Classification and Taxation

Question 1

What is Taxation defined as?

Answer 1

a compulsory exaction of money by a public authority for general purposes, enforceable by law, and is not a payment for services rendered

Question 2

What are the sources of tax law?

Answer 2

Legislation and Court Decision (case law) - these must be read together

Question 3

What is tax governing body?

Answer 3

ATO - government body responsible for administering the federal taxation laws

Question 4

What is Taxation in regards to the government?

Answer 4

the Federal Government’s principal source of income

Question 5

How is Income Tax calculated?

Answer 5

Income Tax = (Taxable Income x Tax Rate) - Tax Offsets

Taxable Income = Assessable Income - Deductions

Question 6

What are the term forms of assessable income?

Answer 6

Ordinary and Statutory Income

Question 7

What are the characteristics of ordinary income?

Answer 7

Payment for services rendered or goods supplied
regular
recurrent
relied upon for person’s maintenance and support

Question 8

What is statutory income?

Answer 8

is income deemed by statute (legislation) to be ordinary income.

Question 9

What are examples of general deductions one might apply for?

Answer 9

Stationary - for work performed at home

Internet access and data usage for work performed at home

Question 10

What are specific deductions?

Answer 10

Costs that are specifically stated in legislation to be allowable deductions

Question 11

What is Capital Gains Tax?

Answer 11

in place to stop people benefitting from capital proceeds without paying any tax. Capital gains are therefore a form of statutory income.

Question 12

How is Capital Gains Tax simply defined?

Answer 12

the difference between what was paid for an asset and what the asset was sold for

Question 13

What was the Flood Levy?

Answer 13

A good example of a short term levy introduced for a specific purpose

Question 14

What is the Budget Repair Levy?

Answer 14

Should not be charged after 30 June 2017

Question 15

What is an offset?

Answer 15

It directly reduces a person’s tax liability. Different from deduction which reduces a person’s taxable income. Common ones include; medical expenses offset

Question 16

What is Superannuation?

Answer 16

A way that Australia forces people to start saving for retirement. Employees should make a 9%contribution.

Question 17

What is the Goods and Services Tax?

Answer 17

Essentially a 10% tax on goods and services. A HINT to calculate it on a product/service is to divide the total price by 11.

Question 18

What doesn’t have GST paid on?

Answer 18

GST free supplies and input tax supplies

Question 19

What is a Fringe Benefit Tax?

Answer 19

A tax imposed on the employer. A fringe benefit is a benefit recieved by an employee but not apart of their salary or wages.

Question 20

How does Taxation Administration work?

Answer 20

mainly relies on a self-assessment mechanism of taxation

Question 21

What is Pay-As-You-go?

Answer 21

employers are required to comply with a pay as you go withholding system for their employees. Requires employers withhold amounts from an employee’s wage and remit those amounts to the ATO.

Question 22

Classification decisions are to give effect, to the following principles:

Answer 22

adults should be able to enjoy what they want
minors should be protected from anything that can harm or disturb them
Everyone should be protected from exposure to unsolicited material that they find offensive
take into account community concerns about;
- depictions that condone or incite violence
- portrayal of persons that’s demeaning