科技進(jìn)步策略PPT通用課件

1、CO5120Taxation LawModule 2Derivation of Taxable IncomeModule ObjectivesApply concepts of ordinary and statutory income.Understand the concept of “derivation” of income.Understand the general law principles for determining income and their statutory modifications.Understand the differences between in

2、come, capital receipts, windfall gains and mutual payments.Understand the rules governing non-cash receipts.Understand the rules governing income substitution and compensation payments.Understand the tax effect of receipts from illegal activity.The Australian Tax SystemThree Critical Questions:Who d

3、o we tax?What do we tax?How much do we tax?The Taxation EquationsAssessable Income = Gross income (Exempt income + Non-assessable non-exempt income) (see s 6-1).Taxable Income = Assessable income - Deductions (see s 4-15). Tax Payable = (Taxable income x Rate) - Tax Offsets (see s 4-10(3). Gross inc

4、ome = All income (from any source) “All income” includes both:exempt income; and non-assessable, non-exempt income.Therefore (because of s 6-15)Assessable Income =All “ordinary income” PLUS All “statutory income”LESSAny “exempt income” ANDAny “non-assessable non-exempt income”. Ordinary and Statutor

5、y IncomeSection s 6-5(1):“ordinary income” is “income according to ordinary concepts”.Section 6-10(2)“statutory income” includes “amounts that are not ordinary income but are included in your assessable income by provisions in the Act about assessable income”. Therefore:Whether a particular receipt

6、is INCOME that is taxable in the hands of a taxpayer depends on whether it is:a.INCOME ON ORDINARY CONCEPTS (Ordinary income); orb.Income under some SPECIFIC STATUTORY PROVISION (Statutory income).ANDWhether it has been derivedIncome on Ordinary ConceptsThe ITAA does not define the term “income”;Sec

7、tion 6(1) (ITAA 1936) does define:income from personal exertion;Income from property;Income from carrying on a business. The ITAA also deems some receipts to be “income” for taxation purposes (eg non-cash business benefits, tips and gratuities, post-1985 capital gains etc). These receipts are called

8、 statutory income;BUT, apart from those receipts, determining whether a particular receipt is “income” has been largely determined by the courts.Section 6(1) ITAA 1936 Defines: Income from personal exertion; Income from property; and Income from carrying on a business. SO such receipts are ORDINARY

9、INCOME.Statutory Income Receipts that would not be income under ordinary concepts but which are included in income because some provision of a taxing statute make them income.Major examples include:s 21A (non-cash business benefits)s 15-2 (allowances, gratuities etc);s 15-15 (income from profit maki

10、ng undertakings or plans)Other examples include:Capital gains (s 102-5);Deemed dividends (various sections - incl Div 7A);Balancing adjustments (Div 40);Recoupments (s 20-20);Some ETPs (employment termination payments).“Derivation” of Income Income becomes assessable when it is “derived” ss 6-5(2) a

11、nd (3)You “derive” income when you receive it or when “it is applied or dealt with in any way on your behalf or as you direct” s 6-5(4) and s 6-10(3) . Taxable Income = Assessable incomeLESSDeductionsDeductions Losses and outgoings incurred in gaining or producing assessable income s 8-1(1)(a)ORNece

12、ssarily incurred in carrying on a business for the purpose of gaining or producing assessable income s 8-1(1)(b)OROther amounts the ITAA allows you to deduct (specific deductions) - s 8-5Question:Give an example of the difference between “assessable income” and “taxable income” in the context of: a.

13、Wage and salary income;b.Interest income;c.Rental income;d.Business income. Question:Are the following receipts “income” and, if so, are they income from personal exertion or income from property?a.a wage received by an employee;b.a commission received by a salesman;c.a sign-on fee received by a pro

14、fessional footballer;d.a bonus received for being the firms Top Salesman;e.a share in profits received by a silent partner;f.gambling winnings;g.a redundancy payment;h.a pension;i.a capital gain from selling a block of land;j.royalty payments received for a technology licence;k.a loan from a private

15、 company to its managing director;l.key money paid to a landlord for a lease.Income - General Law PrinciplesIt must “come in” to the taxpayer (Cooke & Sherden).It must be money or something readily convertible to money.Not everything which comes in is necessarily income:Capital receiptsWindfall gain

16、s (the “Normal Proceeds” of personal exertion, property or business are income - Windfall Gains are not. )“Mutual payments”.4.It must be received by the taxpayer as income;Is it income in the hands of this taxpayer? - Federal CokeHas it been “received”? - Brent5.It often exhibits characteristics of

17、periodicity, regularity and recurrence.6.“Income Substitution” or compensation payments may be income.7.Illegal, immoral and ultra vires receipts may be income. It Must “Come In”At general law a mere saving of expenditure is not enough to constitute income (Tennant v Smith; Cooke and Sherden);This h

18、as been statutorily modified under: s 15-2 (the former 26(e) - which taxes the “value to you” (subject to the FBT legislation see s 23L); and s 21 (which deems a money equivalent); ands 21A (which deals with “non-cash business benefits).Question:Which, if any, of the following amounts are assessable

19、 income under the ITAA?a.a holiday valued at $5,000 awarded by a firm to its “Salesman of the Month”;b.the same holiday awarded to its best performing non-employee agent? The Receipt Should Be Money 1.Linked to the requirement that, to be income, the receipt should come in and not be a mere saving o

20、f expenditure.This has been substantially modified by statute and it can no longer be seen as a characteristic of “income”. See, again in particular:Section 15-2;Section 21; andSection 21A (though note s 23L(2). Not Everything That Comes In is Necessarily IncomeCapital receipts;Windfall gains (the “

21、Normal Proceeds” of personal exertion, property or business are income - Windfall Gains are not);“Mutual payments”.Capital Receipts Our system was designed to tax “income”.The concept was based on the trust law distinction between capital and income (the “tree” and the “fruit of the tree” analogy) .

22、Capital receipts were not taxed (and still are not taxed) UNLESS the are covered by the CGT provisionsWindfall GainsWindfall gains fall into two main categories:Gambling winnings; andGifts. They are generally not taxable unless (in the case of gambling proceeds) they are the result of income earning

23、 related activity (eg a “business of gambling”).Rules with GratuitiesA gift is not ordinarily “income”; something received for services rendered probably is;2.In characterising a gift, look at the whole of the circumstances surrounding it;3.The regularity, recurrence and periodicity of the receipt m

24、ay be important;4.If the taxpayer relies upon the receipt it is more likely to be income;5.If the taxpayer “expects” the payment (eg as a moral right), it is more likely to be income;6.The motives of the donor may be relevant but are seldom decisive;7.If the recipient has already been adequately rew

25、arded, the gift is less likely to be income;8.Payment by a third party does not prevent the payment being income. Mutual PaymentsThe Underlying Principle: A taxpayer cannot derive taxable income from payments to himself/herself.It applies particularly to income received by clubs and societies from d

26、ealing with their members.If there is “complete identity” between those who contribute and those who benefit (taken as a class) the receipts are not income.Income from business activities aimed at producing a profit (as opposed to a surplus) and from non-members is taxable.Income of Clubs 1.Is the r

27、eceipt exempt income?If not, the Mutuality Principle produces three (3) possibilities:the receipt is wholly exempt because it comes from members;the receipt is wholly taxable because it comes from sources outside the club;the receipt is partly assessable because it comes from the general trading act

28、ivities of the club which cannot be sourced to members alone. Question:The Cardwell Quoits Club was established in 1980 to promote quoits in the upper Herbert. Members pay an annual fee which was used to rent premises and finance the clubs activities. To allow fellowship after practice or competitio

29、n matches a refrigerator was bought and the club sold drinks and snack foods to members and guests.As quoits gained in popularity, membership increased, the club purchased new premises, installed a bar and (later) a restaurant again for members and guests. The restaurant was also rented out for weddings and other functions. With its increased size the club also installed poker machines and added 10 motel units.The club now has a membership in the thousands and regularly serves a diverse range of visitors from all over Australia.What is its tax position? Should Be Rec