Taxation
Australian Tax Framework
Candidates must understand the concepts of assessable income (ordinary income and statutory income) and deductions (general and specific). Key topics: goods and services tax (GST), capital gains tax (CGT), fringe benefits tax (FBT), and company tax. Know the residency rules for companies and individuals, and the source of income.
GST
GST is a broad-based tax of 10% on supplies of goods and services. Businesses registered for GST claim input tax credits. Trap: confusing GST-free supplies (e.g., basic food, health, education) with input-taxed supplies (e.g., financial services, residential rent) for which no input tax credits are available.
CGT
CGT applies to the disposal of CGT assets. Calculate capital gain = proceeds - cost base. Individuals and trusts may access the 50% CGT discount for assets held >12 months. Companies cannot. Traps: forgetting to reduce the cost base by depreciation claimed; applying the discount to companies.
Worked Example
An individual buys shares for $10,000, pays $500 brokerage, and sells for $15,000 after 2 years. Capital proceeds = $15,000. Cost base = $10,000 + $500 = $10,500. Capital gain = $4,500. Apply 50% discount: $2,250 net capital gain included in assessable income.
Rule of thumb: For companies, tax rate is 25% (base rate entity) or 30%; for individuals, marginal rates apply.