Tax Law FAQ

Residency for tax is tested under the ordinary concepts test, the domicile test, the 183-day test, and the Commonwealth superannuation test. Residents are taxed on worldwide income, non-residents on Australian-sourced income only. The tests are fact-sensitive and often litigated.

Assessable income is the sum of ordinary income and statutory income. Ordinary income is receipts according to ordinary concepts (salary, business income, rent, interest). Statutory income is anything made assessable by a specific provision of the tax legislation.

Capital gains tax is not a separate tax but is income tax on capital gains made on CGT events — usually the disposal of CGT assets. Individuals and trusts may be eligible for a 50% discount after holding an asset for 12 months or more.

A gain on the sale of a taxpayer's main residence is usually exempt from CGT. Special rules apply to properties used to produce income, absences, dwellings on land exceeding 2 hectares, and deceased estates. Foreign residents lost access to the exemption from 1 July 2020.

The small business CGT concessions provide significant relief (15-year exemption, 50% active asset reduction, retirement exemption, small business rollover) on capital gains made on active assets, subject to the small business turnover test or maximum net asset value test.

Division 7A treats certain payments, loans, and forgiven debts from a private company to a shareholder or associate as unfranked dividends unless they are formally documented as Division 7A compliant loans with set interest rates and minimum repayments.

GST is a 10% broad-based consumption tax administered by the ATO. Entities carrying on an enterprise with GST turnover of $75,000 or more ($150,000 for non-profit bodies) must register. Taxi and ride-sourcing drivers must register regardless of turnover.

Common GST-free supplies include most basic food, health and education services, exports, and sale of a going concern. GST-free supplies allow the supplier to claim input tax credits, unlike input taxed supplies (financial services, residential rent).

Part IVA is the general anti-avoidance rule. It allows the Commissioner to cancel a tax benefit obtained under a scheme where, having regard to specific factors, it would be concluded the dominant purpose of a person entering the scheme was to obtain the tax benefit.

A discretionary (family) trust does not pay tax itself — its net income is assessed in the hands of beneficiaries to whom it is distributed, or taxed at the top rate in the trustee's hands if not distributed. Distribution patterns can attract Part IVA and section 100A scrutiny.

Section 100A is a long-standing anti-avoidance rule targeting reimbursement agreements where a trust beneficiary is presently entitled to income that is effectively enjoyed by another person. The ATO issued new guidance in TR 2022/4 / PCG 2022/2 flagging increased compliance focus.

A taxpayer dissatisfied with an assessment can lodge an objection with the Commissioner within the prescribed period (generally 4 years for most taxpayers, 2 years for small business and individuals). The objection must be in writing and state fully and in detail the grounds.

Yes. If an objection is refused, the taxpayer can either apply to the Administrative Review Tribunal for merits review or appeal to the Federal Court on a question of law. Different cost and evidence rules apply in each forum.

GIC accrues on unpaid tax liabilities at a rate set quarterly. Shortfall penalties under s 284-75 apply to inaccurate statements at 25% (lack of reasonable care), 50% (recklessness), or 75% (intentional disregard), with remissions possible for voluntary disclosure.

Transfer pricing rules require international related-party dealings to be on arm's length terms. The ATO can reconstruct dealings and impose adjustments where terms differ from those that independent parties would have agreed, with significant penalties and documentation obligations.

The ATO generally treats cryptocurrency as a CGT asset, so gains and losses on disposal are capital in nature unless the taxpayer is carrying on a business of trading crypto. Personal use asset exemptions are narrowly limited.

FBT is a tax paid by employers on the value of non-cash benefits (cars, loans, entertainment, housing) provided to employees or their associates. The FBT year runs from 1 April to 31 March, and the FBT rate is the top marginal income tax rate plus Medicare levy.

The CGT discount reduces capital gains by 50% for individuals and trusts, or 33.33% for complying superannuation funds, where the asset was held for at least 12 months. Companies are not eligible for the CGT discount. Foreign resident individuals lost access to the discount from 8 May 2012 on a prospective basis.

Tax avoidance is arranging affairs within the law to reduce tax (subject to anti-avoidance rules). Tax evasion is deliberately concealing income, fabricating deductions, or using false documents — it is a criminal offence that can attract imprisonment and penalties.

Tax advice fees vary widely. A private binding ruling application may cost $5,000-$20,000 in legal fees. Complex restructuring, disputes, or transfer pricing matters can run into hundreds of thousands. Most tax lawyers charge on time-cost basis with regular estimates.