deductions

1. S. 82A(1): a deduction for expense of self-education allowable under s. 8-1 is limited to the excess
over $250 of the net amount.
Self-education Expenses
2. Self-education expenses are not capital.
FCT v Finn
3. Will be a nexus between self-education expenses and earning assessable income if:
A. Self-education is to maintain a level of knowledge or skill in continuing to earn income.
FCT v Studdert
B. Self-education will increase a persons qualifications in their current field.
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FCT v Highfield
4. Formula: Upper limit of the = Net amount of expenses - $250
total s. 8-1 deduction of self-education
5. S. 82A(2): necessarily incurred by the taxpayer for or in connection with a prescribed course (not
necessary to be formal course) of education.
6. Net amount of expense of self-education = reduce the expense by educational assistance payment
Tax-Related Expenses
7. S. 25-5(1): expenditure incurred in managing the taxpayers tax affairs, or in paying a general interest
charge imposed under Taxation Act, is deductible.
Repairs
8. S. 25-10(1): can deduct expenditure incurred for repairs to part or a depreciating asset held solely for
the purpose of producing assessable income.
9. S.25-10: if held partly for producing assessable income, you can deduct expenditure as is reasonable.
10. S. 25-10(3): cannot deduct the expenditure if its capital.
11. Significantly improving the items function is not a repair.
FCT v Western Suburbs Cinemas
12. Pre-emptive repairs are deductible ().
13. Altering an item that is functioning efficiently is not a repair.
( repair)
Case J47 & Case G29
14. Initial repairs: repairs made to restore a newly acquired (recently) item to functional condition or
suitable working order are not deductible.
Law Shipping
Entertainment
15. S. 32-5: entertainment is generally not deductible.
16. Definition of entertainment in s. 32-10(1): food, drink recreation or accommodation or travel to do
with food, drink, or recreation.
Payments to related parties
17. S. 26-35(1): can only deduct amounts paid to related parties that the Commissioner considers
reasonable.
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18. Applies where the taxpayer attempting to claim the deduction is an individual or partnership.
Superannuation
19. S. 290-150(1): a taxpayer can get deduction for superannuation paid to a superannuation fund for
their own super they pay. (for self)
20. S. 290-150(3): the deduction is claimed in the year you make the contribution.
21. S. 290-60(1): deduction allowed for taxpayers for superannuation contributions made on behalf of
their employees to superannuation funds. (for employer)
Borrowing expense
22. S. 25-25(1): deduction allowed for expenses incurred in borrowing money for the purpose of
producing assessable income.
23. This does not refer to interest on the loan, but loan application fees, legal expenses, stamp duty on the
loan, valuation fees, brokers commission.
24. S. 25-25(6): if the borrowing expenses do not exceed $100, they are deductible in full in the year
incurred.
25. S. 25-25(5): if more than $100, then the expenses are amortised over the period of the loan.
* the period from when the money was borrowed until it was repaid
* 5 years (1826 days) from when the funds were borrowed
Others
26. S. 25-20: allows a deduction for expenditure incurred in preparing, registering a lease, or for the
assignment or surrender of a lease of property, that is to be, or has been, held by the
taxpayer solely for the purpose of producing assessable income.
()
27. S. 25-30: allows a deduction for the expense of discharging a mortgage given by the taxpayer to the
extent to which the money borrowed or property purchased was used for producing
assessable income.
()
28. S. 25-35: you can deduct a bad debt if it was included in assessable income in any year or lent in
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the course of a money lending business; the debt is bad; the debt is written off in the
income year the deduction is claimed.
()
29. S. 25-45: a loss of money included by a taxpayer through theft and the like is deductible where the
perpetrator was a person employed by the taxpayer, and the money is included in the
taxpayers assessable income.
(
30. S. 25-50: allows a deduction for the employment by a taxpayer of a pension, gratuity or retirement
allowance to an employee or former employee of a business carried on by the taxpayer.
(
31. S. 25-55(1): allows a deduction for payment for membership of a trade, business or professional
association, subject to a $42 limit for each association as laid down in s. 25-55(2).
($42 )
32. S. 25-75: allows an entity to deduct annually assessed rates and land tax imposed on its premises
where it uses those premises to produce mutual receipts and assessable income.
()
33. S. 26-5: denies a deduction under s. 8-1 for any penalty imposed by law or fine imposed by court.
()
34. S. 26-10: prevents a deduction under s. 8-1 for amounts simply accrued in leave provisions.
35. S. 26-26: dividend paid by a company are not deductible by the company.
()
36. S. 26-40: expenditure incurred by a taxpayer in maintaining a spouse who is living with the taxpayer
or child under 16 years old is not deductible.
()
37. S. 26-45: (recreational club expense)
38. S. 26-50: (leisure facilities)
39. S. 26-53: denies a deduction for a bribe () to a public official.
40. S. 26-54: denies a deduction for a loss or outgoing incurred in relation to the commission of an
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indictable offence.
()
41. Tax loss is that amount by which total deductions exceed assessable income and net exempt income.
Topic 10 Tax Offsets

1. S. 159H: a. Available to Australian resident taxpayer only
b. Must be an individual
c. Reduces gross tax, ie rebates are not a deduction
2. Assessable income - Allowable deduction = Taxable income Tax rates = Gross tax
3. S. 159N: a $445 offset allowed where taxable income is $37,000 or less
b. Reduced by 1.5 cents for every $1 (15%) that taxable income exceeds $37,000.
4. S. 159P: allows a rebates for medical expenses paid in respect of the taxpayer and resident dependants.
5. S. 159J(4): the notional rebate of $376 is reduced by $1 for every $4 of the dependants separate net
income over $282.
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6. Notional rebate formula = $376 - ((net income - 282)/4)
6. Formula: Rebates = (net medical expense - $2120) 10%
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Topic 11 Capital Allowance - Depreciating Assets

1. Division 40: deductions for depreciation of certain assets used to produce assessable income
(concentrating on tangible assets)
2. S. 40-25(1): allows a deduction for the decline in value of a depreciating asset held during an income
year.
3. S. 40-25(2): must reduce the deduction when the asset is not solely used for a taxable purpose.
4. Depreciating asset under s. 40-30(1): a. it is an asset that has limited effective life
b. Reasonably expected to decline in value over time
c. Does not include land, trading stock.
5. S. 40-80(2): non-business assets that cost less than $300 may be written off fully in the first year its
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held .
6. S. 40-95 says that a taxpayer can choose an effective life in accordance with s. 40-105 or use a
Commissioners estimate in accordance with s. 40-100.
7. S. 40-95(3): make the choice at start time where the asset is first used or installed ready for use.
8. Diminishing value: s. 40-70(1) or s. 40-72(1)
Base Value Days Held (s.40-70(1)) 150% (cite s. 40-70(1)) or 200% (cite s.40-72(1))
365 Effective Life (cite s.40-95, s. 40-100, s. 40-105)
-Base value s. 40-70(1) = cost at start time or opening adjustable value plus second element costs.
-Second element cost = costs in bringing the asset to its present condition and location and costs
attributable to a balancing adjustment (eg cost of delivery, installation)
-If start time is after 9 May 2006, use 200% (s. 40-72(1))
9. Prime cost: s. 40-75(1)
Assets Cost Days Held (s.40-70(1)) 100%
(s. 40-180) 365 Effective Life
10. Sale of depreciating asset:
a. if termination value exceeds adjustable value, there is an assessable gain s. 40-285(1).
b. If adjustable value exceeds termination value, there is a deductible loss s. 40-285(2).
11. Termination value: generally be the amount received for the asset on disposal (s. 40-300(1)) or taken
to have received (s. 40-305(1)).
12. Adjustable value: cost less the total decline in value (depreciation) up to the date of sale (s.
40-85(1)).
13. S. 40-25(2): if there has been some private use of the asset, then the deduction for decline in value is
reduced by the percentage of private use
14. The balancing adjustment is also reduced and is calculated in accordance with s. 40-290(2).
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Topic 13 Carrying on Business

1. S. 6-5(1): income from a business is assessable as ordinary income.
Harris
2. Deduction allowed under s. 8-1(1)(b), providing none of the negative limbs are satisfied.
3. Guidelines of the definition of business:
A. Whether the activity is conducted in an organized and systematic way
B. Scale of operations (large vs small)
C. Continuity and repetition () of transactions
D. Profit motive
E. Whether the activity has significant commercial character
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4. If the taxpayers operations the same as the those who operate a business in the same industry, then
that is an indicator that the taxpayer is conducting a business.
IR Commrs V Livingston
5. Hobby usually do for fun, not for profit, and no one would pay others to do your hobby for you, thus
hobby is not a business.
6. A business can be conduct in a small way.
Thomas v FCT
7. Athletic talents for profit should be treated carrying on a business of being a professional athlete and
all receipts should be assessable.
()
FCT v Stone
8. Gambling has profit motive, but it is not a business.
Brajkovich v FCT
9. Moneylenders dont always have to lend money to the public at large, but it is a business.
FCT v Bivonia
10. Illegality is irrelevant (FCT v La Rosa);
Having a regular job or other business is irrelevant (FCT v Stone)
Being forced into operation is irrelevant (Tweddle)
11. A taxpayer is not carrying on a business while experimenting in order to choose between alternative
possible products.
Case D69
12. Inactive does not necessary mean that the business has ceased.
Avondale Motors
13. S. 90: calculate net income or loss of a partnership as if it were a resident taxpayer.
14. S. 92: the net income or loss is distributed to partners who pay tax on that distribution.
15. Partnership: carrying on a business in common with a view to profit.
16. Advantages of partnership: A. No need to publish audited financial accounts
B. Not a separate legal entity (make it simple and easy to reduce cost)
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C. Can distribute losses (big tax advantage)

D. Easy to set up and administer (reduce cost)
17. Disadvantage of partnership: A. Unlimited liability (big disadvantage)
B. Lack of permanence
C. Transfer of an individuals interest into and out of partnership is
complex
D. Lack of flexibility in distributing profits
18. Net income under s. 90: assessable income of the partnership less allowable deductions.
19. Net loss under s. 90: excess of allowable deductions over assessable income.
20. Cannot deduct superannuation contributions for partners under s. 90. Instead individual partner gets
the deduction under s. 290-150.
Topic 14 Partnerships
1. S. 90: calculate net income/loss of a partnership as if it were a resident taxpayer.
2. S. 92: the net income/loss is distributed to partners who pay tax on that distribution.
3. S. 90: a. Net income = Assessable income of partnership - allowable deductions
b. Net loss = Allowable deductions - assessable income (with some modifications)
4. Modifications: a. Cannot deduct superannuation contributions for partner s. 90.
Instead individual partner get deduction under s. 290-150.
b. Cannot deduct losses from prior years under s. 92(2).
These losses are distribute to the individual partners.
c. Partnerships cannot make capital gains for tax.
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The individual partners do instead. Since an interest in a partnership asset is a CGT

asset in its own right (s. 108-5(2))
5. S. 92: a. Actual drawings are irrelevant.
b. If there is a profit to distribute to partners - cite s. 92(1)
c. If you are distributing a loss - cite s. 92(2)
6. Partners salaries: a. Partners cannot enter into an employment contract with a partner
Rose v FCT
b. Salary is a prior claim on profits before the balance is shared among them
c. Such salaries are not deductible, when calculating net income per. S. 90.
7. One partner profit, the other one get nothing.
Case S75
8. A partnership cannot enter into an employment contract with a partner
(
Rose v FCT
9. Partners salaries are not deductible when calculating net income according to s. 90.
10. The salary must be agreed to at the beginning and be in the partnership agreement; the salary should
be reasonable for the services performed.
Case S75
11. Partners can be owed money from the partnership in two ways:
A. Distribution of profits has not been paid
B. The partner has lent the partnership money (partners cannot loan themselves money)
12. Interest paid on a partners loan can be deducted in certain circumstances.
Leonard v FCT
13. The interest is deductible if it satisfies both step 1 and step 2:
Step 1: a. If the interest is paid on capital account, then the interest is an allocation of profit
( unpaid distribution )
b. If the partner has lent money under a loan agreement, the interest payment is an expense
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()
if not under an agreement, cannot deduct
if under an agreement, go step 2
Step 2: a. If the partner lent the money under a loan agreement then determine if the interest expense
satisfied either of the two positive limbs of s. 8-1.
b. Interest is never capital, the main issue is whether the loan was used for private purpose or
used to derive exempt income or was used for taxable purpose.
*taxable purpose = derive assessable income
14. Leonard v FCT - interest can be deductible if two criteria are met:
A. If partner loaned as a lender - this has been met due to the commercial interest rate
charged
B. If the loan was used for a taxable purpose - this has occurred since the loan was
used to build the business
Thus interest is deductible under s. 8-1(1)(b)
15. S. 6-5(1): interest will be assessable to the partner as income from property.
16. S. 106-5(1): individual partners must account for the CGT as they have an undivided fractional
interest in the partnership assets.
17. S. 106-5(2): each partner has their own cost base for the asset. (50% vs 50%)
18. S. 108-5(2)(c): an interest in an asset of a partnership is a CGT asset.
19. Disposal of partnership assets:

A. CGT assets - s. 106-5(1)
B. Depreciating assets - s. 118-24(1) & (2) and s. 40-285
Gains/losses taken up as balancing adjustment in the partnership if 100% for taxable use:
include as part of s. 90 net income/loss
C. Acquisition of asset:
each partner is treated as having acquire an undivided fractional interest in that asset
(each partner has their own cost base for asset s. 106-5(2))
Disposal does not occur at the partnership level, instead each partner is treated as having
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disposed of their fraction of the asset s. 106-5(1).

Definition of CGT asset in s. 108-5: under s. 108-5(2)(c) an interest is an asset of a
partnership is a CGT asset.
Thus the partnership never acquires the CGT asset, instead partners acquires an
indivisible fractional interest in it
20. Example of acquisition of asset:
A & B (equal partnership) acquire a block of land for $100,000
-50% interest for each partner s. 108-5(2)(c)
-each partner has a cost base of $50,000 under s. 110-25(2)(a) (s. 106-5(2))
-land sold 2 months later for $130,000
-proceeds for each partner is $65,000 ($130,000/2) s. 116-20(1)
-gain is $15,000 ($65,000 - $50,000) s. 104-10(4) & s. 104-5
21. Payment to related entities:
A. Individual taxpayer - topic 9 s. 26-35(2)
B. Definition of related entities for a partnership in s. 26-35(3)
C. Company - s. 109
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Topic 15a Taxation of Trusts

1. S. 95(1): must calculate net income or loss as if it were a resident taxpayer, and lodge a tax return
showing the distribution.
2. Net income can be distributed to beneficiaries, while losses cannot be distributed.
Key Questions
3. For the income of the trust you must ask the following:
A. Is there a beneficiary who is presently entitled to the income of the trust?
()
B. Is there any income to which no-one is presently entitled?
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()
C. What section of the Act is the income taxed under?
()
D. Who pays the tax and at what rate?
()
4. If there is a beneficiary who is presently entitled to some income then we need to know:
A. Is the beneficiary under a legal disability?
()
B. Is the beneficiary a resident or a non-resident?
()
C. Has the beneficiary derived any other income outside of the trust?
()
Approach to Trust
5. Approach: A. Work out the net income of the trust under s. 95(1) - assessing section.
B. Determine who is presently entitled to s. 95(1).
is the beneficiary under a legal disability?
resident or non-resident?
has derived any other income outside of the trust?
C. Work out who pays the tax, under what section, and at what tax rate.
D. Beneficiaries can derive other income. What section and what rate will tax that?
Step 1 net income of a trust

6. S. 95(1): Net income of a trust = total assessable income - all allowable deductions
(only concern with resident trusts)
Step 2 present entitlement (2 cases)
() Who
7. FCT v Whiting: present entitlement refers to a right of the beneficiary to demand payment of the
income from the trustee.
(here beneficiary is required to have full legal capacity and to have a fully vested
interest in the income on terms of the trust instrument)
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* vested interest:
8. Taylor v FCT: beneficiaries under a legal disability (under 18, in gaol , bankrupt, insane )
may be presently entitled to trust income, but they just couldnt demand payment.
()
() When? (depends on the type of trust)
9. Deceased estates: no-one is presently entitled until: () Whiting v FCT
A. Administration of the deceased estate has finished
B. Debts have been provided for and a residue has been determined
10. Fixed trust: deceased estates/ inter vivos (fixed %) ()
A. Beneficiaries of fixed trusts become presently entitled in a manner described by the
trust instrument.
B. This is usually expressed in the form of fixed percentage to specific individuals.
(trusts )
11. Discretionary trust: deceased estates/ inter vivos ()
A. trustee exercises discretion ()in favor of that beneficiary - s. 101
B. Must be an effective exercise of the trustees discretion on or before 30 June
C. Discretion exercised by the trustees coming together for a meeting and signing a
resolution concerning the distribution.
(resolution is a kind of document which determines who get what of the trust income)
( 30 June )
() Accumulation
12. Taylor v FCT: some trusts accumulate the beneficiarys entitlement until the beneficiary reaches a
certain age, usually relevant for beneficiaries under legal disability.
()
13. If the beneficiary die before reaching 18, beneficiary get the decision to decide who get the money.
Step 3 Who is taxed, under what section, and at what rate?
() No-one is presently entitlement
14. If no-one is presently entitled, then the trustee will be taxed. The tax rate and what section that
applies is determined by the type of trust.
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() Beneficiary is presently entitlement (5 situations)

1st situation: s. 97(1)
15. Resident beneficiary is presently entitled and not under a legal disability.
A. Includes trust income in their own assessable income under s. 97(1)
B. Beneficiary pays tax at resident individual rates.
2nd situation: s. 98(1) (
16. Beneficiary is presently entitled under a legal disability (resident or non-resident).
A. Trustee is liable for tax on the income under s. 98(1)
B. The rate can vary on the type of legal disability.
if the beneficiary is a non-resident, the trustee will pay using non-resident rates
if the beneficiary is a resident minor, the Div 6AA resident rates may apply
if the beneficiary is a resident under a legal disability, the trustee will pay using resident
individual rates.
17. If the beneficiary also derived other taxable income is AU, the beneficiary is required to lodge a tax
return in AU under s. 100.
A. Include distribution to which is presently entitled in accord with s. 100(1)
B. Tax on total income, but to avoid double taxation, and s. 100(2) provides that Beneficiary
receives a credit for the tax paid by the trustee.
(1. 2. trustee 3.
trustee
3rd situation: s. 98(3)(a),(b) ()

18. Non-resident beneficiary is presently entitled and not under a legal disability.
A. If the beneficiary is a company, use s. 98(3)(b)
B. If the beneficiary is an individual, use s. 98(3)(a) (not subject to any deduction)
19. Trustee is assessed and liable to pay tax at non-resident individual rates.
20. If the beneficiary also derived other AU sourced income, he will need to lodge a tax return.
A. S. 98A(1) will apply to include his share of trust income with the other AU sourced income.
B. The beneficiary will receive a credit for any tax paid by the trustee under s. 98A(2).
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(s. 98A(1)s. 98A(2)

s. 100(1), s. 100(2))
4th situation: s. 99 or s.99A ()
21. There is income of the trust to which no beneficiary is presently entitled.
22. Trustee will be assessed, if:
A. the trust is deceased estate, tax under s. 99 (per s. 99A(2))
*if the trust is deceased estate, then the rate will be determined how long it has been since the
deceased die:
if it has been less than 3 years since the date of death, use resident individual rates
if it has been three years or more since the date of death, higher rate with low
threshold apply ()
B. the trust is not a deceased estate, tax under s. 99A
*S. 99A applies to inter vivos thrusts and the rate is a flat rate of 45% plus Medicare Levy.
( s. 99A, 45%+Medicare Levy)
23. Where there is some income to which no-one is presently entitled, this income is accumulated in the
trust. But, this is not an accumulation like Taylor v FCT. This is because the accumulation has bot
been set aside for a particular beneficiary.
()
24. S. 101A held that professional fees owing to the deceased at his death and received by his executor
subsequently were not income of the estate, but in the nature of capital and not assessable.
()
25. S. 101A now brings these fees into the s. 95(1) income of a deceased estate and deems it to be
income to which no beneficiary is presently entitled.
26. Where accumulation is not held in trust by the beneficiarys personal representatives, if the
beneficiary dies before the relevant age.
( presently entitled presently entitled,
)
5th situation: s. 102 ()
27. Revocable trusts:
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A. Where the creator of the trust has the power to revoke or alter the trust so as to acquire a
beneficial interest in the trust property (s. 102(1)(a))
B. Where a person creates a trust for the benefit of their children and income is distributed
to one or more of them when they are under 18 years old (s. 102(1)(b))
28. The trustee will be liable to pay the tax assessed under s. 102(2).
()
29. To avoid this section, it is best to ensure that the creator of the trust is not a parent of potential infant
beneficiary.
()
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Topic 15b Taxation of Minors

1. Separate tax rates exist for minors in Div 6AA (for resident or non-resident).
2. Relevant for trusts as trusts tend to distribute money to minors quite often to reduce tax.
3. Rates are applied to eligible assessable income derived by a prescribed person:
A. Small tax-free threshold of $416.
B. From $417 to $1,307, taxed is levied at 66%.
C. More than $1,307, tax is levied at 45% on the lot.
D. No low income debate either for this situation.
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4. S. 102AC(1): a prescribed person is a person who is under 18 on the last day of the income year, and
who is not an excepted person in relation to that year.
5. S. 102AC(2): an excepted person is a minor engaged in a full-time occupation on the last day of the
year of income s. 102AC(2)(a),
a miner in receipt of various allowance or pensions
s. 102AC(2)(b).
()
6. If the minor is not an excepted person, the income derived by the minor will be caught by Div 6AA, if
the income is eligible assessable income.
7. S. 102AD: Eligible taxable income = eligible assessable income - related allowable deductions
(Div 6AA rates apply to this type of income)
8. Eligible assessable income is assessable income that not excepted assessable income s. 102AE(1)
nor excepted trust income s. 102AG(1)
( employment payment deceased estate income )
9. Excepted assessable income under s. 102AE(2)
A. Employment or business income s.102AE(2)(a)
B. Employment income is defined in s. 102AF(1)(b) as payment for services rendered or to
be rendered.
10. Excepted trust income under s. 102AG(2): income from a deceased estate s. 102AG(2)(a)(i).
(taxed at resident or non-resident individual rates)
11. The distribution from the inter vivos discretionary trust is not excepted trust income under
s. 102AG(2), and Div 6AA will apply per s. 102AG(1).
Basic Approach
11. Start by all under 18 and all income they derived within Div 6AA, then exclude either:
A. Excepted persons all income
B. Either excepted trust income or excepted assessable income
Step 1
12. Is the minor an excepted person per s. 102AC(2)?
A. If yes, Div 6AA does not apply, and all their income is taxed resident or non-resident
individual rates
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B. If no, then the minor is a prescribed person per s. 102AC(1), and go step 2.
Step 2
13. If a trust distribution is received, is the distribution excepted trust income per s. 102AG(2)?
(Example of excepted trust income is income from a deceased estate)
A. If yes, Div 6AA does not apply to that trust distribution under s. 102AG(2), and
ordinary individual rates will apply instead (resident or non-resident)
B. If no, Div 6AA does apply to that income since per s. 102AG(1), and go to step 3 for
non trust income.
Step 3
14. Is the income excepted assessable income as per s. 102AE(2)?
(consider each type of receipt separately, eg. wages, interest, etc.)
A. If yes, the Div 6AA does not apply to that income, and ordinary individual rates will apply
(resident or non-resident).
B. If no, then the income is eligible assessable income per s. 102AE(1) and Div 6AA rates will
apply.
Topic 16 Taxation of Companies

1. Companies are separate legal entities under the Corporations Act 2001.
2. Two levels of taxpayers: a. The company - pays on its taxable income
b. The shareholders - pay tax on dividends
3. Flat rate 30% on taxable income.
4. S. 36-17: a. Companies can carry forward its losses and deduct them against future assessable income.
b. Companies can choose how much of the loss they deduct (assume maximize deduction).
c. Summary of rules in s. 36-25; details of rules in subdivision 165-A.
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5. Subdivision 165-A: a company cannot deduct a tax loss unless under s. 165-10, unless it satisfies
either: a. Continuity of ownership test (COOT) in s. 165-12
b. The same business test (TSBT) in s. 165-13
6. Tax loss is that amount by which total deductions exceed assessable income and net exempt income.
Basic Approach
(the company only need to satisfy one test)
7. First apply COOT for each loss (always first)
If the test is failed for any losses
Apply TSBT for those losses
If TSBT is failed (if TSBT passed, all the losses can be deducted)
Those losses cannot be deducted
Continuity of Ownership Test (COOT) s. 165-12
8. Under s. 165-12, the company must maintain continuity of persons holding more than 50% of:
A. Voting power s. 165-12(2)
B. Rights to dividends s. 165-12(3)
C. Rights to capital distributions s. 165-12(4)
(at all times during the ownership test period)
9. COOT is only concerned with whether there has been a change of ownership greater than 50% in the
ownership test period for that loss.
10. Key point: when the change of ownership occurred?
11. Ownership test period under s. 165-12(1):

A. From the start of the loss year (1/7/loss year - 1): eg. Loss in 2008: 1/7/2007
B. To the end of the income year (current, 30/6/2014)
12. There is a different ownership test period for each loss that you want deduct.
13. S. 165-165(1): the same persons must own the 50% or more of the same shares throughout the test
period.
The Same Business Test (TSBT) s. 165-13 & s. 165-210
14. S. 165-13(1) & (2): if COOT has been failed for some losses, company must pass TSBT to deduct
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those loss.
15. Satisfied if throughout TSBT period, the company carries on the same business as it carried on
immediately before the test time. S. 165-210(1)
16. Test period is the income year.
17. Test time is the time immediately before the change in ownership that led to the failure of COOT.
18. Avondale Motors the meaning of same business was interpreted:
A. Identical business activity must be carried on, rather than merely the same kind of business.
B. Size of business is irrelevant.
(distributing + installing does not equal manufacturing, selling and installing; retailing does
not equal manufacturing)
Topic 17 Dividend Imputation

1. Example: imputation system
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2. Franking of dividends: s. 203-35(1)
3. Example:
4. S. 203-45: for private companies, the franking period is the income year.
5. S. 203-40: for public companies, the income year is divided into two 6 month franking period.
6. S. 203-50: penalties exist for franking either more or less than the benchmark percentage.
7. S. 203-50(1)(a): if the franking percentage exceeds the benchmark, over franking tax is imposed.
8. Penalties:
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9. Example:
10. A resident shareholder receiving a dividend must gross-up the dividend by the amount of the
imputation credit (s. 207-20(1)) and receive a rebate equivalent to this imputation credit (s.
207-20(2)).
11. Example:
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48

Australian Taxation Law Notes - PDF (Sadiq)

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Australian Taxation Law Notes - PDF (Sadiq)

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lOMoARcPSD|1329443

Taxation (Swinburne University of Technology)

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Topic 2 Ordinary Income

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Topic 3 Derivation of Income

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Topic 4 Statutory Income and Exempt Income

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Topic 5 Residence and Source

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c. Durability of association with Australia.

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Topic 6 Capital Gains Tax (CGT)

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Topic 7 Fringe Benefits Tax (FBT)

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Step 2 - a car benefit?

Step 3 - calculating taxable value

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C = Number of days benefit provided in a year

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

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

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Topic 8 General Deductions

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

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

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Topic 9 Specific Deductions

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Topic 10 Tax Offsets

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6. Notional rebate formula = $376 - ((net income - 282)/4)

6. Formula: Rebates = (net medical expense - $2120) 10%

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Topic 11 Capital Allowance - Depreciating Assets

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Topic 13 Carrying on Business

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C. Can distribute losses (big tax advantage)

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The individual partners do instead. Since an interest in a partnership asset is a CGT

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19. Disposal of partnership assets:

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disposed of their fraction of the asset s. 106-5(1).

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