Random 2 Flashcards
What section deals with taxation of minors?
Division 6AA, ITAA 36
What is a prescribed person?
Any person
- under 18 years old at end of tax year
- not an excepted person *
- May be considered an excepted person if engaged in full-time employment at 30 June or receiving a carer allowance or disability pension.
What 2 types of assessable income can a minor derive?
Excepted (own income)
Eligible (given to them).
How is a excepted person taxed?
At normal tax rates. Div 6AA does not apply.
How is excepted assessable income taxed?
Excep ted = minor’s own income.
Taxed at normal rates.
Includes Wages, trust income, deceased persons estate, business income, investments of the above.
How is eligible assessable income of a minor taxed?
Eligible = given to the minor.
Taxed at special higher rates under sec 6AA.
Includes DIR (dividends, interest, royalties) where “given” or decisions made for them.
What should you be mindful of with eligible assessable income?
If total eligible under $416, taxed at marginal rate
Not entitled to low income offset
Liable for 2% Medicare levy if over $24,276 (2023/24 rates).
A taxpayer is under 18 years at 30 June.
They work-full time at 30 June.
Are they a prescribed person or excepted person?
As they work full time at 30 June, they are an excepted person.
Div 6AA special rates do not apply, all income is at normal rates.
What is an excepted person?
Under 18 at 30 June and either:
- in full-time employment at 30 June
- disabled or incapacity so can’t get full time employment
- getting a carers allowance
When is overseas service tax exempt?
When overseas for a period of MORE than 91 days and one of:
- charity / aid work for recognised non-govt organisations
- government aid worker
- government employee of disciplined force.
What is Crowdfunding?
Using internet / social media to find supporters to raise funds for project/venture
What is the sharing economy?
People connecting with others to share transactions, crowd fund or resources.
E.g. Uber, AirBNB
What is important to consider with sharing economy income?
Is it a hobby or business? (RSPCC)
If more than $75k T/O, GST registration needed
If not a hobby, normal tax obligations apply.
Resident taxpayer receives a dividend from a foreign company.
How is this taxed?
Both the dividend received plus foreign tax deducted is included in assessable income.
Tax payer then claims a credit (lower of foreign tax paid or the Australian tax on the dividend).
Is the payout of unused annual or long service leave considered an ETP?
No, generally, they are not ETP’s (s82-135).
However, if in connection with a genuine redundancy, are ETP’s.
What are the 2 types of ETP’s?
- Life Benefit
- Death Benefit
Where an employee is dismissed on the takeover of a business, and there is an agreement to be re-hired with the new owner, is this considered a termination for ETP purposes?
Yes.
Termination occurs even if engaged by the new owner.
Where an employee ceases to work for a subsidiary, then is re-engaged by the parent company, has termination of employment for ETP purposes occurred?
Yes.
For life benefit ETP’s, what factors are used to determine the rate of PAYG Withholding?
- Type of payment
- Age of taxpayer
- Amount of payment
- Whether taxpayer has reached preservation age (at last day of income year)
What two components do life benefit ETP’s have?
- Tax-free component
- Taxable component
What are the two tax free parts of a tax-free ETP?
- Part relating to pre-July 1983 employment
- Invalidity segment, where employee has sustained a permanent disability.
How is the tax free component of an invalidity payment calculated?
ETP amount x (days to retirement / (employment days + days to retirement))
What conditions are required for an invalidity ETP?
Permanent disability and both of the below are met:
- Employment ceased as a result of ill health
- Two medical professionals certify that it is unlikely to be gainfully employed in a capacity they are reasonably qualified.
What are the life benefit ETP tax rates ? (2023/24)
Under preservation age:
Amounts under $235,000 - taxed at 30% plus 2% medicare levy
Remainder - taxed at top marginal tax rate (45% + Medicare Levy)
Preservation age and over:
Amounts under $235,000 - taxed at 15% plus 2% medicare levy
Remainder - taxed at top marginal tax rate (45% + Medicare Levy)
