BTF3931 Study Guide - Final Guide: Income Tax, Tax Expenditure, Tertiary Education Fees In Australia
6 Aug 2018
School
Department
Course
Professor
INCOME TAX PAYABLE FORMULA (W3)
Section
Meaning
S3-5
ITAA97
Income tax is payable each year by each individual and company and certain other entities
S4-1(1)
ITAA97
Financial year means a 12-month period beginning 1 July
S4-10
ITAA97
Formula: Income Tax liability is based on the formula (Income Tax Liability = Taxable
income*Rate – Offsets)
S4-15
ITAA97
Formula: Taxable income is the fundamental component of the income tax payable formula
Key Provisions:
o Assessable income Div 6
o Deductions Div 8
Div. 6
Assessable Income
Div. 8
Deductions
S6-1
ITAA97
Assessable income = Ordinary Income + Statutory Income
S6-5
ITAA97
Ordinary Income
• Assessment of gains that have an income character as set out in the doctrines that
have been developed by the courts
• S6- 1 your assessable incoe icludes icoe accordig to ordiary cocepts =
Ordinary Income
Categories of Ordinary Income
• Income from personal exertion
• Income from business
• Income from profit making schemes
• Income from property
Income tax
Taxable income
Tax rate
Tax offsets
=
x
–
Assessable Income
Deductions
–
Ordinary
income
Specific
deductions
Statutory
income
General
deductions
(
)
find more resources at oneclass.com
find more resources at oneclass.com
S6-10
ITAA97
Statutory Income
• Assessment of amounts by a specific provision in the income tax legislation
• Division 10 lists the statutory income provision in the income tax legislation
S8-1
ITAA97
Deductions = General Deductions + Specific Deductions
General Deductions = Losses or outgoings, may be claimed provided they satisfy the general
deductions in s8-1
Specific Deductions = Specific provisions in the income tax allowing specific losses or outgoings
to be deducted.
Income
Tax
Rates
Act 1986
Applicable rate of income tax depends on the type of taxpayer set out in the act:
• Companies: Flat rate of 30%
• Individuals who are and are not Australian residents are subject to a progressive rate
structure
LEVIES AND CHARGES (W3)
• Australian tax system is also a collection mechanism for other amounts payable by
Australian Tax Residents e.g.
• Medicare Levy
• Medicare Levy Surcharge
• Repayment of higher education debt (Higher Education Loan Program e.g. HECS)
• Debt levy of 2% from 1 July 2014 (only applicable for taxpayer over 180k)
• Total liability (shown in above formula)
Medicare
Levy (ONLY
RESIDENTS
PAY)
• Basic levy payable:
• EXEMPTED from Medicare Levy
o Foreign Residents
o Persons not entitled to Medicare benefits in respect of services
or treatment or care (exempted certificated required)
o Low income earners may be fully or partially exempt
Tax liability
Income tax
Medicare
Levy
Medicare
levy
HELP
repayments
=
+
+
+
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Income tax is payable each year by each individual and company and certain other entities. Financial year means a 12-month period beginning 1 july. Formula: income tax liability is based on the formula (income tax liability = taxable income*rate offsets) Formula: taxable income is the fundamental component of the income tax payable formula. Itaa97: assessable income div 6, deductions div 8. Assessable income = ordinary income + statutory income. Ordinary income: assessment of gains that have an income character as set out in the doctrines that have been developed by the courts. S6-(cid:1009) (cid:894)1(cid:895) (cid:862)your assessable inco(cid:373)e i(cid:374)cludes i(cid:374)co(cid:373)e accordi(cid:374)g to ordi(cid:374)ary co(cid:374)cepts(cid:863) = Statutory income: assessment of amounts by a specific provision in the income tax legislation, division 10 lists the statutory income provision in the income tax legislation. General deductions = losses or outgoings, may be claimed provided they satisfy the general deductions in s8-1.
