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Taxation > Week 1: Introduction to Australian Taxation Ch1-4,6 > Flashcards

Week 1: Introduction to Australian Taxation Ch1-4,6 Flashcards

1
Q

What is the definition of tax in accordance to Oxford?

A

‘Compulsory contribution to the support of government, levied on persons, property, income, commodities, transactions, etc.’

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2
Q

What are the 4 other ways for the term “taxes’?

A

Duties
Levies
Tariffs
Charges

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3
Q

What are the 4 functions of tax?

A
  1. Revenue raising
  2. Social and political
  3. Economic
  4. Redistributes
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4
Q

What is the revenue raising function?

A

Redirects resources from citizens to government

Provides government with revenue for use in its spending programs

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5
Q

What is the social and political function?

A

Used to promote government objectives

  • Tax incentives – carrot to encourage certain behaviour
  • Tax burdens – stick to discourage certain behaviour
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6
Q

What is an example of tax incentive?

A

i.e. superannuation are subject to tax at a lower rate than ordinary savings. Therefore, investing in super for future is more attractive

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7
Q

What is an example of a tax burden?

A

imposing tax on cigarettes discourages smoking hence reducing country’s health costs + Medicare levy health charge

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8
Q

What is the economic functions?

A

Modifies consumer behaviour:

  • Higher taxation leads to less spending (deflationary effect)
  • Lower taxation leads to more spending (inflationary effect)
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9
Q

What does it mean by economic functions?

A

when gov use tax to affect the cost of products encouraging spending on certain products rather than others.

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10
Q

What is an example of high taxation regarding Economic function?

A

means consumers have lower disposable income hence spends less = deflationary effect

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11
Q

What does it mean by lower taxation?

A

consumers have higher disposable income, therefore can spend more hence inflationary effect on economy

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12
Q

What does redistribution function mean?

A

Redistributes wealth among citizens – those who could not support themselves would find it harder without tax

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13
Q

What are 2 factors that would encourage society to accept taxation?

A

Sees justification for the tax

Considers the level of tax appropriate

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14
Q

What is Adam Smith’s maxims?

A

Guiding Principles of designing a good tax system on what it should be and how it should be formatted

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15
Q 
What are the features of a good tax system?
\_\_\_\_\_\_\_\_\_\_\_\_\_
Simplicity
Stability
Transparency and integrity
\_\_\_\_\_\_\_\_\_
Neutrality
\_\_\_\_\_
“Horizontal equity”
“Vertical equity
A

Fiscal and policy objectives

Efficiency and flexibility

Equity

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16
Q

What does fiscal and policy objectives mean?

A

Tax laws should be consistent with gov broader policy objectives and should support things i.e. increase in productivity, growth in employment

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17
Q

What are the 2 types of equity?

A

Horizonal & Vertical

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18
Q

What is Horizontal Equity?

A

People in similar circumstances are treated in same way

19
Q

What is Vertical Equity?

A

people in different economic circumstances are taxed differently fairly.

20
Q

What are the structural features of taxes?

A

Taxpayers

Tax base

Tax periods

Tax rates

21
Q

What is a tax base?

A

Property, transaction, activity or concept on which the tax is imposed

22
Q

What is the tax base for income tax and gst?

A

Taxable Income

Taxable supplies and taxable importations

23
Q

What are the 3 types of taxes?

A

Proportional taxes

Progressive taxes

Regressive taxes

24
Q

What are proportional taxes?

A

Imposed at the same rate for all taxpayers (eg GST)

25
Q

What are progressive taxes?

A

Imposed at rates that increase with amount of tax base (eg income tax)

26
Q

What are regressive taxes?

A

Imposed at rates that decrease with amount of tax base

27
Q

What are the 3 types of tax rates?

A

Marginal

Average

Effective

28
Q

What is marginal tax rate?

A

The rate of tax that is applied to the incremental amounts of the tax base

29
Q

What is average tax rate?

A

Taxpayer’s total tax liability/tax base

30
Q

What is the effective tax rate?

A

Taxpayer’s total tax liability/taxpayer’stotal economic income

31
Q

What is an direct tax?

A

Economic burden of tax is borne by person who pays the tax (eg income tax)

32
Q

What is indirect tax?

A

Person who pays the tax is able to pass on the economic burden of tax to a third party (eg GST)

33
Q

What jurisdiction approach does Australia follow?

A

Worldwide approach

34
Q

What is the worldwide approach?

A

Australian residents are generally taxed on their Australian and foreign source income

Foreign residents are generally taxed on their Australian source income

35
Q

What are the 2 types of primary sources of tax law

A

Statute
&
Cases

36
Q

What is a statute?

A

Enacted by parliament

37
Q

What are cases?

A

High court
Full Federal court
Federal court
Administrative appeals tribunal

38
Q

What is a tax unit?

A

Australia taxes individuals, rather than families

generally treats partnerships and trusts as flow-through entities

treats companies as opaque companies

39
Q

What does it mean for Australia to tax individuals rather than families

A

No general account taken of taxpayer’s dependants for tax purposes

Nevertheless, some limited tax concessions apply to individuals with families

40
Q

What does it mean by Australia treating companies as opaque entities

A

Companies and their members are taxed as separate entities (subject to imputation)

41
Q

What are the 3 levels of taxation

A

Types of taxes imposed

Types of tax expenditure programs

Different tax bases

42
Q

Main Commonwealth taxes

A

Income tax

Medicare levy (ML)

Medicare levy surcharge (MLS)

Fringe benefits tax (FBT)

Superannuation taxes

Goods and services tax (GST)

43
Q

What are the 3 state and territory taxes?

A

Payroll tax

Land tax

Stamp Duty

Taxation (7 decks)

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