Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
0 – $18,200 Nil
• Progressive Rates
• Marginal Rates
• The Temporary Budget Repair Levy
• Contrast the tax rates for residents and non-residents
• The Backpacker’s Tax
Medicare Levy
Medicare Levy Act 1986
Most individual resident taxpayers are liable to pay the Medicare levy which is based on their taxable income. The rates for 2016-
17 are as follows:
Taxable Income ($) Levy Payable
0 – 21,655 Nil
Married Taxpayers – No Medicare levy is payable where the family income does not exceed $36,541. This threshold is increased
by $3,356 for each dependent child or student.
Medicare Levy Surcharge of 1% is imposed on taxpayers whose income for surcharge purposes exceeds $90,000 pa and who do
not have private health insurance. For families, the threshold is $180,000 pa plus $1,500 for the second and every subsequent
dependant child.
Amounts are withheld in respect of particular payments or Businesses that register for GST generally pay their income tax in
transactions by quarterly payments at the same time as their GST when they lodge
the person who makes the payments their Business Activity Statement
o Payments to employees; Businesses may offset GST credits against income tax instalments
o Payments under labour hire agreements. and other payments (eg, fringe benefits tax instalments) that are
Investment Income made at the same time
Certain non-cash benefits are also caught Non-GST payers also make quarterly PAYG instalments
These amounts are then paid (remitted) to the Commissioner unless they have a tax liability of <$8000, in which case they
can pay an annual instalment
The Small Business Entity (SBE) System
Div 328 ITAA 1997 (post 1 July 2007)
The SBE system has been designed to benefit small businesses by:
o reducing tax liability;
o simplifying reporting requirements (for determining income and deductions, capital allowances and trading stock);
o reducing compliance costs by simplifying record keeping requirements.
Eligibility criteria:
1. the taxpayer must carry on a business during the year, and
2. the taxpayer satisfies the < $2 million aggregate turnover test.
Self-Study Questions
ATSM 27th Edition
PAYG
PAYG Instalment: 246 – The solution to this question describes the mechanics of the PAYG system very clearly
PAYG Withholding: 259
Download the 2014 Tax Pack from the unit’s iLearn page
Part B: The Income Concept: Incidental Issues
CASES:
FCT v Applegate (1979) *Krever 329
FCT v Jenkins (1982) *Krever 330
Under the changes, the first $37,000 of ‘working holiday taxable income’ is taxed at 15% and then the balance is taxed at the standard rate
applicable to residents.
EXAMPLE: Sergio is a non-resident for income tax purposes. He is a WHM for the whole of the 2015-16 year, earning $75,000 in total.
Sergio pays tax at the rate of 15% for the first $37,000 and 32.5% on the remaining $38,000 (total tax of $17,900).
NOTE That: Entities that employ WHM’s are required to register with the Tax Office.
TASKS:
Read Woellner (27th edn.) 24-214 on “Temporary Residents” – and prepare your own short notes.
What are the differences between WHM’s and Temporary Residents?
Resident Companies
Section 6 (1) ITAA 1936 definition of “resident”:
An Australian resident company is one which is either:
1. Incorporated in Australia; or
2. a Foreign Registered Corporation, that
a) conducts business in Australia; and
b) Either has its
central management and control in Australia; or
voting control in Australia
Source of Income
Significance of ascertaining the source of income for tax purposes:
Fundamental to the imposition of tax
Are central to obtaining relief from double taxation.
There are no specific statutory guidelines to establish the source of income
The source of an item of income is factual, and is determined separately in each case.
While there are general rules for different types of income, consideration must always be given to the facts surrounding each case.
Conditions:
Foreign tax must have been paid on the foreign income derived by the Australian resident
Australian resident must gross up their foreign income to include the foreign tax paid, then apply the offset
The offset can only be claimed for the income year in which the double taxed income is included in assessable income
The amount of the tax offset is based on the amount of foreign income tax paid
The offset is generally the lesser of:
the amount of foreign tax paid; and
the Australian tax payable on that income
Exception: if the foreign income tax does not exceed $1,000, an offset is available for the full amount of foreign tax paid.
Problem
Countries are not under any obligation to collect tax on behalf of other countries
To overcome this problem, a withholding tax mechanism (i.e. – the PAYG withholding) is employed to collect tax at a flat rate on
interest, dividends and royalties paid to non-residents (Woellner 24-600).
The payer – (i.e. the Australian agent) - must withhold the tax from the gross receipts and remit it to the ATO.
In the case of investment income, whilst the tax is withheld at a low rate (eg, for dividends, at a rate between 0% and 30%), this
satisfies the foreign resident taxpayer’s final tax liability
For an overview of the W/T rates, see Woellner 24-605
Revision Questions
Students are advised to look at questions 9, 16, 17and 31 from ATSM (27th edn) which deal with residence and source issues.
Usually, this occurs when services are provided, goods are sold or when rent is due
1. Accruals basis is in most cases the appropriate method to determine income derived from trading: (J Rowe & Sons 1971) *Krever 247
2. However accounts receivable (including those paid) are not always equal to the amount earned (or derived under accrual accounting)
-- Read Woellner 13-300.
3. Prepaid Income Subject to Potential Refund: Arthur Murray (1965) *Krever 245; Woellner 13-330
4. Work in Progress -- Read Woellner 13-380
Henderson v FCT (1970); Stapleton v FCT (1989
TR 98/1: Factors which indicate that the earnings method may be the appropriate basis for determining income
a) The taxpayer’s income producing activities involve the sale of trading stock;
b) The outgoings incurred by the taxpayer, in the day to day conduct of the business, have a direct relationship to income derived;
c) The taxpayer relies on circulating capital or consumables to produce income; or
d) Size of the business : the taxpayer relies on staff or equipment to produce income.
e) Credit policy and debt recovery
f) Books of account
This amount was earned in 2015/16 year and would have been included in the income of that year
Revision Questions
Students are advised to look at questions 1, 3, 4, 18 and 37, from ATSM (27th edn.) which deal with tax accounting issues.