2021 5350 synopsis - Reading Guide PDF

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Synopsis The unit examines key aspects of the Commonwealth income tax, goods and services tax and superannuation tax systems. It examines taxation theory and policy and maps the constitutional and administrative framework of the federal tax system. The unit focuses on the following topics: goods and services tax, ordinary and statutory income, general and specific deductions, capital allowances, capital gains tax, taxation of companies and shareholders and the taxation of superannuation contributions and investments. Special emphasis is placed on how the taxation law applies to common commercial transactions.

About your teaching team Chief Examiner Name: Mei-Ling Barkoczy

Email: [email protected] How this unit is organised This unit will be run via lectures that will be conducted on zoom. It is expected that students will attend and participate in all lectures. Any questions regarding the subject material must be asked in lectures as this is a vital way to ensure discussion and understanding by all participants. By attending lectures, students will ensure that they do not miss any discussion. The unit covers the topics outlined below. The topics are based on readings from the prescribed textbooks. All references containing a “¶” prefix relate to readings from 2021 Foundations of Taxation Law (FTL) . The key legislative provisions are contained in 2021 Core Tax Legislation and Study Guide (CTLSG). Detailed summaries of the cases are contained in the Australian Tax Casebook (ATC). The lectures will refer extensively to specific passages, sections, tables, examples and questions from the prescribed texts, FTL and CTLSG, so please make sure you have copies of these books in front of

you during lectures. Please note that there have been substantial changes to many areas of law covered in this course (including tax rates) over the last 12 months and you should therefore not use old editions of the books as they are considerably out of date. You are expected to read all references in FTL even though some topics may not be covered in detail in the lectures as this will provide you with the necessary background to understand the key concepts covered in the unit. You are strongly recommended to read the references in FTL before lectures in the relevant topics begin. Before the first class please read topics 1 (Taxation Principles and Theory) and 2 (Constitutional Framework). These topics will be covered only broadly in lectures as it is expected that students will have done their pre-reading. There are 8 important cases that have been marked with an asterisk “*”. You are expected to have fully read the judgments in the marked cases. For all other cases it is sufficient to simply read the summaries of the cases in the ATC. At least one exam question is likely to deal with issues raised in one or more of the cases marked with an asterisk. The issues may not necessarily have been discussed in detail in lectures, but will be obvious from reading the cases. The final topic is a practice revision question which will be covered in the final class (if time allows). It deals with many of the topics studied in the unit and is based on a previous exam question set by your lecturer. You are expected to prepare a draft written answer to the question in your personal study time. TOPICS 1 Taxation Principles and Theory (Undertake readings before the first class) Introduction ¶1.1 Kinds of taxes ¶1.2 Functions of taxation ¶1.3 Tax expenditures ¶1.4 Structural features of taxes ¶1.5 Tax systems and national stability ¶1.6

Australia's economy and the design of its tax system ¶1.7 Features of a good tax system ¶1.8 The tax unit ¶1.9 Sovereign right to tax ¶1.10 Jurisdiction to tax ¶1.11 International taxation agreements ¶1.12 Level of taxation ¶1.13 Tax evasion and avoidance ¶1.14 2 Constitutional Framework (Undertake readings before the first class) Introduction ¶3.1 Australian system of government ¶3.2 The Commonwealth Constitution ¶3.3 Commonwealth taxation power ¶3.4 Powers of the Houses of Parliament ¶3.5 Laws imposing taxation ¶3.6 Consolidated Revenue Fund and Appropriation Acts ¶3.7 Exclusive power to impose customs and excise duties ¶3.8 Financial assistance ¶3.9 Prohibition on taxing property belonging to the States ¶3.10 3 Australian Taxes Introduction ¶4.1 Australian tax history ¶4.2 Commonwealth taxes ¶4.3 State and Territory taxes ¶4.4

Local government taxes ¶4.5 4 Australian taxation office, the tax profession and tax ethics Introduction ¶6.1 The Australian Taxation Office ¶6.2 The tax profession ¶6.3 5 Goods and Services Tax Introduction ¶7.1 Background to the introduction of GST ¶7.2 Basic principles of GST ¶7.3 Net amount for a tax period and payment rules ¶7.4 Registration of entities ¶7.5 Taxable supplies ¶7.6 GST-free and input tax supplies ¶7.7 Creditable acquisitions ¶7.8 Accounting for GST and input tax credits ¶7.9 Increasing and decreasing adjustments ¶7.10 Tax invoices and adjustment notes ¶7.11 Going concerns ¶7.12 Financial supplies ¶7.13 Leases and sales of residential premises ¶7.14 6 Income Tax Introduction ¶8.1 Income tax legislation ¶8.2 Calculating income tax liability ¶8.3

Assessment, payment and collection of income tax ¶8.4 Taxable income ¶8.5 Other concepts relevant to calculating income tax liability ¶8.6 Income tax rates and levies ¶8.7 Tax offsets ¶8.8 Higher Education Loan Program ¶8.9 Sample income tax calculation ¶8.10 Reconciling income tax with GST and FBT ¶8.11 7 Administrative aspects of taxation and penalties (general overview only) Introduction ¶43.1 Income tax returns ¶43.2 Assessments ¶43.3 Taxation rulings ¶43.4 Objections, reviews and appeals ¶43.5 Administrative penalty regime ¶46.2 Tax offences ¶46.3 8 Ordinary Income Introduction ¶10.1 Characterising income — key concepts ¶10.2 Income from personal exertion ¶10.3 Income from business ¶10.4 Income from profit-making schemes ¶10.5 Income from property ¶10.6 Eisner v Macomber (1920) 252 US 189

Keily v FC of T 83 ATC 4248 FC of T v Blake 84 ATC 4661 FC of T v Harris 80 ATC 4238 FC of T v Dixon (1952) 86 CLR 540 Kelly v FC of T 85 ATC 4283 Tennant v Smith [1892] AC 150 FC of T v Cooke & Sherden 80 ATC 4140 Payne v FC of T (1996) 66 FCR 299; 96 ATC 4407 Moorhouse (Inspector of Taxes) v Dooland [1955] 1 All ER 93 Brent v FC of T (1971) 125 CLR 418; 71 ATC 4195 Calvert v Wainwright (1947) 27 TC 475 Kelly v FC of T 85 ATC 4283 FC of T v Dixon (1952) 86 CLR 540 Hayes v FC of T (1956) 96 CLR 47 Scott v FC of T (1966) 117 CLR 514 Dickenson v FC of T (1958) 98 CLR 460 FC of T v Woite 82 ATC 4578 Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159 *Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188 Statham & Anor v FC of T 89 ATC 4070 FC of T v Merv Brown Pty Ltd (1985) 7 FCR 1; 85 ATC 4080 *FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR; 82 ATC 4031 FC of T v Stone 2005 ATC 4234

*FC of T v The Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363 *Westfield Ltd v FC of T (1991) 28 FCR 333; 91 ATC 4234 Henry Jones (IXL) Ltd v FC of T (1991) 31 FCR 64; 91 ATC 4663 Moana Sand Pty Ltd v FC of T 88 ATC 4897 McCurry v FC of T 98 ATC 4487 FC of T v Cooling (1990) 22 FCR 42; 90 ATC 4472 FC of T v Montgomery (1999) 198 CLR 639; 99 ATC 4749 FC of T v Day (2008) 236 CLR 163 Compensation Amounts ¶10.7 Federal Coke Pty Ltd v FC of T 77 ATC 4255 Heavy Minerals Pty Ltd v FC of T (1996) 115 CLR 512 Liftronic Pty Ltd v FC of T 96 ATC 4425 9 Exempt Income and Non-Assessable Non-Exempt Income Introduction ¶12.1 Exempt income ¶12.2 Non-assessable non-exempt income ¶12.3 10 General Deductions Introduction ¶13.1 Loss or outgoing and apportionment ¶13.2 Positive limbs ¶13.3 Negative limbs ¶13.4 Clothing expenses ¶13.6 Travel expenses ¶13.7

Self-education expenses ¶13.8 Home office expenses ¶13.9 Rent and licence fee expenses ¶13.10 Interest expenses ¶13.11 Legal and management expenses ¶13.12 W Nevill & Co Ltd v FC of T (1937) 56 CLR 290 Charles Moore & Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344 Lunney v FC of T & Hayley v FC of T (1958) 100 CLR 478 Cecil Bros Pty Ltd v FC of T (1964) 111 CLR 430 FC of T v Finn (1961) 106 CLR 60 Ure v FC of T 81 ATC 4100 *Fletcher & Ors v FC of T (1991) 173 CLR 1 FC of T v Janmoor Nominees Pty Ltd 87 ATC 4813 Madigan v FC of T 96 ATC 4640 FC of T v Maddalena 71 ATC 4161 Magna Alloys & Research Pty Ltd v FC of T 80 ATC 4542 FC of T v Phillips 78 ATC 4361 Placer Pacific Management Pty Ltd v FC of T 95 ATC 4459 *FC of T v Brown 99 ATC 4600 FC of T v Jones 2002 ATC 4022 FC of T v Smith (1981) 147 CLR 578; 81 ATC 4114 FC of T v Snowden & Willson Pty Ltd (1958) 99 CLR 431 Softwood Pulp and Paper Ltd v FC of T 76 ATC 4439 British Insulated & Helsby Cables Ltd v Atherton [1926] AC 205

Vallambrosa Rubber Co Ltd v Farmer (1910) 5 TC 529 *Sun Newspapers Ltd v FC of T (1938) 61 CLR 337 Greig v FC of T 2020 ATC ¶20-733 FC of T v Sharpcan Pty Ltd 2019 ATC ¶20-715 Broken Hill Theatres Pty Ltd v FC of T (1952) 85 CLR 423 Hallstroms Pty Ltd v FC of T (1946) 72 CLR 634 John Fairfax & Sons Pty Ltd v FC of T (1959) 101 CLR 30 FC of T v South Australian Battery Makers Pty Ltd (1978) 140 CLR 645 FC of T v Cooper (1991) 29 FCR 177; 91 ATC 4396 FC of T v Edwards (1994) 49 FCR 318; 94 ATC 4255 FC of T v Faichney (1972) 129 CLR 38; 72 ATC 4245 FC of T v Finn (1961) 106 CLR 60 Handley v FC of T (1981) 148 CLR 182; 81 ATC 4165 FC of T v Highfield 82 ATC 4463 Jayatilake v FC of T 91 ATC 4516 Martin v FC of T (1984) 2 FCR 260; 84 ATC 4513 Lodge v FC of T (1972) 128 CLR 171; 72 ATC 4174 Lunney v FC of T & Hayley v FC of T (1958) 100 CLR 478 FC of T v Maddalena 71 ATC 4161 Mansfield v FC of T 96 ATC 4001 FC of T v Munro (1926) 38 CLR 153 FC of T v Payne (2001) 202 CLR 93; 2001 ATC 4027 FC of T v Roberts and Smith (1992) 37 FCR 246; 92 ATC 4380 *Steele v DFC of T (1999) 197 CLR 459; 99 ATC 4242

FC of T v Studdert (1991) 33 FCR 75; 91 ATC 5006 Swinford v FC of T 84 ATC 4803 Blank v FC of T 2016 ATC ¶20-587 11 Provisions that Deny or Limit Deductions Introduction ¶15.1 Substantiation ¶15.2 Car expenses ¶15.3 Taxes ¶15.4 Entertainment expenses ¶15.5 12 Capital allowances Introduction ¶16.1 Capital allowance regime ¶16.2 Balancing adjustments ¶16.3 Business-related ‘‘blackhole’’ capital expenditure ¶16.6 13 Trading Stock Introduction ¶17.1 Meaning of trading stock ¶17.2 General treatment of trading stock ¶17.3 Accounting and valuing trading stock ¶17.4 Interaction of Div 70 with the general tax rules ¶17.5 Special trading stock rules ¶17.6 14 Capital Gains Tax Introduction ¶18.1 Net capital gains and net capital losses ¶18.2 Capital gains and capital losses ¶18.3

CGT assets ¶18.4 Exemptions and special rules ¶18.5 Exemptions and special rules ¶18.5 Cost base and reduced cost base ¶18.6 Capital proceeds ¶18.7 Discount capital gains ¶18.8 Small business concessions ¶18.9 CGT events (CGT event A1 only) ¶18.10 15 Taxation of Companies and Shareholders Introduction ¶24.1 Companies and their members ¶24.2 Corporate tax rate ¶24.3 Dividends ¶24.4 Taxation of dividends ¶24.5 Imputation system ¶24.6 Franking distributions ¶24.7 Gross-up and credit mechanism ¶24.8 Capital returns ¶24.9 Dividend withholding tax ¶37.2 Franking credit trading schemes ¶24.13 16 Taxation of Superannuation Introduction ¶20.1 Outline of the superannuation tax concessions ¶20.2 History of superannuation ¶20.3 Regulation of superannuation ¶20.4

Superannuation guarantee scheme ¶20.5 Phases in the tax treatment of superannuation ¶20.6 Superannuation contributions ¶20.7 Superannuation contributions ¶20.7 Government co-contributions ¶20.8 Excess contributions ¶20.9 Division 293 tax ¶20.10 Release authorities ¶20.12 Taxation of superannuation entities ¶20.13 Taxation of superannuation benefits ¶20.15...