Topic 5 Flashcards
1
Q
What is taxation planning
- The financial process requires financial planners to ______ a detailed consideration of a client’s circumstances, financial position and objectives and to ________ appropriate recommendations
- As part of these obligations, it is generally a requirement to _______ the tax position of the client and discuss how this might affect or be affected by the advice
A
What is taxation planning
- The financial process requires financial planners to undertake a detailed consideration of a client’s circumstances, financial position and objectives and to develop appropriate recommendations
- As part of these obligations, it is generally a requirement to consider the tax position of the client and discuss how this might affect or be affected by the advice
2
Q
Tax due = Assessable income
minus
Allowable deductions
equals
Taxable income
Gross tax (as per tax rates)
minus
_____________________
plus
_________________________
minus
______________
A
Tax due = Assessable income
minus
Allowable deductions
equals
Taxable income
Gross tax (as per tax rates)
minus
Rebates and credits
plus
Medicare levy and surcharge
minus
Prepaid tax
3
Q
Tax-offset for low income earning or non-working spouse
- A tax offset of ______ % can be claimed when an amount of up to $___________has been contributed to a complying superannuation fund or a retirement savings account (RSA) on behalf of a non-working or low income earning spouse, giving a maximum rebate of $_______
- The maximum rebate of $______ applies if the spouse’s assessable income plus reportable fringe benefits is $___________ or less (from 1 July 2017) and the full amount of $________ is contributed
- the rebate is reduced if the contributed amount is less than $_________ or/and the spouse earns more than $_______
- rebate phases out at $_________
Please note: the spouse’s _____________________ cap cannot be breached.
A
Tax-offset for low income earning or non-working spouse
- A tax offset of 18% can be claimed when an amount of up to $3000 has been contributed to a complying superannuation fund or a retirement savings account (RSA) on behalf of a non-working or low income earning spouse, giving a maximum rebate of $540
- The maximum rebate of $540 applies if the spouse’s assessable income plus reportable fringe benefits is $37,000 or less (from 1 July 2017) and the full amount of $3,000 is contributed
- the rebate is reduced if the contributed amount is less than $3,000 or/and the spouse earns more than $37,000
- rebate phases out at $40,000
Please note: the spouse’s non-concessional contributions cap cannot be breached.
4
Q
Taxation of minors
- Minors are defined as _______ persons under ____ years of age____________ employment
- Any ‘unearned’ income of minors such as interest received, rental income and dividends is taxed at ___________
- Income which is considered ‘earned’ by the minor such as employment and business income is taxed at ______________
A
Taxation of minors
- Minors are defined as unmarried persons under 18 years of age not in full-time employment
- Any ‘unearned’ income of minors such as interest received, rental income and dividends is taxed at_________
- Income which is considered ‘earned’ by the minor such as employment and business income is taxed at____________
5
Q
Dividends
- Dividends are income from investment in shares and are subject to income tax at ___________________
- Dividends can be franked, unfranked or partially franked
- franked dividends are dividends paid out by the company from after tax profits
- unfranked dividends are dividends paid out from pre-tax profit
- partially franked dividends are dividends paid out partially from
after tax and partially from pre-tax profits
The 45-day rule:
=> in order to _______the franking credits on the dividends received, investors must hold the shares for at least 45 calendar days plus the two days when the shares were acquired and disposed of
A
Dividends
- Dividends are income from investment in shares and are subject to income tax at the recipient’s marginal tax rate (MTR)
- Dividends can be franked, unfranked or partially franked
- franked dividends are dividends paid out by the company from after tax profits
- unfranked dividends are dividends paid out from pre-tax profit
- partially franked dividends are dividends paid out partially from after tax and partially from pre-tax profits
The 45-day rule:
in order to receive the franking credits on the dividends received, investors must hold the shares for at least 45 calendar days plus the two days when the shares were acquired and disposed of
6
Q
Capital Gains Tax (CGT)
- CGT is calculated on the difference between the proceeds from the sale of an asset and the cost base of that asset
- The cost base includes:
- the cost of _______ an asset
- other costs such as _________ and _______, ___________ for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant etc.
- expenditure on ________ to an asset, for example ________new kitchen cabinets
- non-capital costs of ownership when an asset is not an income __________ asset such as interest payments on loans used to finance an asset, costs of repairs, insurance and rates
A
Capital Gains Tax (CGT)
- CGT is calculated on the difference between the proceeds from the sale of an asset and the cost base of that asset
- The cost base includes:
- the cost of acquiring an asset
- other costs such as stamp duty and legal fees, remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant etc.
- expenditure on improvements to an asset, for example installing new kitchen cabinets
- non-capital costs of ownership when an asset is not an income producing asset such as interest payments on loans used to finance an asset, costs of repairs, insurance and rates
7
Q
CGT - continued
- The main CGT exemptions are: assets ________, ________ and _________
- Capital losses can only be _______ against capital gains
- CG (adjusted by__________ or _________) becomes part of assessable income in the year when the CGT event occurred (e.g. the sale or transfer of an asset)
A
CGT - continued
- The main CGT exemptions are: assets bought before 1985, main residence and motor car
- Capital losses can only be offset against capital gains
- CG (adjusted by an indexation or a discount) becomes part of assessable income in the year when the CGT event occurred (e.g. the sale or transfer of an asset)
8
Q
CGT discount
- To _______CGT, a discount method can be _______to capital gains derived from assets held for 12 or longer
- A discount of:
- 50% applies to individuals (including partners in partnerships) and trusts
- 33 1/3% applies to _________superannuation funds
- Companies are not entitled to a discount but can apply an________method
A
CGT discount
- To reduce CGT, a discount method can be applied to capital gains derived from assets held for 12 or longer
- A discount of:
- 50% applies to individuals (including partners in partnerships) and trusts
- 33 1/3% applies to complying superannuation funds
- Companies are not entitled to a discount but can apply an indexation method
