CA ANZ Advanced Tax (Australia) cheat sheet

Constitutional basis: s51(ii) gives the Commonwealth power to tax; s55 requires laws imposing taxation to deal with one subject of taxation and prohibits tacking other provisions onto taxing Acts.

Income Tax Assessment Act 1997 (ITAA 1997) contains the core provisions; ITAA 1936 retains key rules (e.g., Div 7A, s99A trust streaming, Part IVA). Rates and thresholds sit in the Income Tax Rates Act 1986 and ITRA 1986.

FBT, GST, superannuation and indirect taxes are levied under separate Acts; the ITAA does not levy them.

The Commissioner's powers: general power of administration (s8 ITAA 1997), power to obtain information (s353-10 Sch 1 TAA 1953), access and search (s353-15), and to issue public and private rulings (Div 358 Sch 1 TAA 1953).

TPB Code of Professional Conduct (s30-10 TPB Act 2009) has five principles: honesty and integrity; independence; confidentiality; competence; and compliance with the law. Breach may attract sanctions up to termination of registration.

Tax agent registration requires satisfaction of s20-5 TPB Act (qualifications, experience, personal suitability); registered agents must lodge returns and notify clients of relevant matters.

Rulings and precedents: public rulings bind the Commissioner, not taxpayers; private rulings protect the taxpayer where relied on in good faith (Div 357-359 Sch 1 TAA 1953).

Administrative review: objection under Part IVC Sch 1 TAA 1953 (2 years for assessments, 60 days for non-assessment decisions), then AAT/ART or Federal Court.

Taxpayer rights: Taxpayers' Charter, confidentiality of taxpayer information (s355-25 Sch 1 TAA 1953) and privilege against self-incrimination limited by s353-10 notice requirements.

Ordinary income (s6-5 ITAA 1997): income according to ordinary concepts; characteristics include regularity, periodicity, reliance, and connection with income-producing activity.

Statutory income (s6-10) includes s15-2 allowances, s15-3 return-to-work payments, s20-20 government grants, s21A and Div 82.

Deductions: general deductions under s8-1 require a nexus with gaining or producing assessable income; no deduction for capital, private or domestic, or income-producing purpose outside the business.

Specific deductions (s8-5 to s25-110) include repairs (s25-10), depreciation (Div 40), borrowing costs (s25-25), and bad debts (s25-35).

Timing: s8-1 deductions are recognised when incurred (s3-1, s3-5); prepayments under ss82KZM-82KZMG ITAA 1936 spread over the eligible service period unless the 12-month rule applies.

Trading stock (s70-10): closing stock valued at cost, market selling value, or replacement value (s70-45); opening stock equals prior closing stock.

Trading stock disposal: s70-90 treats disposal outside ordinary course as at market value; s70-95 deals with insurance and compulsory acquisition.

Non-deductible items: entertainment (Div 32), penalties (s26-5), and amounts paid to related parties that are not at arm's length (s26-35).

Reconciliation: assessable income (s6-1) less deductions (s8-1) equals taxable income; tax offsets reduce tax payable, not taxable income.

CGT event A1 (s104-10): disposal of a CGT asset; capital gain is capital proceeds less cost base; capital loss is reduced cost base less proceeds.

Cost base has five elements (s110-25): acquisition costs, incidental costs, ownership costs (non-deductible), enhancement costs, and costs to preserve title. Reduced cost base omits the third element.

CGT discount: 50% for individuals and trusts (s115-100), 33⅓% for complying superannuation funds; requires 12-month ownership (s115-25). Companies do not access the discount.

Exemptions and rollovers: main residence exemption (Subdiv 118-B), small business concessions (Div 152), scrip-for-scrip rollover (Subdiv 124-M), and marriage breakdown rollover (Subdiv 126-A).

CGT events include A1 (disposal), C1/C2 (trust distributions), D1 (creation of contractual rights), E1-E9 (trust events), and J1 (foreign residents' indirect interests).

Depreciation (Div 40): decline in value of depreciating assets using prime cost or diminishing value; effective life per s40-100 (self-assessed or Commissioner's determination).

Instant asset write-off thresholds and accelerated depreciation for small business (s328-180) apply where aggregated turnover is under the relevant threshold.

Capital works (Div 43): 2.5% or 4% deduction on construction cost of buildings and structural improvements; no deduction for pre-1987 buildings or non-residential improvements before 20 July 1982.

Balancing adjustment (s40-285): termination value less adjustable value determines assessable gain or deductible loss.

Individuals: progressive marginal rates; tax-free threshold; Medicare levy (2%) and Medicare levy surcharge based on income for surcharge purposes; low income tax offset and other offsets.

Partnerships are not taxpayers; partners are taxed on their share of net partnership income (s90 ITAA 1936) in the year the income is derived by the partnership.

Trusts: beneficiaries assessed under Div 6 ITAA 1936 on present entitlement (s97); trustee assessed under s98 or s99A where no beneficiary is presently entitled.

Trust streaming: Div 6E ITAA 1936 allows streaming of capital gains and franked distributions to beneficiaries where recorded in the trust records by 30 June.

Companies: base rate entity (aggregated turnover under $50m) taxed at 25%; other companies at 30%; franking credits via imputation (Div 207 ITAA 1997).

Dividends: franked distributions carry imputation credits; resident shareholders gross up and claim a tax offset (s207-20), with excess refundable for individuals and complying super funds.

Div 7A ITAA 1936: payments, loans and forgiven debts from private companies to shareholders/associates treated as dividends unless minimum yearly repayments or arm's-length terms are met.

Consolidation: a corporate group may form a single tax entity (s703-5 ITAA 1997); losses and assets move to the head company.

Company loss recoupment: s165-12 ITAA 1997 continuity of ownership test or s165-13 same business test.

GST rate is 10% (s9-70 GST Act); taxable supplies require registration, enterprise, consideration, and connection with the indirect tax zone (s9-5).

GST-free supplies (Div 38) include fresh food, health and education; input taxed supplies (Div 40) include residential rent and financial supplies, with no input tax credits.

Registration threshold: $75,000 turnover ($150,000 for non-profits); taxi and ride-sourcing services must register regardless of turnover (s23-5 GST Act).

Input tax credits (Div 11) available for creditable acquisitions; adjustments for change in extent of creditable purpose (Div 129) and bad debts (Div 21).

Accounting basis: cash or accrual (s29-40); GST returns quarterly or monthly; BAS lodgment and payment obligations.

FBT: employers pay FBT on benefits provided to employees; gross-up rates (Type 1 at 2.0802, Type 2 at 1.8868 for 2024-25); exemptions for portable electronic devices and work-related items.

Payroll tax: state-based, threshold varies (e.g., NSW $1.2m); grouping provisions apply; contractors may be deemed employees.

Land tax: state-based annual tax on unimproved land value; principal place of residence and primary production exemptions.

Customs duty and excise: applied on imports and specified goods (fuel, alcohol, tobacco); GST applies to imports via taxable importations (Div 13).

Residence: individual resides in Australia under ordinary concepts or meets 183-day, domicile, or Commonwealth superannuation tests (s6(1) ITAA 1936).

Source: Australian-source income of non-residents is assessable (s6-5(3)); withholding tax applies to dividends (30% or 15% treaty), interest (10%), and royalties (30% or treaty rate).

Foreign residents' CGT: main residence exemption denied post-9 May 2017 (with transitional rules); 10% withholding on disposal of taxable Australian property (Subdiv 14-D Sch 1 TAA 1953).

Controlled foreign companies (Part X ITAA 1936): attributable income included in Australian shareholders' income where control and tainted income thresholds met.

Transferor trust rules (Div 6AAA) and foreign investment fund rules (Div 830) attribute income from offshore trusts and interests.

Transfer pricing: Div 815 ITAA 1997 requires arm's-length consideration; Subdiv 815-B self-assessment, Subdiv 815-C reconstruction, and Subdiv 815-D documentation.

Thin capitalisation: Div 820 limits debt deductions where debt-to-equity ratio exceeds 1.5:1 or arm's-length debt test; safe harbour and worldwide gearing tests.

Double tax agreements: allocate taxing rights and provide foreign tax credit or exemption; s23AB ITAA 1936 and Div 770 ITAA 1997 for foreign income tax offsets.

Hybrid mismatch rules (Div 832) deny deductions for payments giving rise to double non-taxation.

Concessional contributions cap (2024-25: $30,000) taxed at 15% in the fund; Division 293 tax applies 15% additional tax for high-income earners (income plus contributions over $250,000).

Non-concessional contributions cap (2024-25: $120,000); bring-forward rule allows up to three years' contributions where total superannuation balance is below the threshold ($1.9m in 2024-25).

Preservation age is 60 for those born after 30 June 1964; retirement phase income is tax-free for those aged 60 and over.

Transfer balance cap (2024-25: $1.9m) limits tax-free retirement phase; excess transfer balance tax applies.

Superannuation guarantee rate is 11.5% in 2024-25, rising to 12% from 1 July 2025; maximum contribution base applies.

Deductions for personal contributions (s290-150 ITAA 1997) require notice to the fund and acknowledgement; spouse contribution offset and government co-contribution apply subject to income tests.

Fund taxation: concessional contributions and earnings taxed at 15%; capital gains at 10% for assets held over 12 months; no tax on earnings supporting pensions.

SMSF rules: residency (Australian residents, central management and control in Australia), in-house asset limit (5%), and sole purpose test (s62 SIS Act 1993).

Withdrawal: lump sums and pensions tax-free after age 60 for taxed funds; between preservation age and 60, taxed at marginal rates with a 15% offset.

Part IVA ITAA 1936: general anti-avoidance rule; requires a scheme, a tax benefit, and a dominant purpose of obtaining a tax benefit determined by the eight s177D factors.

Specific anti-avoidance: Div 7A, s109XB, s100A (trust distributions to beneficiaries), s99A, and the personal services income rules (Div 85-87 ITAA 1997).

PSI rules: income from personal services is attributed to the individual unless the results test, unrelated clients test, employment test, or business premises test is met.

Tax avoidance vs evasion: evasion involves fraud or dishonesty and attracts criminal penalties; avoidance attracts Part IVA determinations and penalties under Sch 1 TAA 1953.

Penalties: base penalty units (shortfall penalty 25/50/75%), uplift for repeat behaviour, and safe harbour where advice from a registered tax agent is obtained.

Record keeping: 5 years generally (s262A ITAA 1936); CGT records for assets held over 12 months; substantiation for work-related expenses and car claims.

Tax planning strategies: timing of income and deductions, income splitting subject to Div 6AA and PSI, superannuation contributions, and family trust elections.

Voluntary disclosure: reduces penalties (80% reduction for pre-notification disclosures) and may avoid prosecution.

Compliance: lodgment programs, ATO data-matching, and the reportable tax position schedule for large taxpayers.