ITAA36 = Income Tax Assessment Act 1936
TAA = Taxation Administration Act 1953
GST Act = A New Tax System (Goods and Services Tax) Act 1999 FBTAA = Fringe Benefits Tax Assessment Act 1986
Week 1 - INTRODUCTION TO TAXATION & THE AUSTRALIAN TAXATION SYSTEM
Taxes - compulsory, unrequited payments to general government. Collected for the provision of social & merit goods. 1. Social goods - Joint consumption (use by 1 doesn’t reduce others) & Non-excludable (can’t effectively exclude anyone from access to good). E.g. fresh air, street lighting, knowledge, open source software. 2. Merit goods - provided on the basis of need and not ability to pay & positive externalities to society as a whole. E.g. health care, food stamps, education. 3. Social Engineering – Reason govt. may tax. – attempt to change a person’s behaviour. E.g. higher taxes on ‘alcopops’ / tobacco / carbon tax. This may not always work & may have negative consequences. 4. Market Imperfections – tax aim to correct the allocation of free market resources.
Tax Policy Objectives:
1. Simplicity – low compliance costs and certainty of who needs to pay what. 2. Equity ie fairness - Vertical equity: those in different positions should be treated (taxed) differently i.e. progressive taxation & horizontal equity: those in similar positions should be taxed in the same way i.e. different types of ‘income’ still. 3. Neutrality – decisions should not be influenced by tax e.g. business decisions.
History of Taxes:
England - Modern tax system introduced in 1842, “Schedular system” – different classes of income taxed under different rules. Australia - Income tax introduced in 1915 (due to WW1): Income Tax Act 1915 (Cth) * Did not follow English tax legislation, but did not entirely reject it * No notion of “schedules” – all income taxed under same Act and at same rate
Constitutional Background: Taxation is a “concurrent power” (State and Federal govt. power) * Section 51: allows federal government to pass laws in respect of taxation * Section 55: laws imposing taxation must only deal with taxation and must only cover one subject of taxation (means we have a number of different ‘tax acts’)
Sources of tax laws: Legislation, case law, ATO rulings.
* Administrative Appeals Tribunal -> Federal Court (single judge) -> Federal Court (Full Court) (3 judges) -> High Court (7 judges) (if special leave approved)
Income tax payable by each individual and company (and some other entities), regardless of residency status: s4-1 ITAA97 * However: See s 6-5 & 6-10 ITAA97
* Residents: taxed on worldwide income (subject to exceptions) * Non-residents: taxed on Australian source income (subject to exceptions)
* s4-10 ITAA97: Income tax = (Taxable income x Tax Rate) – Tax offsets * s4-15 ITAA97: Taxable income = Assessable income – Deductions * s6-20 ITAA97: Exempt Income e.g. scholarships/compensation from personal injury * s6-23 ITAA97: Non-assessable non-exempt income - not assessable income and not exempt income.
Week 2 – ORDINARY INCOME (no statutory defo.) – s6-5 Income according to ordinary concepts
* There are competing concepts of income: Accounting concept (Profits and losses) vs. Economic concept: Income = consumption + change in wealth i.e. savings (the source of the income is irrelevant) vs. Judicial concept “what comes in” * Types of income: Ordinary Income, Statutory Income, Exempt Income (not included in assessable income e.g. income made by charitable, religious and educational institutions), Non-assessable non-exempt income. * Income propositions - Negative: Amounts that are not ordinary income & Positive: Characteristics of ordinary income. * Types of ordinary income – Personal exertion; business; property
S6-5 Ordinary Income – Income according to ordinary concepts.
* Ordinary income: must either be money or convertible into...