CPA Australia Taxation flashcards
CPA Australia Taxation · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Tax-free threshold
- The amount of income a resident individual can earn before paying tax, $18,200 for 2023-24. Non-residents and some temporary residents are not entitled to it.
- Medicare levy
- A 2% levy on taxable income for resident individuals, with a low-income phase-in reduction. Non-residents are generally exempt from the levy.
- Base rate entity
- A company with aggregated turnover below $50 million and no more than 80% of assessable income being passive (interest, dividends, rent, royalties). Taxed at 25%.
- CGT discount
- A 50% reduction of a capital gain for resident individuals and trusts holding an asset for at least 12 months. Super funds get 33.33%; companies get none.
- Active asset
- An asset used or held ready for use in a business carried on by the taxpayer, or an intangible asset inherently connected with the business. Required for small business CGT concessions.
- FBT gross-up factors
- Multipliers applied to the taxable value of fringe benefits to reflect GST: 2.0802 for Type 1 (GST-creditable) benefits and 1.8868 for Type 2 benefits.
- Concessional contributions cap
- The annual limit on before-tax super contributions, $27,500 for 2023-24. Excess contributions are included in assessable income and taxed at marginal rates.
- Division 293 tax
- An additional 15% tax on concessional super contributions for individuals with income plus contributions exceeding $250,000, bringing total tax to 30%.
- GST registration threshold
- Businesses must register for GST if turnover reaches $75,000 ($150,000 for non-profits). Registration is optional below the threshold.
- Input tax credit
- A credit for GST paid on creditable acquisitions used in carrying on an enterprise. It offsets GST collected on supplies, with refunds for excess credits.
- PAYG withholding
- The system requiring employers and other payers to withhold tax from payments such as salary, wages, and contractor payments, and remit it to the ATO.
- PAYG instalments
- Periodic prepayments of tax by businesses and individuals with investment income, based on prior-year tax liability. Due quarterly or annually depending on turnover.
- Instant asset write-off
- A temporary measure allowing small businesses to immediately deduct the full cost of eligible depreciating assets below a threshold, rather than depreciating over time.
- Temporary full expensing
- An incentive allowing eligible businesses to deduct the full cost of new depreciating assets in the year of purchase, subject to turnover thresholds and asset eligibility.
- Small business income tax offset
- A tax offset of up to $1,000 for individuals who are small business entities or have share of net small business income, calculated at 16% of tax on that income.
- Franking credits
- Credits attached to dividends representing company tax paid. Resident shareholders can use them to offset their own tax, with excess refundable for individuals.
- Capital works deduction
- A deduction for the decline in value of a building or structural improvement used to produce income, typically 2.5% per year over 40 years for construction after 1987.
- Depreciation (decline in value)
- A deduction for the decline in value of a depreciating asset used for income-producing purposes, calculated using diminishing value or prime cost methods.
- Trading stock
- Items held for sale or used in manufacture. Taxpayers value trading stock at cost, market value, or replacement value at year-end, with adjustments to assessable income.
- Non-commercial business loss
- A loss from a business activity that fails the non-commercial loss tests (e.g., income threshold, profit test, real property, or other assets test) and is quarantined.
- Personal services income
- Income mainly from personal skills or efforts. The personal services income rules may attribute income to the individual and limit deductions for certain payments.
- Alienation of personal services income
- The practice of directing personal services income through an entity. The PSI rules may attribute the income back to the individual if the results test or other tests are not met.
- Superannuation guarantee
- The mandatory employer contribution to an employee's super fund, 11% of ordinary time earnings from 1 July 2023, paid at least quarterly.
- Non-concessional contributions cap
- The annual limit on after-tax super contributions, $110,000 for 2023-24. Individuals under 75 may bring forward up to three years of contributions.
- Transfer balance cap
- The lifetime limit on the amount that can be transferred into retirement phase super, $1.9 million for 2023-24, indexed periodically.
- Fringe benefits tax
- A tax on employers for non-cash benefits provided to employees or associates, calculated on the grossed-up taxable value at the FBT rate of 47%.
- Reportable fringe benefits
- The grossed-up taxable value of fringe benefits exceeding $2,000, reported on an employee's income statement and used in income tests.
- Goods and services tax
- A 10% broad-based tax on most goods and services consumed in Australia, collected by businesses and remitted to the ATO.
- GST-free supply
- A supply that is not subject to GST, such as basic food, health services, education, and exports. The supplier can still claim input tax credits.
- Input-taxed supply
- A supply that is not subject to GST and does not entitle the supplier to input tax credits, such as financial services and residential rent.
- Taxable payments reporting
- An annual requirement for businesses in certain industries (e.g., building, cleaning) to report payments to contractors to the ATO, improving compliance with income reporting.
- Superannuation contributions tax
- A 15% tax on concessional contributions and earnings in accumulation phase, paid by the fund. Higher earners may pay Division 293 additional tax.