CA Program Core 4: Tax (Australia) cheat sheet
CA Program Core 4: Tax (Australia) · Keep the key ideas within reach.
Australian tax system
Residents are taxed on worldwide income; non-residents only on Australian-sourced income and capital gains on taxable Australian property.
Residency tests: resides test, domicile test (permanent place of abode), 183-day test, and Commonwealth superannuation test.
Marginal rates for resident individuals: 0% to $18,200; 16% $18,201–$45,000; 30% $45,001–$135,000; 37% $135,001–$190,000; 45% above $190,000.
Medicare levy is 2% of taxable income, with low-income thresholds and a 10% surcharge for high-income earners without private hospital cover.
Taxable income = assessable income − deductions (s 4-15 ITAA 1997).
GST is a 10% broad-based consumption tax; the states receive all GST revenue.
Company tax rate is 30% for base rate entities (25% for eligible small companies).
Tax offsets reduce tax payable; refundable offsets can produce a refund, non-refundable offsets cannot.
Tax policy and administration
The ATO administers federal tax laws under the Taxation Administration Act 1953.
Self-assessment: taxpayers must lodge returns and are liable for penalties for incorrect returns.
Rulings (public, private, oral) bind the Commissioner if applied; taxpayers can rely on them.
Objection and review: 60 days to object to an assessment; then AAT/ART or Federal Court.
Tax avoidance schemes may attract Part IVA; promoters and advisers can face penalties.
Record keeping generally required for 5 years after the relevant event.
Taxpayers can seek private rulings, and the ATO can issue amended assessments within limited review periods (typically 2 or 4 years).
The Budget process and Treasury develop tax policy; legislation must pass both Houses.
Assessable income
Ordinary income (s 6-5) includes income from personal exertion, business, and property, with characteristics of regularity, periodicity, and reliance.
Statutory income (s 6-10) includes amounts specifically made assessable, e.g., net capital gains, allowances, and dividends.
Capital receipts are generally not ordinary income but may be statutory income (e.g., CGT).
Gifts: whether a gift is income depends on whether it is a reward for services or a personal gift.
Fringe benefits and superannuation contributions are generally not assessable to the employee.
Trading stock proceeds are assessable; changes in trading stock affect assessable income.
Exempt income includes certain government grants, some education payments, and income of charitable entities.
Non-cash benefits may be converted to cash-equivalent and included in assessable income.
Deductions and trading stock
General deductions (s 8-1) require a nexus with assessable income, not capital, private, or domestic.
Specific deductions include repairs, borrowing costs, and decline in value of depreciating assets.
Repairs: deductible if restoring function, not initial repair or improvement.
Trading stock: valued at cost, market value, or replacement value, whichever is lower (s 70-45).
Closing stock is deducted from purchases to determine cost of goods sold; opening stock is added.
Capital works deductions (Div 43) at 2.5% or 4% for eligible construction.
Small business simplified depreciation: immediate deduction for assets under threshold, pooled assets.
Non-deductible: entertainment, penalties, and private expenses.
Capital gains tax
CGT applies to net capital gains included in assessable income (s 102-5).
CGT events include disposal, loss, and creation of assets; A1 is disposal of a CGT asset.
Cost base has five elements: acquisition costs, incidental costs, non-capital costs, enhancement costs, and title costs.
Discount method: individuals and trusts may reduce a capital gain by 50% if asset held >12 months.
Small business CGT concessions: 15-year exemption, 50% active asset reduction, retirement exemption, rollover.
Main residence exemption: full or partial exemption for dwelling used as main residence.
Capital losses can only offset capital gains, not other income.
CGT assets include real property, shares, and collectables; personal use assets have special rules.
Entities and tax consolidation
Companies are taxed at 30% (25% for base rate entities); dividends carry franking credits.
Partnerships are flow-through: partners include their share of income and deductions.
Trusts: beneficiaries are assessed on present entitlement; trustee assessed at top marginal rate if no beneficiary.
Consolidation: a head company and eligible subsidiaries form a single tax entity.
Tax consolidation eliminates intra-group transactions and allows losses to be used across the group.
Division 7A limits tax-free loans from private companies to shareholders/associates.
Franking credits: maximum franking credit = dividend × (1/3) for 30% rate, (1/4) for 25% rate.
Non-commercial losses rules may defer deductions for individuals against other income.
Goods and services tax
GST is 10% on taxable supplies; entities must register if turnover ≥ $75,000 ($150,000 for non-profits).
Input tax credits are available for GST on creditable acquisitions used in carrying on an enterprise.
GST-free supplies include basic food, health, education, and exports.
Input-taxed supplies include residential rent and financial supplies; no input tax credits.
GST returns are generally lodged quarterly or monthly; BAS includes GST and PAYG.
Adjustments arise for changing creditable purpose or bad debts.
GST group: members can lodge a single return.
Going concern and margin scheme are special GST rules.
Fringe benefits tax
FBT is 47% on the grossed-up taxable value of fringe benefits.
FBT year ends 31 March; returns due 21 May (or later if lodged by agent).
Gross-up rates: Type 1 (with GST credit) 2.0802; Type 2 (without) 1.8868 for 2023-24.
Exempt benefits include work-related items (portable devices), minor benefits (<$300), and taxi travel.
Car fringe benefit: statutory formula or operating cost method.
FBT is deductible to the employer; GST credits may be available.
Reportable fringe benefits affect income tests (e.g., Medicare levy surcharge, private health insurance rebate).
Salary sacrifice arrangements can create fringe benefits.
Superannuation and retirement
Superannuation guarantee (SG) rate is 11% for 2023-24, 11.5% for 2024-25, 12% from 2025-26.
Concessional contributions cap: $27,500 (2023-24); non-concessional cap: $110,000.
Division 293 tax: additional 15% on concessional contributions for high-income earners (> $250,000).
Superannuation fund earnings taxed at 15%; capital gains at 10% for assets held >12 months.
Preservation age: 60 for those born after 30 June 1964; retirement triggers access.
Minimum pension drawdown: 4% for age 65-74, 5% for 75-79, etc.
Transfer balance cap: $1.9 million (2023-24) for retirement phase.
Excess contributions tax: excess concessional contributions taxed at marginal rate; excess non-concessional can be withdrawn.
International taxation
Residents taxed on worldwide income; foreign income tax offset (FITO) available for foreign tax paid.
Non-residents: withholding tax on dividends (30% or treaty rate), interest (10%), royalties (30%).
Controlled foreign company (CFC) rules attribute income to Australian controllers.
Transfer pricing: arm's length principle; Div 815 ITAA 1997 and Subdiv 284-B.
Thin capitalisation: limits debt deductions where debt exceeds 60% of assets (safe harbour).
Permanent establishment: treaty concept; profits attributable to PE taxed in host country.
Double tax agreements allocate taxing rights and provide relief.
Foreign residents' CGT: main residence exemption denied for foreign residents (with transitional exceptions).
Tax planning, anti-avoidance and ethics
Part IVA: Commissioner may cancel tax benefits from schemes with dominant purpose of obtaining a tax benefit.
Tax planning should be commercially driven, not solely for tax avoidance.
Tax evasion is illegal; tax avoidance is legal but may be caught by anti-avoidance rules.
Ethical obligations: comply with tax law, act honestly, and maintain confidentiality.
Tax agents must be registered with TPB and comply with Code of Professional Conduct.
Disclosure of tax planning schemes: reportable tax positions and early engagement.
Penalties for false or misleading statements: up to 75% of tax shortfall.
Whistleblower protections and confidentiality of taxpayer information.