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

2

Professor Rick Krever |

Email: [email protected]

LECTURER

SELECTED ISSUES

1

0123456789

4

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

2

0123456789

3

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?

12

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?

4

0123456789

13

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?

14

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

15

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

5

0123456789

16

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

BUT

COUNTER CYCLES

17

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

18

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

6

0123456789

19

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

20

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

21

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

7

0123456789

22

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

23

REDISTRIBUTION

DOCTRINE OF PRECEDENT

8

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

25

Transplanted categories

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

26

EU treaty and ECJ understanding of tax

imputation; GFCc-efficiency of VAT

27

9

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

29

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

30

10

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

31

TRUSTS

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

33

11

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

34

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

35

Remedies

common law courts:• - damages

equity courts:• - specific performance• - injunction

12

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)

13

0123456789

land

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

14

0123456789

Trust

• 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

15

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

16

0123456789

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


3

CONSTITUTIONAL ASPECTS:POWER TO TAX

1

0123456789

4

TAX BASES

6

SOURCES OF LAW

2

0123456789

7

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

8

SOURCES OF LAW:CASE LAW & RULINGS

3

0123456789

10

INCOME TAX FORMULA

11

ACCOUNTING AND JUDICIAL CONCEPTS OF INCOME

12

ACCOUNTING PROFIT AND JUDGES’ CONCEPTS OF INCOME

4

0123456789

13


14


15

ORDINARY INCOME AND STATUTORY INCOME 1915-1985

5

0123456789

16


17

STATUTORY INCOME: CAPITAL GAINS

ACCOUNTING vs TAX LAW

6

0123456789

19

ACCOUNTING STANDARDS VS TAX ADVICE

likely

20

ACCOUNTING STANDARDS VS TAX LEGISLATION

21

ACCOUNTING INCOME vs TAX LAW INCOME

7

0123456789

22

DIFFERENCES BETWEEN TAX LAW AND ACCOUNTING

23


24


8

0123456789

25

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


26

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


27


income

9

0123456789

28


expenses

29


30

EXEMPT INCOME AND NON-ASSESSABLE NON-EXEMPT INCOME

10

0123456789

31

DEDUCTIONS:GENERAL AND SPECIFIC DEDUCTIONS

32

Income Tax Rates Act 1986

INCOME TAX FORMULA:TAX RATES

33

LEVIES AND CHARGES

11

0123456789

34

LEVIES AND CHARGES:MEDICARE LEVY

35

LEVIES AND CHARGES:MEDICARE LEVY SURCHARGE

36

LEVIES AND CHARGES:REPAYMENTS OF HIGHER EDUCATION DEBTS

12

0123456789

ORDINARY CONCEPTS OF ORDINARY INCOME

38

Income Tax Assessment Act

Scott v Commissioner of Taxation

WHAT IS ORDINARY INCOME?

39

PREREQUISITES OF ORDINARY INCOME

13

0123456789

40

Tennant v Smith FCT v Cooke and Sherden

Payne v FCT

PREREQUISITES OF ORDINARY INCOME:CASH OR CASH CONVERTIBLE

41

PREREQUISITES OF ORDINARY INCOME:REAL GAIN

42

FCT v Myer Emporium

CHARACTERISTICS OF ORDINARY INCOME

14

0123456789

43

Keily v FCTAnstis v FCT

FCT v Dixon

CHARACTERISTICS OF ORDINARY INCOME:REGULAR / PERIODICAL RECEIPTS

44

Eisner v Macomber

CHARACTERISTICS OF ORDINARY INCOME:FLOW – THE CONCEPT

45

Eisner v Macomber

CHARACTERISTICS OF ORDINARY INCOME:FLOW – THE CONCEPT

15

0123456789

46

CHARACTERISTICS OF ORDINARY INCOME:FLOW – IMPORTANT TRAITS

47

CHARACTERISTICS OF ORDINARY INCOME:COMMONLY RECOGNISED CATEGORIES

48

Federal Coke Co Pty Ltd v FCT

Bohemians Club v Acting FCT

CHARACTERISTICS OF ORDINARY INCOME:COMMONLY RECOGNISED CATEGORIES

16

0123456789

INCOME FROM PERSONAL SERVICES AND EMPLOYMENT

50

A GAIN FROM PERSONAL SERVICES AND EMPLOYMENT

51

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS

17

0123456789

52

Brent v FCT

Kelly v FCT

ORDINARY INCOME – REWARD FOR SERVICES:NEXUS: CLEARLY ESTABLISHED

53

Laidler v Perry Calvert v Wainwright

FCT v Dixon

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

54

Scottv FCT

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

18

0123456789

55

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)

56

Case 37

Kelly v FCT

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

57

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

19

0123456789

58

Payne v FCT

ORDINARY INCOME – REWARD FOR SERVICES:NON-CASH BENEFITS

59

CAPITAL RECEIPT OR PERSONAL EXERTION

60

Bennett v FCT AAT Case 7,752

CAPITAL RECEIPT OR PERSONAL EXERTION:CHANGES TO ENTITLEMENTS

20

0123456789

61

Higgs v OlivierFCT v Woite

Hepples v FCT

CAPITAL RECEIPT OR PERSONAL EXERTION:CHANGES TO ENTITLEMENTS

62

Pickford v FCT

CAPITAL RECEIPT OR PERSONAL EXERTION:SIGN-ON FEES

63

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

21

0123456789

64

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

22

0123456789

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

INCOME FROM PROPERTY

3

RECALL THE ORDINARY INCOME FLOW CONCEPT

1

0123456789

4

Riches v Westminster Bank Ltd

INTEREST

5

DIVIDENDS

Dividend

Dividend assessed asstatutory income:

s 44 ITAA36

6

DIVIDENDS FOR RESIDENT TAXPAYERS:GROSS UP AND TAX OFFSET MECHANISM

2

0123456789

7

Adelaide Fruit and Produce Exchange Co v DCT

RENTAL AND LEASE INCOME:RENT

8

RENTAL AND LEASE INCOME:LEASE PREMIUMS

Kosciusko Thredbo Pty Ltd v FCT

Dickenson v FCT

9

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

3

0123456789

10

McCauley v FCT

ROYALTIES

11

Egerton-Warbuton v DCT

ANNUITIES

INCOME FROM BUSINESS

4

0123456789

13

GAINS FROM BUSINESS ACTIVITIES:INTRODUCTION

14

GAINS FROM BUSINESS ACTIVITIES:PROCESS TO CHARACTERISE GAINS

15

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

5

0123456789

16

Ferguson v FCT

STEP 1: CARRYING ON A BUSINESSINDICATORS OF A BUSINESS ACTIVITY

17

Stone v FCT

FCT v JR Walker

Thomas v FCT

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

18

Ferguson v FCT

Thomas v FCT

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

6

0123456789

19

Trautwein v FCT Evans v FCT

STEP 1: CARRYING ON A BUSINESSHOBBY OR BUSINESS - GAMBLING

20

Stone v FCT Spriggs v FCT Riddell v FCT

STEP 1: CARRYING ON A BUSINESSHOBBY OR BUSINESS - SPORTSPEOPLE

21

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

London Australia Investment Co Ltd v FCT

AGC (Investments) Ltd v FCT

7

0123456789

22

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

23

STEP 2: NORMAL PROCEEDS OF A BUSINESS

24

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

8

0123456789

25

Memorex

FCT v Merv Brown Pty Ltd

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

26

FCT v Cooke and Sherden

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

TAX ACCOUNTINGFOR RECEIPTS

9

0123456789

28

TAX ACCOUNTING: ACCOUNTING FOR INCOME TAX PURPOSES FINANCIAL ACCOUNTING

29

Henderson v FCT

DERIVATION OF INCOME:CASH VS ACCRUALS METHODS

30

Arthur Murray (NSW) Pty Ltd v FCT

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

Prepayment by customer

30 June 20X1

Servicesrendered

10

0123456789

31

BHP Billiton Petroleum v FCT

DERIVATION OF INCOME:DELAYS BECAUSE OF A DISPUTE

11

0123456789

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

EXTRAORDINARY AND ISOLATED TRANSACTIONS

3

EXTRAORDINARY AND ISOLATED TRANSACTIONS

1

0123456789

4

EXTRAORDINARY AND ISOLATED TRANSACTIONS:ORDINARY INCOME

FCT v Myer Emporium

FCT v Myer Emporium

5

California Copper Syndicate v Harris

EXTRAORDINARY AND ISOLATED TRANSACTIONS:FORMS A BUSINESS ITSELF

Scottish Australian Mining Co Ltd v FCT

6


FCT v Whitfords Beach Pty LtdStevenson v FCT

Statham v FCT Casimaty v FCT

2

0123456789

7

FCT v Whitfords Beach Pty Ltd


8

or Myer Emporium

Myer Emporium

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

9

Myer Emporium

Myer Emporium

EXTRAORDINARY AND ISOLATED TRANSACTIONS:FIRST STRAND OF MYER EMPORIUM

3

0123456789

10

FCT v Cooling


11

Westfield Ltd v FCT


12

Myer Emporium

Henry Jones (IXL) Ltd v FCT

EXTRAORDINARY AND ISOLATED TRANSACTIONS:SECOND STRAND OF MYER EMPORIUM

4

0123456789

13

EXTRAORDINARY AND ISOLATED TRANSACTIONS:STATUTORY INCOME

14

EXTRAORDINARY AND ISOLATED TRANSACTIONS:STATUTORY INCOME: CAPITAL GAINS TAX

15

FCT v Whitfords Beach Pty Ltd

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

5

0123456789

COMPENSATION RECEIPTS DERIVED BY A BUSINESS

17

FCT v Dixon

REPLACEMENT PRINCIPLE

18

COMPENSATION FOR BUSINESS LOSSES

6

0123456789

19

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

20

COMPENSATION FOR BUSINESS LOSSES:LOSS OF A BUSINESS ASSET

21

COMPENSATION FOR BUSINESS LOSSES:LOSS OF A BUSINESS ASSET

Glenboig Union Fireclay v IR Commissioner

Ensign Shipping Co Ltd

7

0123456789

22

COMPENSATION FOR BUSINESS LOSSES:COMPENSATION BY WAY OF INSURANCE

23

McLaurin v FCT

COMPENSATION FOR BUSINESS LOSSES:COMPOSITE CLAIMS

8

0123456789

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

2

deduct

GENERAL DEDUCTION PROVISION

3 1

0123456789

4

5

GENERAL DEDUCTION RULE:POSITIVE LIMBS

6

INTRODUCTION

2

0123456789

7

GENERAL DEDUCTION RULE:NEGATIVE LIMBS

EXAMINING THE POSITIVE LIMBS

9

Charles Moore & Co (WA) Pty Ltd v FCT

LOSS OR OUTGOING

3

0123456789

10

Ronpibon Tin No Liability v FCT

TO THE EXTENT

11

NilsenDevelopment Laboratories Pty Ltd v FCT

RACV Insurance Pty Ltd v FCT

INCURRED

12

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

4

0123456789

13

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

14

Softwood Pulp and Paper Ltd v FCT

Lunney v FCT; Hayley v FCT


15

Application to travel expenses

Lunney v FCT; Hayley v FCT


FCT v Collings

FCT v Wiener Re Hill v FCT

FCT v Vogt

5

0123456789

16

FCT v Maddalena

Spriggsv FCT; Riddell v FCT


17


18

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


6

0123456789

19

Employment related cases

FCT v Day

FCT v Payne


20

Application to self-education expenses


FCT v Studdert FCT v Hatchett

21

Application to self-education expenses (continued)

FCT v Finn


7

0123456789

22

FCT v Anstis


23

PlacerPacific Management v FCT

FCT v Jones


Loan drawn down

Business ceases

Interest accruing & payablenexus still maintained

24

Ronpibon Tin No Liability v FCT

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

AMOUNT OF DEDUCTION:REASONABLE VS. ACTUAL EXPENSE

8

0123456789

25

Ure v FCT

AMOUNT OF DEDUCTION:SUBJECTIVE PURPOSE

EXAMINING THE NEGATIVE LIMBS

CAPITAL EXPENSES

9

0123456789

28

any one

GENERAL DEDUCTION RULE:NEGATIVE LIMBS

29

CAPITAL OR CAPITAL IN NATURE

30

Vallambrosa Rubber Co Ltd v Farmer

British Insulated and HelsbyCables Ltd v Atherton

CAPITAL OR CAPITAL IN NATURE:JUDICIAL TESTS

10

0123456789

31

Sun Newspapers Ltd and Associated Newspapers v FCT

CAPITAL OR CAPITAL IN NATURE:JUDICIAL TESTS

32

MODEL TAX TREATMENT

33

RECOGNITION OF CAPITAL EXPENSES IS A “RELIEF”

11

0123456789

34

DEPRECIATION FOR WASTING ASSETS

35

DEPRECIATION TIMING

36

BLACK HOLE EXPENSES

12

0123456789

37

BLACK HOLE EXPENSES

38

BLACK HOLE EXPENSES

39

RECOGNISING CAPITAL EXPENSES:2017

13

0123456789

40

DEPRECIATION

41

CLAIMING A DEDUCTION:2. DECLINE IN VALUE

42


14

0123456789

43


Year 1:

Year 2:

Year 3:

44


45


Year 1:

Year 2:

Year 3:

15

0123456789

46

BALANCING ADJUSTMENTS

PRIVATE OR DOMESTIC

48

FCT v Cooper

Lodge v FCT

Fullerton v FCT

PRIVATE OR DOMESTIC

16

0123456789

49

Westcott v FCT

PRIVATE OR DOMESTIC: APPLICATION TO CLOTHING & DRY CLEANING EXPENSES

FCT v Edwards

Mansfield v FCT .

50

Morris v FCT

PRIVATE OR DOMESTIC: APPLICATION TO CLOTHING & DRY CLEANING EXPENSES

51

FCT v Munro

Steele v DCT

PRIVATE OR DOMESTIC: INTEREST EXPENSES

17

0123456789

52

PRIVATE OR DOMESTIC: HOME OFFICE EXPENSES

FCT v Faichney

53

Interest and tax minimisation

Ure v FCT

PRIVATE OR DOMESTIC: INTEREST EXPENSES

DEDUCTION DENIALS

18

0123456789

55

INCURRED IN GAINING / PRODUCING CERTAIN TYPES OF INCOME

Income:Assessable

Expenses:Deductible

Income:Not assessable

Expenses:Not deductible

56

DENIED DEDUCTIONS

La Rosa

57

DENIED DEDUCTIONS:REIMBURSEMENTS

19

0123456789

GENERAL DEDUCTIONS (CONT); SPECIFIC DEDUCTIONS: REPAIRS


2

AGENDA

SPECIFIC DEDUCTIONS: REPAIRS

1

0123456789

4

REPAIRS:KEY ISSUES

5

Lurcott v Wakely and Wheeler

Case J47

MEANING OF REPAIR

6

INCOME-PRODUCING PURPOSES

2

0123456789

7

CAPITAL

8

Law Shipping Co Ltd v Inland Revenue Commissioners

W Thomas & Co v FCT

CAPITAL:INITIAL REPAIRS

9

CAPITAL:IMPROVEMENT

3

0123456789

10

FCT v Western Suburbs Cinemas Ltd

CAPITAL:IMPROVEMENT

11

Samuel Jones & Co (Devondale) Ltd v IRC

W Thomas & Co Pty Ltd v FCT

CAPITAL:REPLACEMENTS

4

0123456789

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

SPECIFIC DEDUCTIONS:CAPITAL ALLOWANCES

3

INTRODUCTION

1

0123456789

4

DEPRECIATION DEDUCTIONS

Depreciatingasset acquired

Decline in value deduction

Decline in value deduction

End ofeffective life

5

DEPRECIATING ASSET

6

DEPRECIATING ASSET

2

0123456789

7

CLAIMING A DEDUCTION

8

CLAIMING A DEDUCTION:1. HELD

9


3

0123456789

10


11


12


4

0123456789

13


Year 1:

Year 2:

Year 3:

14


15


Year 1:

Year 2:

Year 3:

5

0123456789

16


less

+

17


18


6

0123456789

19


20


21


less less

7

0123456789

22

BALANCING ADJUSTMENTS:ASSET USED FOR NON-TAXABLE PURPOSE

23

CAPITAL WORKS DEDUCTIONS

24

CAPITAL WORKS DEDUCTIONS

8

0123456789

25

CAPITAL WORKS DEDUCTIONS:CONSTRUCTION EXPENDITURE

26

CAPITAL WORKS DEDUCTIONS:RATE OF DEDUCTION

27

BLACKHOLE EXPENSES

9

0123456789

28

BLACKHOLE EXPENSES:BUSINESS-RELATED COSTS

OTHER DEDUCTIONS

30

TAX-RELATED EXPENSES

10

0123456789

31


32

BAD DEBTS

33

FCT v Payne

directly

TRAVEL BETWEEN WORKPLACES

11

0123456789

34

GIFTS

FCT v McPhail

PRIOR YEAR LOSSES & PROVISIONS THAT LIMIT DEDUCTIBILITY

36

PRIOR YEAR LOSSES

12

0123456789

37

PRIOR YEAR LOSSES:ILLUSTRATION

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

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

Exempt income: $10,000

38

after

PRIOR YEAR LOSSES:CORPORATE TAXPAYERS

39

NON-COMMERCIAL LOSSES

13

0123456789

40

NON-COMMERCIAL LOSSES:EXEMPTIONS

41

NON-ARM’S LENGTH PRICES BETWEEN ASSOCIATED PARTIES

42

SUBSTANTIATION

14

0123456789

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

2

GENERAL DEDUCTION PROVISION


1

0123456789

4


5


BAD DEBTS

2

0123456789

7

BAD DEBTS

CHARITABLE GIFTS

9

GIFTS

FCT v McPhail

3

0123456789

CARRIED-FORWARD LOSSES

11

PRIOR YEAR LOSSES

12

PRIOR YEAR LOSSES

4

0123456789

13

PRIOR YEAR LOSSES:ILLUSTRATION

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

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

Exempt income: $10,000

14

after

PRIOR YEAR LOSSES:CORPORATE TAXPAYERS


5

0123456789

16


17

NON-COMMERCIAL LOSSES:EXEMPTIONS

DOMESTIC TRANSFER PRICING

6

0123456789

19

NON-ARM’S LENGTH PRICES BETWEEN ASSOCIATED PARTIES

PASSIVE LOSSES (NEGATIVE GEARING)

21

PASSIVE LOSSES

7

0123456789

22

PASSIVE LOSSES

23

PASSIVE LOSSES

8

0123456789

CAPITAL GAINS TAXWU November 2018AUSTRALIAN TAXATIONslide set 8

2

OVERVIEW

3

NET CAPITAL GAIN

1

0123456789

CAPITAL GAINS AND LOSSES

5

KEY ISSUES

6

CGT EVENTS

2

0123456789

7

CGT EVENTS

8

CGT EVENTS

9

CGT EVENT A1

3

0123456789

10

CGT EVENTS C1 AND C2

11

CGT EVENTS D1

12

CGT ASSETS

4

0123456789

13

CGT ASSETS:COLLECTIBLES

14

CGT ASSETS:PERSONAL USE ASSETS

15

CGT: THE TRANSITIONAL RULE

5

0123456789

16

CGT ASSETS:SEPARATE CGT ASSETS (EXAMPLES)

Post CGTPre-CGT

Building constructedLand acquired

17

CGT ASSETS:SEPARATE CGT ASSETS (EXAMPLES)

18

CGT ASSETS:TIME OF ACQUISITION

Date when purchasertaken to have acquired

CGT asset

6

0123456789

19

EXEMPTIONS AND EXCEPTIONS

20

EXEMPTIONS AND EXCEPTIONS: DISREGARDED GAINS AND LOSSES ON CERTAIN ASSETS

21

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

7

0123456789

22

EXEMPTIONS AND EXCEPTIONS:MAIN RESIDENCE EXEMPTION

23


24


8

0123456789

CALCULATING A CAPITAL GAIN OR CAPITAL LOSS

26

GENERAL POSITION

27

CAPITAL PROCEEDS

9

0123456789

28

CAPITAL PROCEEDS: MODIFICATION 1: MARKET VALUE SUBSTITUTION RULE

29

CAPITAL PROCEEDS: MODIFICATION 2: APPORTIONMENT

Building constructedLand acquired

Capital proceeds (one amount)

30

CAPITAL PROCEEDS: MODIFICATIONS 3 TO 6

10

0123456789

31

COST BASE

32

COST BASE:EXCLUDED EXPENDITURE

33

COST BASE:MODIFICATIONS

11

0123456789

34

COST BASE:APPORTIONMENT

35

COST BASE:INDEXATION

11.45am on 21 September 1999

Indexation of cost base: Indexation of cost base:

36

COST BASE:INDEXATION - FACTORS

12

0123456789

37

COST BASE:INDEXATION – WORKED EXAMPLE

38

COST BASE:CAPITAL LOSSES AND THE REDUCED COST BASE

NET CAPITAL GAIN

13

0123456789

40

RECALL: NET CAPITAL GAIN

41

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

42

REDUCTION OF CAPITAL GAIN:DISCOUNT CAPITAL GAINS

14

0123456789

43

NET CAPITAL LOSSES

RESIDENTS AND NON-RESIDENTS

45

TAXABLE AUSTRALIAN ASSETS

15

0123456789

46

ENTRY AND EXIT

ROLLOVERS

48

ROLLOVERS

16

0123456789

49

ROLLOVERS

50

ROLLOVERS

51

ROLLOVERS

17

0123456789

52

ROLLOVERS

53

ROLLOVERS

54

ROLLOVERS

18

0123456789

55

ROLLOVERS

19

0123456789

TAX OFFSETS


2

INTRODUCTION

3

INTRODUCTION:OFFSET AGAINST INCOME TAX LIABILITY

1

0123456789

4

TYPES OF OFFSETS

5

TYPES OF OFFSETS:RECOGNITION OF TAXES ALREADY PAID

6

RECOGNITION OF TAXES ALREADY PAID:DIVIDEND TAX OFFSETS

2

0123456789

7

RECOGNITION OF TAXES ALREADY PAID:DIVIDEND TAX OFFSETS

8

RECOGNITION OF TAXES ALREADY PAID:INCOME SUBJECT TO FOREIGN TAX

9

CONCESSIONAL TAX OFFSETS

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

Tax offset is subtracted from income tax payable

3

0123456789

10

CONCESSIONAL TAX OFFSETS:COMMON OFFSETS

11

COMMON CONCESSIONAL OFFSETS: DEPENDANT (INVALID AND CARER)

12


4

0123456789

13


Less

14

COMMON CONCESSIONAL OFFSETS: PRIVATE HEALTH INSURANCE

15

COMMON CONCESSIONAL OFFSETS: PRIVATE HEALTH INSURANCE

5

0123456789

16

ORDER OF TAKING OFFSETS

6

0123456789

GOODS AND SERVICES TAXWU November 2018AUSTRALIAN TAXATIONslide set 10

THE DESIGN OF A GST

3

TAX BASES

1

0123456789

CONSUMPTION TAXES

5

TWO MODELS FOR TAXING CONSUMPTION

6

TWO MODELS FOR TAXING CONSUMPTION:NO TAX WORLD

2

0123456789

7

TWO MODELS FOR TAXING CONSUMPTION:RETAIL SALES TAX

8

TWO MODELS FOR TAXING CONSUMPTION:GOODS AND SERVICES TAX

GST

Net Payable = $10

GST

Net Payable = $10

GST

Net Payable = $10

GST

RST or VAT

3

0123456789

TWO MODELS FOR TAXING CONSUMPTION:RETAIL SALES TAX and VAT

RST v VAT

4

0123456789

5

0123456789

16

TAXABLE SUPPLY:OVERVIEW

TAXABLE SUPPLIES (OUTPUTS)

6

0123456789

19

TAXABLE SUPPLY:CHARGING PROVISION

supply

consideration;

enterprise;

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

registered

20


21

TAXABLE SUPPLY:CONSEQUENCES

7

0123456789

22

TAXABLE SUPPLY:CALCULATING THE TAX

23

TAXABLE SUPPLY:CALCULATING THE TAX

WHAT IS A SUPPLY?

8

0123456789

25


supply

consideration;

enterprise;


registered

26

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)

27

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

9

0123456789

WHAT IS CONSIDERATION?

29


supply

consideration;

enterprise;


registered

30

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

10

0123456789

31

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

WHAT IS AN ENTERPRISE?

11

0123456789

34


supply

consideration;

enterprise;


registered

enterprise

"business "

36

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

12

0123456789

supplysupply

13

0123456789

Consideration

CONSIDERATION

enterprise

"business "

CONNECTED TO AUSTRALIA (“THE INDIRECT TAX ZONE”)

14

0123456789

43


supply

consideration;

enterprise;


registered

44

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

45

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

15

0123456789

REGISTERED

47


supply

consideration;

enterprise;


registered

16

0123456789

49

must

may

TAXABLE SUPPLY: ELEMENT 5 - REGISTRATION

51

TAXABLE SUPPLY: ELEMENT 5 - REGISTRATION

17

0123456789

52

REGISTERED VS. UNREGISTERED BUSINESSES

53

REGISTERED VS. UNREGISTERED

54

REGISTERED VS. UNREGISTERED

18

0123456789

55

BUNCHING

TAXABLE SUPPLIES: PASSIVE SUPPLIES?

19

0123456789

taxable supply

GST-FREE SUPPLIES

60

GST-FREE SUPPLY

20

0123456789

61

GST-FREE SUPPLY

62

GST-FREE SUPPLY:FOOD

63

GST-FREE SUPPLY:HEALTH

21

0123456789

INPUT TAXED SUPPLIES

65

INPUT TAXED SUPPLY

66

South Steyne Hotel Pty Ltd v FCT

INPUT TAXED SUPPLY:RESIDENTIAL PREMISES

22

0123456789

MIXED AND COMPOSITE SUPPLIES

68

TYPES OF SUPPLIES

69


23

0123456789

70

FCT v Luxottica Retail Australia Pty Ltd


ACQUISITIONS (INPUTS)

72

CREDITABLE ACQUISITIONS

24

0123456789

73

CREDITABLE PURPOSE (s 11-15)

74


75


25

0123456789

76

CREDITABLE ACQUISITIONS:CONSEQUENCES

LIABILITY FOR GST & ATTRIBUTION

78

LIABILITY FOR GST & NET AMOUNT

26

0123456789

79

NET AMOUNT:ADJUSTMENTS

80

TAX PERIODS

81

ACCOUNTING METHODS

27

0123456789

TAX INVOICES

83

TAX INVOICES

84

TAX INVOICES

28

0123456789

INTERACTION OF GST & INCOME TAX

86

INTERACTION WITH INCOME TAX

SPECIAL RULES AND PROBLEMS

29

0123456789

SECOND-HAND GOODS

30

0123456789

DEPOSITS

31

0123456789

94

SPECIAL RULES:DEPOSITS (DIV 99)

DEPOSITS FOR UNDELIVERED SUPPLIES

32

0123456789

97

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

33

0123456789

34

0123456789

35

0123456789

106

LOYALTY SCHEMES

107

SPECIAL RULES:VOUCHERS (DIV 100)

LOYALTY SCHEMES

36

0123456789

37

0123456789

38

0123456789

FRINGE BENEFITS TAXWU November 2018AUSTRALIAN TAXATIONslide set 11

2

HOW ARE RECEIPTS FROM PERSONAL SERVICES AND EMPLOYMENT TAXED?

3

Fringe Benefits Tax Assessment Act 1986 Fringe Benefits Tax Act 1986

FEATURES OF THE FBT REGIME

employer

1

0123456789

4

DEFINITION OF A FRINGE BENEFIT

5

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

6

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

2

0123456789

7

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

8

EXCLUSIONS

9

EXCLUSIONS:ALLOWANCE VS. REIMBURSEMENT

3

0123456789

DETERMINING THE TAXABLE VALUE OF A FRINGE BENEFIT

11

CATEGORIES OF FRINGE BENEFITS

12

CATEGORIES OF FRINGE BENEFITS:CAR FRINGE BENEFITS

4

0123456789

13


14


15


5

0123456789

16


17


18


6

0123456789

19

CATEGORIES OF FRINGE BENEFITS:LOAN FRINGE BENEFITS

less

20

CATEGORIES OF FRINGE BENEFITS:LOAN FRINGE BENEFITS

21

CATEGORIES OF FRINGE BENEFITS:DEBT WAIVER FRINGE BENEFITS

7

0123456789

22

CATEGORIES OF FRINGE BENEFITS:EXPENSE PAYMENT FRINGE BENEFITS

23

CATEGORIES OF FRINGE BENEFITS:PROPERTY FRINGE BENEFITS

24

CATEGORIES OF FRINGE BENEFITS:MEAL ENTERTAINMENT FRINGE BENEFITS

8

0123456789

25


26


27

REDUCTIONS IN TAXABLE VALUE

9

0123456789

28

REDUCTIONS IN TAXABLE VALUE:RECIPIENT’S CONTRIBUTION

29

REDUCTIONS IN TAXABLE VALUE:OTHERWISE DEDUCTIBLE RULE

EXEMPT FRINGE BENEFITS

10

0123456789

31

EXEMPT FRINGE BENEFITS

32

EXEMPT FRINGE BENEFITS:MINOR BENEFITS

33

primarily in the employee’s employment

EXEMPT FRINGE BENEFITS:WORK-RELATED ITEMS

11

0123456789

34

EXEMPT FRINGE BENEFITS:MEMBERSHIP FEES, SUBSCRIPTIONS & TAXI TRAVEL

CALCULATING FBT LIABILITY

36

STEPS

12

0123456789

37

STEP 1:TYPE OF FRINGE BENEFIT

38

STEP 2:FRINGE BENEFITS TAXABLE AMOUNT

39

STEP 3:FRINGE BENEFITS TAX LIABILITY

13

0123456789

40

FBT LIABILITY EXAMPLE

INTERACTION WITH OTHER TAXES

42

INTERACTION WITH INCOME TAX

14

0123456789

43

INTERACTION WITH GST

15

0123456789

INTERNATIONALWU November 2018AUSTRALIAN TAXATIONslide set 13

2

3 1

0123456789

4

62

0123456789

3

0123456789

4

0123456789

5

0123456789

6

0123456789

7

0123456789

RESIDENCY AND SOURCE

WU Novmeber 2018AUSTRALIAN TAXATIONslide set 14

2

GENERAL JURISDICTIONAL RULESIN SECTION 6-5 ITAA97

3

WHEN IS A TAXPAYER A TAX RESIDENT OF AUSTRALIA?

1

0123456789

4

Miller v FCT

INDIVIDUALS:RESIDES TEST

5

Miesagaes v Commissioners of Inland Revenue

IRC v Lysaght

Levene v IRC

INDIVIDUALS:RESIDES TEST - FACTORS

6

Domicile Act 1982:

INDIVIDUALS:DOMICILE TEST

2

0123456789

7

permanent place of abode outside Australia

FCT v Applegate

INDIVIDUALS:DOMICILE TEST

8

INDIVIDUALS:183-DAY TEST

9

Re Koustrup v FCT

INDIVIDUALS:183-DAY TEST & WORKING HOLIDAY VISAS

3

0123456789

10

INDIVIDUALS:SUPERANNUATION

11

PERIOD OF RESIDENCE

12

CorporationsAct 2001

COMPANIES:PLACE OF INCORPORATION TEST

4

0123456789

13

COMPANIES:CENTRAL MANAGEMENT AND CONTROL TEST

14

Malayan Shipping Co Ltd v FCT

Koitaki Para Rubber Estates v FCT

COMPANIES:CENTRAL MANAGEMENT AND CONTROL TEST

15

COMPANIES:CONTROLLING SHAREHOLDERS TEST

5

0123456789

16

Nathan v FCT

SOURCE OF INCOME:OVERVIEW

17

SOURCE OF INCOME:CATEGORIES OF INCOME

FCT v French FCT v Efstathakis

Spotless Services v FCT

EsquireNominees Ltd v FCT

6

0123456789

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

CANCELLATION OF DEBT

3

CANCELLATION OF DEBT

1

0123456789

DEEP AND SHALLOW DISCOUNTS

5


6


2

0123456789

FOREX

8

FOREX GAINS AND LOSSES

INSTALMENT SALES

3

0123456789

10

INSTALMENT SALES

11

INSTALMENT SALES

DISSECTED DEBT: MYER SCHEME

4

0123456789

13

MYER SCHEME

14

MYER SCHEME

15

SALES FOR CONTINGENT PAYMENTS

5

0123456789

Australian Tax Law · Australian Tax Law Slides. AUSTRALIA’S TAXATION SYSTEM, SOURCES OF LAW,...

Documents

Transcript of Australian Tax Law · Australian Tax Law Slides. AUSTRALIA’S TAXATION SYSTEM, SOURCES OF LAW,...