BTC3150

What is taxation law?

• The body of law that governs a person/entity's liability to pay tax

• Who and what get tax

What are the function of taxation?

• Revenue raising

• Economic function

• Redistributing function

• Social function

Define doctrine of precedent

• If the facts of a later case are the same as those in a previously decided case

• Cases relating to the same principle should reach the same outcomes

• Requires court to follow the same decision

• Compare similar cases to reach a conclusion

What are the structure of a tax?

• Tax payer

• Tax base

• Tax period

• Tax rate

Define taxation ruling

• Secondary sources of taxation law 

• are not law, but they can be of great assistance for tax payers seeking guidance on tax issues

• Opinion of the tax commissioner

• ATO empowers the commissioner of taxation

What are the types of taxation ruling?

• Private ruling

• Public ruling

Define private ruling

• Taxpayer can protect themselves from the risk of a penalty by asking the Commissioner for a private ruling = how ATO applies law to a transaction

• Rulings are binding on the commissioner = Commissioner must honour the ruling and shield a taxpayer from any penalties if it later found to be incorrect

Define Public ruling

• Used to explain which factors will be taken into account by the Commissioner when exercising a discretion provided in the tax law

• ATO's views on the way in which a provision of an Act should be applied

What are the features of a good tax system?

• achieves key fiscal targets

• not too complex ; easy for taxpayers to understand

• stable

• transparent

• has integrity

• flexible

• efficient

• Equitable taxes = reasonable tax rate

What is ordinary income?

• Identification with a source that generates the income

• When constitute ordinary = from labour, business or the use of property

What is statutory income?

• Amounts that are included in the taxpayer's assessable income by a provision in the income tax legislation = s 6-10(2)of the ITAA1997.

• Based on the taxpayer's residency status and source of the income

What is tax offset?

• Deducted from income tax payable

• Reduce the amount that must be paid by the taxpayer

What are the receipts that acquire an income character?

• A product of labour

• Business activity

• The use or exploitation of property

  

Define assessable income

Receipts recognised for tax purposes

How does HELP or HECS work?

• Make compulsory tax repayments through the tax system when their income reach a threshold amount

Repayment amount is based on:

• Taxpayer "repayment income"

• Progressive rate ranging from 1%-10%

• Regularly revised overtime

What is medicare levy?

• Helps fund the Australian public health system

• Medicare levy =Taxable income*2% (flat rate)

• Individuals who are exempted = non-resident and certain low income earners

What is medicare levy surcharge?

• Additional charge only for certain tax payers

• For 2024-25 = singles above 97k and family above 194k is subjected to additional charges if they don't have private health insurance

• It has a progressive rate

Low income exemption:

• Taxable income of less than the threshold amount receive full exemption

• Greater than threshold but less than phase in limit pay a rate of 10 cents on every dollar

What is Inspector-general of taxation?

• Independent statutory agency

• Undertakes broad reviews into tax administration matters

• Make recommendations to the ATO and to the Government

What is registration for a GST?

• A wide range of entities can register for GST

• Entitlement to a refund of GST paid

• It is required that entity with a turnover over $75,000 register for GST

What activities conducted under an enterprise?

Series of activities conducted:

• In the form of a business

• In the form of an adventure or concern in the nature of trade

• In the form of leasing, licensing or other grant of an interest in property on a regular or continuous basis

What are the features that create a taxable supply?

• It makes a supply

• The supply is for consideration

• The supply is made in the course or furtherance of the entity's enterprise

• The supply is connected with the indirect tax zone

• The entity is registered or required to be registered for GST (make a turnover of $75000 or above must register)

List some of the GST free supply

GST-free supply

• Food that is not subjected to any process or treatment is GST free

• Health --> the supply of treatment as being necessary is GST free

• Education, including supplies and excursions that is related to the course

• Childcare, exports and international mail

• Exports

• Water, sewerage and drainage

• Supplies of going concerns

• Transport and related matters

• Mobile global roaming

Define input taxed credit

• A refund of GST

• Private consumers are not entitled for input tax credit, but wholesaler and retailer are

What is input taxed supply and what does this include?

• Exempt from being taxable supplies

Includes:

• Financial supplies (except legal practitioner or accountant) [section 40-5 of the GST Act]

• Residential rent (except for commercial purposes) [s 87-25]

• Sales of certain residential premises, excluding "new residential premises" and commercial residential premises

Define acquisition

• An entity's entitlement to "input tax credits"

• Any form of acquisition whatsover [s11-10] for the business

What are the features of a creditable acquisition?

• Relates to the carrying on the entity's enterprise

• Made for business purposes

• Does not count if its domestic or private in nature

• Entitled to input tax [ s 11-20 of GST Act]

• Input tax arises when the entity makes a creditable acquisition

How does GST work on importation?

• Liability for GST is imposed on an entity which makes a taxable importation

• An entity does not have to carry on an enterprise

• Liability to pay GST is imposed on the importer of goods

What are the non taxable importation?

• Goods that would have been GST-free or input taxed supplies if they were supplies (s13-10(b))

• Goods exported from Australia and returned to Australia unchanged (s42-10)

• Goods that qualify for certain customs duty concession (s 42-5) = low value goods

When does an entity lodge a BAS for GST?

• Entity registered for GST must complete and lodge a GST return on a quarterly basis [ss 27-5,31-5 and 31-8]

• Annual turnover of more than 20 million and carry on the business for less than 3 months or have bad history must complete BAS on a monthly basis [ ss27-15, 31-5 and 31-10]