Nt1310 Unit 1 Assignment 1
Chapter 2 of the Book
Income tax only works in developed countries – Australia has a heavily reliance on income tax.
Tax = [(assessable income – deductions) x rate] – offsets ( note there is a order for these) –payg(w) (at the very end +- any levies) Taxable Income
e.g. the medicare levy is based on your taxable income.
Note: The tax free threshold for a resident for part of the year is calculated through a special formula. (pg71 of text book)
Deductions reduce your assessable income to calculate the amount of tax you need to pay. They fall into two categories: general and specific deductions (see section 12-5; pg125)
Offsets reduces your tax payable – also known as credits or rebates:
1st : low …show more content…
Personal Use assets – clothing, furniture, sporting equipment, electrical appliances, white goods, boat. Purchased mainly for your personal use and enjoyment - Only applicable if bought for >$10,000 - Losses cannot be offset against anything and are disregarded - Ownership costs are not included in the cost base
3. Separate CGT assets – land, buildings, structures (not applicable though)
Timing: the CGT event occurs when the contract is entered into and not when the money is received. Important for….. 1. Determining which tax year we include this in 2. Is it pre CGT event 3. Does the discount method or indexation apply.
Exceptions To Event A1 (Section 104-10 pg 439 of act)
Pre-CGT event regarding an asset or a lease.
There is no change in beneficial ownership – you stop being the legal owner but you still remain a beneficiary (event E2)
Due to Bankruptcy or liquidation
There is merely a change in trustee these come under other CGT events, and not under event A1
Assets specifically exempted (118-A)
Gambling’s 118-37
Financial Arrangements
Termination payments and superannuation lump sums 118-22
Trading stock
Income tax only works in developed countries – Australia has a heavily reliance on income tax.
Tax = [(assessable income – deductions) x rate] – offsets ( note there is a order for these) –payg(w) (at the very end +- any levies) Taxable Income
e.g. the medicare levy is based on your taxable income.
Note: The tax free threshold for a resident for part of the year is calculated through a special formula. (pg71 of text book)
Deductions reduce your assessable income to calculate the amount of tax you need to pay. They fall into two categories: general and specific deductions (see section 12-5; pg125)
Offsets reduces your tax payable – also known as credits or rebates:
1st : low …show more content…
Personal Use assets – clothing, furniture, sporting equipment, electrical appliances, white goods, boat. Purchased mainly for your personal use and enjoyment - Only applicable if bought for >$10,000 - Losses cannot be offset against anything and are disregarded - Ownership costs are not included in the cost base
3. Separate CGT assets – land, buildings, structures (not applicable though)
Timing: the CGT event occurs when the contract is entered into and not when the money is received. Important for….. 1. Determining which tax year we include this in 2. Is it pre CGT event 3. Does the discount method or indexation apply.
Exceptions To Event A1 (Section 104-10 pg 439 of act)
Pre-CGT event regarding an asset or a lease.
There is no change in beneficial ownership – you stop being the legal owner but you still remain a beneficiary (event E2)
Due to Bankruptcy or liquidation
There is merely a change in trustee these come under other CGT events, and not under event A1
Assets specifically exempted (118-A)
Gambling’s 118-37
Financial Arrangements
Termination payments and superannuation lump sums 118-22
Trading stock