LAW2453 Taxation Law notes pt 3 PDF

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Lecture Notes for Taxation Law LAW2453...

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GST is charged on the ‘value’ of taxable supplies (s 9-70).

GST Registration Turnover Threshold: $75,000 ($150,000 for non-profits). An entity may register for GST if they carry on an enterprise but do not meet or exceed the registration turnover threshold. Taxi travel • Suppliers of “taxi travel” must register for GST regardless of turnover (s 144-5) o “Taxi travel” is “travel that involves transporting passengers, by taxi or limousine, for fares” (s 195-1) • What meets this definition? o UberX services (Uber BV v Commissioner of Taxation (2017)) o “Ride-sourcing” services Supplies and acquisitions

Suppliers: Taxable supply An entity makes a taxable supply under s 9-5 if:

GST-free supply • No GST charged on the value in respect of GST-free supplies • Can claim an input tax credit for GST on acquisition • Note: GST-free supplies are excluded from the definition of taxable supplies • GST-free supplies are listed in Div 38, eg: o Food o Health o Education o Exports o Water, sewerage and drainage o Supplies of going concerns o Transport and related matters o Mobile global roaming industries provided in Australia Food •

Food and ingredients for human consumption is GST-free, unless an exception applies (s 38-2). • Exceptions (s 38-3): o Food for consumption on the premises o Hot takeaway food o Food listed in Sch 1, eg. Prepared food; confectionary; savoury snacks, bakery products, ice-cream food, flavoured milk • Broad rule of thumb: food that is only fresh, unprocessed food will be GST-free • Beverages are taxable except where explicitly specified as GST-free.

Health • Supply of a medical service is GST-free (s 38-7) • Medical services include: o Services where a Medicare benefit is payable o Services provided by or on behalf of a medical practitioner approved pathology provider (s 195-1) • Other health services included, eg, dental, nursing, podiatry, acupuncture, medicine, hospital care (ss 38-10; 38-45, 38-40; Subdiv 38-B) Input taxed supply • No GST charged but on the value of input taxed supplies (ITS) BUT No input tax credit for GST included in the price of acquisitions. • Note: ITS excluded from the definition of taxable supplies • Where a supply is GST-free and input taxed, GST-free characterisation applies: s 930(3) • Input taxed supplies are listed in Div 40, for example: o Financial supplies o Residential rent and premises

o o o o

Precious metals School tuckshops and canteens Fund-raising events conducted by charitable institutions Inbound intangible consumer supplies

Creditable purpose (s 11-15) Acquisition relates to making input taxed supplies. • No creditable purpose exists if the acquisition relates to making input taxed supplies (see eg, Rio Tinto Services Pty Ltd v FCT (2015))

Financial supplies • Term “financial supplies” is defined by reference to the GST Regulations (s 40-5). Categories in GST Reg 40-5.09, include:

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Legislation passed in 2017 to treat supplies of digital currency equivalent to a supply of money, ie. Generally not subject to GST unless made in exchange for digital currency or money.

Residential rent • Broadly, the lease, hire or licence of “residential premises” is input taxed (s 40-35) • “Residential premises” is defined as: o Land or a building that is occupied or intended to be occupied as a residence; or o Capable of being occupied as a residence for residential accommodation (s 195-1; also see South Steyne Hotel Pty Ltd v FCT (2009)) • Suppliers of “commercial residential premises” (as defined in s 195-1, eg, a hotel) on a long-term basis: o Possible to treat the supply as taxable supplies under concessional rules under Div 87 or input taxed Creditable acquisition • An entity’s entitlement to “input tax credits” (ie, a refund of GST paid on acquisitions it makes) arises when the entity makes a “creditable acquisition”. • An “acquisition” is very broadly defined as “any form of acquisition whatsoever” (s 11-10), but is not if relates to (or extent it is) an input taxed supply or a private/domestic acquisition. • You make a creditable acquisition if under s 11-5 if:

Administration: Net amounts and Tax periods Entity reports on the GST return and the ‘net amount’ calculated as (s17-5):

Entities registered or required to be registered for GST required to complete and lodge a GST return on a quarterly basis (can elect for monthly tax periods). Due the 28th of the following month (eg. March quarter, due 28th April). Monthly tax periods mandatory for entities. With an annual turnover > $20 million; • Carrying on an enterprise in Australia for $1,000 • Details of the thing supplied, including quantity and price • Extent to which the supply is taxable • Date the document is issued Tax invoices not required for low-value transactions ($75 excluding GST)

Overall guide: s 6(1) ITAA36 Interaction with other taxes Income tax

When is a taxpayer a tax resident of Australia?

Fringe benefits tax Gross up factor depends on the entity’s entitlement to input tax credits (see, chapter 7) Special rules: Non-deductible expenses An acquisition that is a “non-deductible expense” is deemed not to be a creditable acquisition (Div 96). “Non-deductible expense” is when an expense is not deductible for income tax purposes. Note, only certain non-deductible expenses are treated as not being creditable acquisition, for example: • Penalties: s 26-5 ITAA97 • Relative’s travel expenses: s 26-30 ITAA97 • Family maintenance expenses: s 26-40 ITAA97 • Entertainment expenses: Div 32 ITAA97 • Non-compulsory uniforms: Div 34 ITAA97

Residency test (overview): individuals Only one out of four tests needs to be satisfied or an individual to be considered a tax resident of Australia.

Week 2 Chapter 4 General principles A resident of Australia for tax purposes will be taxed on income from all sources: see s 65(2) Income Tax Assessment Act 1997 (ITAA97). A foreign resident for tax purposes will be taxed on income from Australian sources only: see s 6-5(3) ITAA97. Tax residency: impact on individual taxpayers • Individual tax rates: o Differ depending on whether the individual taxpayer is a resident for tax purposes or a foreign resident o Broadly, a foreign resident does not receive the benefit of the tax-free threshold • Foreign residents do not have access to many personal tax offsets • Foreign residents are not liable for the Medicare levy

Resides test • Known as the “residence according to ordinary concepts” test...