Tax Articles

If your business is a company that owns 100% of another company, trust or partnership, tax consolidation is an option you should consider. A consolidated group generally consists of a head company and subsidiary members. Throughout consolidation, subsidiary members...

Who is a working holiday maker?To be considered a working holiday maker (WHM) in Australia, a person must hold one of two specific visa subclasses: 417 Working Holiday Visa 462 Work and Holiday (Backpackers) Visa Verification of one's visa status can be done through...

Who is a temporary resident?Temporary residents are individuals who enjoy certain tax exemptions on foreign source income or capital gains in Australia. They are treated similarly to non residents for tax purposes, even if they might otherwise be classified as...

Transfer pricing includes the pricing of goods, services, or intangible assets exchanged between different entities. It involves determining the prices for these transactions, taking into account the possibility that the relationship between the involved entities...

What is a permanent establishment?A permanent establishment is a fixed place of business where an enterprise (a company) conducts its business activities. This place can be a building, office, factory, workshop, mine, oil/gas well, quarry, agricultural land, or...

What is thin capitalisation?Thin capitalisation is a financial practice involving the funding of subsidiaries with a higher proportion of debt relative to equity than is typical in an arm's length financial arrangement. This practice is often employed for tax related...

What is double taxation?Double taxation is a situation in which a taxpayer is subjected to similar tax obligations by two different countries for the same income, during the same timeframe, and related to the same subject matter. This problem arises from the fact that...

Dividend withholding tax – basic conceptsDividend withholding tax is a final tax imposed on certain dividends paid by resident companies in Australia to non residents.For the purpose of withholding tax, dividends include: Any distribution made by a company to its...

Interest withholding tax conditionsWithholding tax must be paid on interest income under certain conditions: If the interest is earned by someone who is not a resident for tax purposes. If the interest is paid by either: A resident, except when the interest is...

In Australia, royalties earned by non-residents are subject to withholding tax, unless specific exemptions are applicable under the tax laws.Royalty withholding tax scenariosWhen royalties are paid by a resident entity, meaning a business or individual that is...

The source of income for tax purposesThe term "source" of income in Australian taxation can refer to both the geographic origin and the transaction or means by which income was generated. This definition forms the basis for tax liability determination. Income doesn’t...

The Controlled Foreign Company (CFC) provisions form part of the accruals basis of assessing offshore income in the Australian tax legislation. It is referred to as an accruals basis because the Australian tax law can impose tax on an Australian taxpayer without any...

What is value shifting? Value shifting is when the value of one asset increases while the value of another decreases as a result of certain actions. Value shifting rules attempt to prevent taxpayers from deferring or avoiding their tax liabilities. This can occur by...

Website expensesMany businesses and other taxpayers regularly incur expenditure to acquire, develop, maintain or modify a commercial website. Beware, it is best not to assume that these costs are deductible. Remember that section 8-1 of Income Tax Assessment Act 1997...

A prepaid expense describes a payment made in advance of the benefit of a service or receipt of something. The potential advantage of a prepaid expense is the opportunity for a taxpayer to bring forward the recognition of a deduction into a sooner income year and...

Division 70 of the ITAA 1997 outlines the tax treatment of trading stock. Section 70-10 ITAA 1997 defines trading stock as including anything produced, manufactured or acquired that is held for the purposes of manufacture, sale or exchange in the ordinary course of...

Division 35 of the Income Tax Assessment Act 1997 (ITAA 1997) contains provisions that prevent individual taxpayers who carry on a business from immediately deducting losses from that business against other income in certain circumstances. The individual can be...

The Personal Services Income (PSI) rules are designed to prevent persons who derive income from their personal services from “splitting” that income with other persons and therefore minimising the overall tax payable. The PSI rules are in Part 2-42 of the ITAA 1997....

You may be subject to the General Interest Charge (GIC) if you have unpaid tax liabilities, including late or unpaid taxes, charges, levies, or penalties. The GIC is calculated daily on a compounding basis, which increases the amount you owe over time. Instances when...