Australian-taxation-law-notes-澳大利亚税法概要.doc

_Topic 2 Ordinary Income1. 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 & Sherden5. 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 Dixon10. 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 Harris12. The compensation for the cancellation of business contracts is income. Heavy Minerals Pty Ltd v FCT13. 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 IRC14. Payments received for entering into restrictive agreements are capital. Dickenson v FCT15. Compensation for loss of trading stock is considered as income.CIR v Newcastle Breweries Ltd16. Sales of knowledge or know-how are income.Rolls-Royce Ltd v Jeffrey17. Sale or assignment of income streams should be treated as income, and the lump sum is assesable under s. 25(1).Myer Emporium18. 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 FCT19. 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 FCT21. 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 T1423. 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 FCT25. Income from illegal activities are assessable.Partridge v Mallandaine26. Profits arising from ultra vires actions of company directors may be assessable of the company.England v WebbTopic 3 Derivation of Income1. 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 business3. 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 FCT4. 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 FCT5. 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 Firstenberg6. 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 - Cash7. For a business selling goods or supplying services, amounts received in advance are not regarded as income. Arthur Murray v FCT8. 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 FCTTopic 4 Statutory Income and Exempt Income1. 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.从税后利润付股利给股东，这部分利润所含的已交公司所得税称为franking credit。股东应申报（股利franking credit）为总股利，按照自己的税率，再减去franking credit，就是这部分收入应交的个人所得税。3. S. 15-2(1): includes the value to the taxpayer of allowances, gratuities, compensations, benefits, bonuses and premiums provided, directly or indirectly, with respect to employment or services.4. S. 15-2(2): does not have to be in the form of money.5. S. 15-2(3)(d): if the allowance etc is ordinary income under s. 6-5, then s. 15-2 will not operate.6. S. 6-25(2): cannot assess income twice.7. S. 15-3: payments only made to induce a resumption of work are included in assessable income.8. S. 15-10: your assessable income includes a bounty or subsidy that is paid a government to assist in the carrying on of a business, where the amount is not ordinary income assessable under s. 6-5.9. S. 15-15: profits arising form the carrying on or carrying out of a profit-making undertaking or plan is included in assessable income, except where the profit is ordinary income assessable under s. 6-5.10. Due to capital gain, s. 15-15 often not apply, there just in case.11. Ordinary meaning of Royalties: 为行使某种权利而支付的费用，并且有数量上的规定。 McCauley v FCT12. S. 15-20: your assessable income includes an amount that you received as or by way of royalty within the ordinary meaning of royalty and is not ordinary income under s. 6-5(1).13. S. 15-30: any amount you received by way of insurance or indemnity for the loss of an amount is included in assessable income, and the amount received is not ordinary income assessable under s. 6-5.14. S. 15-35: If a taxpayer overpays their tax, interest paid on that tax by the ATO is assessable.15. S. 15-70: reimbursement for car expenses on a cents per kilometer basis will be assessable. This is different from a car allowance which is ordinary income under s. 6-5(1). Here, the employee is given extra money from employer to pay for car expenses.16. S. 83-10: unused annual leave paid out as a lump sum on termination of employment is assessable.17. S. 83-70: long service leave paid out is assessable.18. S. 23L(1): income derived via a fringe benefit is not assessable as ordinary income.19. S. 23L(2): non-cash business benefits within the meaning of s. 21A that are valued at less than $300 is exempt.Topic 5 Residence and Source1. 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 individual5. 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 Henderson8. A place of abode is a mans residence, where he lives with his family and sleeps at night.R v Hammond9. 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 everlastingFCT v Applegate11. Under Domicile Test, a person will be a resident of Australia, if his domicile is Australia, unless his permanent place of abode is outside Australia.12. Permanent place of abode outside Australia: a. Intended and actual length of stay, greater than 2 years suggests non-residency. b. Establishment of a home outside Australia. c. Durability of association with Australia.13. 183 day rule: will be a resident for tax if have a presence in Australia for more than half of the income year, either continuously or intermittently. (mainly applicable to people coming into Australia)14. Second limb of 183 day rule: a person will not be a resident of Australia Under this test, if the Commissioner is satisfied that the taxpayer has a permanent place of abode outside Australia.Residence of companies15. 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 test16: 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 FCT18. The central management and control of a company will usually be where the directors exercise their powers of management.De Beers Consolidated Mines v Home19. 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 FCT20. Controlling shareholder test: a company will be a resident of Australia for tax, if it carries on Business (trading activity only) in Australia, and has its voting power controlled by shareholders who residents of Australia.Source of income 21. Payment for services - generally where the work was performed, but in Mitchum v FCT where the place of signing a contract for services was decisive.22. Dividends - the source is the same as the source of the companys profits. Nathan and Esquire Norminees23. Interest - generally where the agreement to pay the interest is made.Studebaker v C of T24. Royalties - the source is usually where the persons with the know-how or who supply the services reside.FCT v United Aircraft Corporation25. Business or trading income - the place where the agreements are made and the transactions entered into.Tariff Reinsurances v DCTTopic 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(奖章), unless bought. b. S. 118-12: asset used to produce exempt income. c. S. 118-25: trading stock (never capital, it is asset) d. S. 104-10(5)(a): assets acquired before September 1985. e. S. 118-24: depreciable assets with 100% taxable use.4. Three category of CGT assets: a. CGT assets b. Collectables c. Personal use assets5. 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 gain