i have a multiple choice question test of a unit called INTRODUCTION TO AUSTRALIAN TAXATION LAW $($TAXA$2000).$ there will be $25$ multiple choice questions

THE FOLLOWING ARE TEST REVISION NOTES$-$ Revision of Topics

Topic $1$ Income

In topic $1$ we looked at the following issues

Year of Income being $1$ July $2022$ to $30$ June $2023=$ CY

Taxable income $=$ Assessable Income $$ Allowable Deductions and is in whole dollars

Tax Formula $=$ Taxable Income x Tax Rate $=$ Gross Tax Payable $+$ Medicare Levy $-$ Offsets $=$ Net Tax Payable or Refund

Assessable Income $=$ Ordinary Income and Statutory Income

Ordinary Income as per s$6-5$ not defined based on case law and principals, revise the characteristics of income as per your notes $($something that comes in$,$ element of periodicity, recurrence or regularity, must be able to be converted into money, business or hobby, reward for personal services, return of capital$)$

Statutory Income $$ being amounts specifically income by legislation eg CGT

Exempt Income $$ exempts entities or exempts income eg Defence Force Reserves and charities.

Private or domestic transactions are not caught as assessable income, nor are windfall gains, and gifts unless part of employment.

Tax offsets $$ Low income earners rebate $($remember to watch taxable income to whether allowable $(37,000$ to $66,667),$ Low Medium Income Tax Offset $($watch your taxable income$)$ franking credits attached to dividends $($remember to include as income first and then deduct$)$ and Pay as You Go Payg instalments

Capital Income is caught under Capital Gains Tax $$ Topic $3$

Source and Residency $$ basically Australian residents are taxed on all income world wide, whilst non residents are only taxed on Australian source income.

Compensation Payments $$ if paid in lump sum that cannot be broken down not caught, if broken down component in relation to lost income is assessable

Insurance payments $$ if compensation received for lost stock then assessable

Remember ATO does not care if the money comes from illegal means or not as it still want you to declare it and pay tax on it$.$

The difference between reimbursements and allowances

How we derive income $$ cash $($when we receive the income$)$ or accruals $($when we invoice etc for the money$).$ Remember we still have received income if it has been dealt with on behalf of the taxpayer e$.$g$.$ dividends on shares not received but reinvested. Also the principles established to determine when income is derived $$ employment cash basis, sole practitioners cash, large professional practices accruals, trading business accruals $($always$).$ Also review prepaid income $$ the Arthur Murray Case.

Dividends $$ come from investment in a company, dividends may be franked $($tax paid$)$ unfranked $($no tax paid$)$ or partly franked. Always remember to include the franking credit as income and then deduct in your tax calculation as an offset.

Income can only be included once so there is no double taxing

Medicare Levy is $2\%$ of taxable income

Small Business Tax Offset $$ don$$t forget the formula to calculate this and that it applies to individuals involved in a SBE.

Topic $2-$ Deductions

In topic $2$ we looked at the following

Deductions under s$8-1$ are general deductions whereby you can claim losses and outgoings to the extent that they produce assessable income $$ two limbs $1)$ expenses incurred in earning assessable income and $2)$ expenses incurred on carrying on a business.

Incurred does not necessarily mean that the expense has been paid. Totally committed to the payment.

Remember can only claim the proportion that relates to assessable income e$.$g$.$ private$/$business$/$work use of home phone etc.

Expense for private, domestic or capital purposes are not deductible. If capital items are included, make sure you exclude them by stating that they are of a capital nature. Also can$$t claim any expenses against exempt income

No double deduction allowed, make sure you claim under the most appropriate section for example subscriptions.

Business Related Costs expenses associated with purchase or establishment of a business are incurred to early to be considered as being incurred in carrying on a business and are classified as capital but can be claimed at $20\%$ under s$40-880($do not proportion for days, straight out $20\%).$ New businesses for SBE can claim outright deductions for costs associated with establishing the new business

Expenses incurred after the cessation of a business can still be deductible

Specific Deductions in Division $25$

Tax Related Expenses $$ managing taxpayer$$s affairs, if day$-$ to$-$day running of business under s$8-1$

Repairs $$ remember if too soon after the purchase $$ then capital. It will become Element $4$ for CGT$.$

Borrowing costs $$ remember to follow the correct formula as per your notes and the legislation. Are costs associated with borrowing funds $($in most cases businesses$/$rental properties$/$shares$)$ to produce assessable income. App