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Tax Deductions

Tax Deductions

Tax Deductions   How do tax deductions work?  The basic Australian income tax formula is: Tax rate x taxable income = tax payable. Taxable income = assessable income less deductions. So, tax deductions reduce tax payable in an indirect way. Example:John’s tax...

Tax Refund & Tax Payable

Tax Refund & Tax Payable

Tax Refund & Tax Payable How does a tax refund or tax payable happen?   The basic tax refund formula is: Tax withheld less tax payable = tax refund. Example:John’s employer withholds $32,000 of tax from his pay.John’s tax payable is $30,000.John’s tax refund...

Trust Tax

Trust Tax Introduction Trusts evolved in England in response to representations for a Court of Chancery. This court brought in a new doctrine of fairness called equity and established the concept of property being held on behalf of or on trust for someone eg. a child,...

Pet Sitter Tax Tips

Pet Sitter Tax Tips

Pet Sitter Tax Tips  As a pet sitter in Australia, you need to be aware of any tax obligations you might have. The first issue you should consider is whether your pet sitting is a hobby or a business. If it’s a hobby, then you won’t have any tax payment or reporting...

Company Tax

Company Tax

Company Tax - Introduction For taxation purposes, a company is defined at section 995-1 of Income Tax Assessment Act 1997 (ITAA 1997) to include body corporates and any other unincorporated associations or bodies of persons. Partnerships are excluded from the...

Travel Tax Deductions

Travel Tax Deductions

Travel Tax Deductions Employees’ travel expenses The Australian Taxation Office (ATO) has issued taxation ruling TR 2021/1 which discusses when deductions may be allowable for employees' travel expenses. The ruling states a travel expense is an expense relating to:...

Entertainment Tax Deductions

Entertainment Tax Deductions

Entertainment Tax Deductions Division 32 of the Income Tax Assessment Act 1997 (ITAA 97) contains the rules relating to the deductibility of entertainment expenses.  The Division provides that expenditure on entertainment (which includes food, drink and...

Car Tax Deductions

Car Tax Deductions

Car Tax Deductions Deductible travel – self-employed and employees Motor vehicle expenses incurred in the course of deriving assessable income or in carrying on business are allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 97),...

GST – Property Development

GST – Property Development

GST - Property Development There is only a liability to GST where: an enterprise is being carried on,the annual turnover is at least $75,000 ($150,000 for non-profit bodies) anda taxable supply is made. Therefore, when selling property there will be no GST liability...

CGT – Property Development

CGT – Property Development

CGT - Property Development The revenue/capital distinction It is very important to determine whether the property is being sold on revenue or capital account as it determines whether: any gain is exempt because it is a disposal of a pre-CGT assetthe 50% discount and...

GST Property Traps

GST Property Traps

GST Property Traps The first issue to be resolved with any sale of real estate is whether there is a GST liability.  If there is, and none is collected from the purchaser and remitted to the Taxation Office (ATO), this is going to be an expensive exercise down...

Investment Property Tax

Investment Property Tax

Investment Property Tax Introduction When investing in an investment property, it is essential to realise that tax isn’t the most important factor. The tax "tail" should not wag the investment "dog" - it should be the other way around. The most important factor is to...

GST Margin Scheme

GST Margin Scheme

GST Margin Scheme Those registered for GST and making taxable supplies can reduce their GST liability by choosing to calculate GST on the margin of real property supply.  Under the margin scheme, GST is calculated on the supply as 1/11 of the margin on the sale. The...

Fringe Benefits Tax FBT

Fringe Benefits Tax FBT

Fringe Benefits Tax FBT FBT was introduced into Australia in 1986 by the Fringe Benefits Tax Assessment Act 1986 (“FBT Act”).  It provides that where a benefit is provided by an employer to an employee (or associate) in respect of his or her employment, the employer...

Salary Packaging – Salary Sacrifice

Salary Packaging – Salary Sacrifice

Salary Packaging - Salary Sacrifice Salary packaging, also referred to as salary sacrifice, involves an employee sacrificing part of his or her salary in return for benefits (e.g. taking a salary of $120,000 plus a motor vehicle and superannuation and other benefits...

CGT Earnout Arrangements

CGT Earnout Arrangements

CGT Earnout Arrangements Capital Gains Tax (CGT) Earnout arrangements are generally where a business is sold for a set amount plus a percentage of profits in the future for a specified period.  The tax treatment of these rights to income in the future has varied over...

Allocating value to business assets

Allocating value to business assets

Allocating value to business assets When selling/buying the assets of a business, for CGT and depreciation purposes it is necessary to allocate the consideration received/paid for each of the assets.  Due to the differing taxation implications for both, the purchaser...

Company carry forward tax losses

Company carry forward tax losses

Company carry forward tax losses Company losses cannot be distributed to shareholders.  They must be carried forward in the company and offset against assessable income in subsequent years.  There are two major tests that determine whether such losses can be...

Commercial debt forgiveness

Commercial debt forgiveness

Commercial debt forgiveness The commercial debt forgiveness rules are contained in Division 245 of the Income Tax Assessment Act 1997 (ITAA 1997). The rules do not treat the debtor as having received a gain when a commercial debt is forgiven. Instead, they apply the...