Week Legal

Topics: Taxation in the United States, Taxation, Tax Pages: 8 (1736 words) Published: November 11, 2011
Week 01 LEGT2751 Notes
ss4, -5, -10, -15 - Shows how to calculate tax, and who should pay tax s36-10 - Explanation of a tax loss
s251S – Medicare levy

Tax formulas [2.2-2.3]
income tax = (taxable income x tax rate) – tax offsets

• Tax offsets – eg imputation credit from share trading, listed in s13-1

taxable income = assessable income - deductions

• Assessable income = ordinary income – statutory income o Ordinary income s6-5 – assessable income according to ordinary concepts o Statutory income s6-10 – assessable income according to provisions • General deduction – s8-1, specific deductions – s8-5

Types of income [2.14]
• If an amount is both ordinary and statutory income it is only taxable once (s6-.25), and rules relating to statutory income prevail over ordinary income • More specific provisions prevail over more general provisions in ITAA36 only • Items that are neither ordinary or statutory are not income, and NOT exempt income eg gifts, not taxable s6-15

Keily v FCT – pension was considered ordinary income
• “characteristics of income of whatever kind are said to include recurrence, regularity and periodicity”

Income generally from:
• Remuneration for personal services (rowe’s case)
• Rewards from carrying on a business (cooling’s case)
• Return on investment (slater holding’s case)

Exempt Income [2.24-2.27]
• Exempt income – income that is excluded from assessable income. Types: o Exempt entities [s11-5]
o Income that is exempt [s11-10]
o Certain income derived by certain entities – eg centerlink [s11-15] • Types of s11-15 exempt income:
o Defence force allowances s51-5
o Maintenance payments to spouse or child s51-50
o Educational allowances s51-10
o Certain foreign source income
o Number of welfare payments

Statutory Income [5.1-5.2]
• Statutory income is legislated income, while ordinary income is judicial income • s6-10 is not an assessing provision, assessment mechanisms are the specific provisions • ITAA97 – statutory prevails over ordinary

• ITAA36 – specific prevails over general

Deductions [8.1-8.3]
S8-1 – general deductions. Loss or outgoing from:
• Gaining/producing your assessable income
• Carrying on a business for the purpose of gaining your assessable income Cannot deduct if:
• Loss of capital nature
• Loss of private/domestic nature
• Loss associated in gaining exempt income, or non-assessable income

S8-5 - specific deductions
• Basically states that you can deduct an amount that a provision of the Act allows

Tax Losses [9.57-9.60]
• s36-10 – tax losses
• tax losses are carried forward indefinitely until they are recouped – after 1989/1990 income year • tax loss arises when deductions exceed TOTAL income, not just assessable income

Tax Loss = D > AY + Net Exempt Income (NEY)

• NEY s36-20 – all exempt income less non-capital outgoings/losses incurred in deriving income, less any taxes on the exempt income • Tax loss is first offset against:
o Net exempt income; and then
o Assessable income over deductions [s36-15]

• 6-5(2) – For Australian residents, assessable income includes income from all sources, in or out of Australia • 6-5(3) - For non-Australian residents, assessable income includes income from all Australian sources • 6-10(4) - For Australian residents, assessable income includes the statutory income from all sources, whether it in or out of Australia. • 6-10(5) - For non-Australian residents, assessable income includes all statutory income from all Australia sources. • 136-5,-10,-25 – related to non-resident CGT event treatment • S23(r) - Income derived by a non-Australian resident from a foreign source completely out of Australia is exempt from income tax

Jurisdictional Matters [2.31-2.32]
• Australian...
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