BUSN3014 Week 1

Tax- Non Penal yet compulsory transfer of resources from the private sector to the public sectorPurpose to fund government spending for various reasons outlined in slide 6 to encourage ( charity) discourage (smoking, alcohol) and social objectives

Tax Rate Structure: proportional -> company tax rate is always 30% regardless of company's incomeprogressive-> higher tax base, higher rate e.g. resident individual taxable income tableregressive-> people argue GST is regressive tax even though it's 10% regardless of base amount. But when you change tax base to income then it becomes regressive.Notice how it's 'rate ON EXCESS over column 1

Interpreting the table: Between 0 and 18200, no taxBetween 18200 and 37000 taxed at 19% and so on. The second column refers to 37000-18200*19%, the amount above the threshold that you get taxed on.

Average and marginal tax ratesMarginal tax rate is the rate applied to any change in the tax base, e.g. the income tax rate applied to the next dollar of taxable income you derive (0%, 19%, 32.5%, 37% or 45%)Marginal tax rate is used to make decisions (worthwhile to earn more income)Average tax rate is derived by dividing the tax payable by the tax base, i.e. the weighted average of marginal tax rates applied to every dollar of your taxable income and is used to measure tax burden

Direct and Indirect tax (GST)Income tax= (TY*TR)-Tax offsetTY= (All assessable income added)- (sum of deductions)Know the difference between deductions and offsets (offsets more valuable)

Tax AdministrationReturn and Assessment: When a return is lodged, ATO will  issue a notice of assessment. Return deemed to be assessment if taxpayer company, superfundRecord keeping Requirements: Sufficient records of income and expenditure must be retained for at least 5 years after completion of relevant transactions. Non business must keep documents for period to substantiate their claims of deductions.Tax Audit: Risk assessment, higher the income, higher the risk of loss of a large sum of money. S.263(1) gives ATO full and free access for ITAA purposeS.264(1) empowers ATO to issues a written notice to any person to provide them with info, evidence and records.

Amended Assessment: Two years to audit individual or small business and four years for taxpayers with more complete affairs. ATO can amend at any time if assessment due to fraud or evasion. If amendment increases tax payable, interest is charged.

PAYGPAYG systems before lodging the annual return and only pay the balance of tax upon return and assessmentPAYG withholding system: employer pays salary to employee withholding amount of tax instalment from the salaryPAYG instalments system: most taxpayers must pay quarterly tax instalments based on income earned one ash quarter

Objection, review and appeal: Taxpayer can lodge written objection and must give evidence to prove. FCT is required to make a decision about the objection (wholly or in part). If taxpayer isn't happy he can ask AAT to review (government supported) and/or Federal Court. The taxpayer and/or FCT can appeal to the High Court. If case involved a high amount of tax or is very relevant the High Court will take the case and their decision is final.Part IVC of TAA contains two categories of decisions: appeasable objection decision (Federal Court) and reviewable objection decision (only AAT can review)

Objection time limit: Notice of objection against an assessment must state the grounds of objection and must be lodged with ATO within 2 years (individuals and small business) 4 years (complex affairs) after notice of assessment.A notice of objection against an amended assessment must be lodged within the later of 2 years or 4 years after service of notice of the original assessment or 60 days after service of notice of the amended assessment.

Administrative Penalty: When a tax payer does something wrong one way to resolve it is by going to the Court, but when it's not severe they may impose administrative penalty. Table of which is shown on slide 35. Depending on culpability will determine what % you will have to pay of tax shortfall as well as whether you voluntarily admit.

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