Taxation is an elective segment offered in the CPA Program.

The primary objective of this segment is to provide the candidate with an in-depth knowledge of the law of income tax as it affects individuals, partnerships, trusts and companies.

The segment will develop your ability to apply the theoretical knowledge of taxation to the business environment. Regardless of whether candidates are working in industry and commerce, public practice or the public service, they will be able to analyse a set of facts and identify how they fit into the federal taxation regime. Other objectives are to:

• understand that the principles and concepts of taxation are derived from a variety of sources including various acts, rulings and case law, whilst appreciating their relative importance within the taxation regime
• identify and use the research tools that provide the sources of taxation law and practice
• identify and apply key taxation principles and concepts

The Taxation segment requires a broad range of skills, but particularly requires a high level of analytical and reading skills, together with an ability to synthesise materials. Extensive use is made of the Income Tax Assessment Act 1936 and 1997 and various other Australian Tax Acts.

The content of the Taxation segment is as follows:

Module 1: Structure of the Income Tax Assessment Act and sources of authority

• the Income Tax Assessment Act 1936
• tax reform
• the Income Tax Assessment Act 1997
• basic provisions of the Act
• income tax regulations
• other Acts affecting Australian tax law
• international framework for the Australian legislation
• other relevant Commonwealth legislation
• statutory interpretation
• case law 
• the judicial hierarchy
• alternative sources of information

Module 2: Principles of assessable income

• the tax equation
• assessable income (s. 6 - 5)
  
  • statutory income
  • non-assessable non-exempt income
  • some common law concepts
  • distinguishing between income and capital
  • source of income
  • residence
  • derivation of income
  • exempt income
• income from business
  
  • existence of a business
  • commencement of a business
  • termination of a business
  • Section 6 - 5 and income from business
  • non-cash business benefits
• assessable income: specific provisions
  • compensation
  • profit on the sale of leased vehicles
  • interest   
  • royalties
  • foreign exchange gains and losses
  • other specific sections
• trading stock
  
  • definition of trading stock
  • valuation of trading stock
  • meaning of cost price
  • meaning of replacement price
  • meaning of market selling value
  • valuation of shares and securities as trading stock
  • trading stock lost or destroyed
  • obsolete stock
  • purchases of trading stock
  • disposal of trading stock
  • death of owner
  • cease to hold items as trading stock (but still own it)
  • compensation for loss of trading stock

Module 3: Principles of general and specific deductions

• general deductions (s. 8 - 1)
  • framework of s. 8 - 1
  • general principles of s. 8 - 1
  • analysing the wording in s. 8 - 1
  • the four negative limbs of s. 8 - 1
  • apportionment
  • some possible general deductions under s. 8 - 1
  • specific exclusions from s. 8 - 1  
  • effect of GST on deductions
• specific statutory deductions
  • repairs
  • bad debts
  • tax affair expenses
  • borrowing expenses
  • travel between workplaces
  • lease termination
  • superannuation contributions
  • payments to associations 
  • gifts or contributions
  • tax losses of previous years
• limitations on deductibility
  • entertainment expenses
  • occupational clothing
  • payments to related entities
  • prepaid expenditure
  • losses from non-commercial business activities
• substantiation of expenditure

Module 4: Capital gains

• profit-making undertaking or plan: assessable income
• capital gains tax
  • CGT events
  • CGT assets
  • CGT exemptions
  • CGT rollover relief provisions
  • capital gains and capital losses
  • determining the assessable capital gain
  • taxpayers subject to CGT
  • administration
  • special circumstances
  • relief from CGT

Module 5: Capital expenditure allowances

• depreciation
• balancing adjustment events
• rollover relief
• blackhole expenditure
• deduction for capital expenditure on capital works

Module 6: Small business entities

• the small business entity (SBE) concessions 
• taxpayer eligibility for the SBE tax system 
• transitional provisions for STS taxpayers

Module 7: Individuals

• income
  • requirements to lodge an income tax return
  • determining taxable income and tax payable
  • tax rates: resident individual
  • tax treatment of minors
  • information required from a resident individual
  • assessable income
• deductions
  
  • allowable deductions
  • employee or contractor
• tax offsets applicable to individual taxpayers
  • family situation rebates
  • rebates that limit the effective tax rate for a class of receipt
  • rebates that effectively increase the tax threshold of recipients
  • rebates to prevent double tax
  • rebates to encourage government policy
• specific issues
  • Medicare levy
  • Higher Education Assistance
  • Family Tax Benefits

Module 8: Companies and dividends

• taxation of companies
  
  • concept of a company for tax purposes
  • classification of companies-public or private
  • residency
  • calculation of taxable income
  • gross-up and imputation credit tax offset
  • special tax issues
• taxation of dividends
  
  • definition of dividend
  • share buy-backs
  • distributors by liquidators
  • is the dividend assessable?
  • debt and equity
  • dividend imputation system

Module 9: Partnerships

• definition of partnership
• taxation of partnership income
• computation of net partnership income or loss
• dissolution or reconstitution of a partnership

Module 10: Trusts

• trust essentials: definition and components
• provisions governing the taxation of trust income
  • legal disability
  • present entitlement
  • typical situations
  • determining net income of a trust estate and tax implications on distribution
  • discrepancy between distributed and taxable net income of the trust
  • capital gains included in trust income

Module 11: Administration of the tax system

• PAYG system of income tax collection
• Business activity statements and instalment activity statements 
• self-assessment
• amendment of assessments
• penalties
• Part IVA
• objections
• reference to Administrative Appeals Tribunal or Court
• other avenues of appeal
• access to information by the commissioner

Module 12: Fringe benefits tax

• key concepts 
  • non-cash employee fringe benefits
  • definition of a benefit
  • administration
  • value of a benefit
  • otherwise deductible rule
  • FBT and GST: The gross up formula
  • non-deductible expenses
  • steps in determining FBT
• specific fringe benefits
  • motor vehicles
  • car parking benefits
  • debt waiver
  • low interest loans
  • payment of employee's expenses
  • housing
  • living away from home allowance
  • board
  • goods and services
  • airline benefits
  • residual benefits
  • exempt benefits
• rebate for exempt employers
• record keeping
• case law: some important lessons

Module 13: Goods and services tax (GST)

• overview of the GST
• fundamental GST concepts
  • taxable supply
  • GST-free and input taxed supplies
  • taxable importations
  • calculating the GST
  • input tax credits
• GST compliance and reporting
  • timing and accounting for GST liability
  • issue of invoices and receipt of consideration
  • GST groups, branches, joint ventures
  • the general anti-avoidance provision (GAAP)
• special GST issues and transactions
  • insurance
  • financial services