Business leaders appreciate that there are taxation implications that flow on from most business decisions. A sound knowledge of Australian taxation law is essential to ensure quality input into the strategic decision making process of a business, and to provide post-implementation taxation advice. Business structures may involve different types of entity (such as individuals, partnerships, trusts and companies), and it is important to consider the tax impact on each of them.
The wide range of skills sourced from successfully completing the other segments of the CPA Program should be applied in the context of recognising all relevant taxation implications. Accounting for income tax is covered in the Financial Reporting segment.
This segment is compulsory for candidates who have not completed studies in taxation at undergraduate level.
Segment aims
The aims of this segment are:
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to ensure candidates are aware of the key provisions of the Income Tax Assessment Act 1936 (Cwlth), the Income Tax Assessment Act 1997 (Cwlth), A New Tax System (Goods and Services Tax) Act 1999 (Cwlth), Fringe Benefits Tax Assessment Act 1986 (Cwlth) and the Taxation Administration Act 1953 (Cwlth)
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to ensure candidates can apply the relevant legislative section(s) to determine the taxation consequences of an event
General objectives
On completion of this segment, candidates should be able to:
- demonstrate an understanding of the Income Tax Assessment Act 1936 (Cwlth), the Income Tax Assessment Act 1997 (Cwlth), A New Tax System (Goods and Services Tax) Act 1999 (Cwlth), Fringe Benefits Tax Assessment Act 1986 (Cwlth) and the Taxation Administration Act 1953 (Cwlth) and related legal precedents
- analyse events and apply the legislation to determine tax liability
- provide strategic advice to stakeholders regarding the tax issues arising from particular business scenarios
Segment content
Module 1: Tax administration
Module 1 looks at the requirement to lodge a tax return and how (via assessments, objections and appeals) the final tax liability of a taxpayer is determined. The module also outlines the Taxation Rulings system and other guidance provided by the Australian Tax Office to assist taxpayers in meeting their tax obligations.
Payment of tax, the application of interest charges and penalties, and the operation of the general anti-avoidance provisions of Part IVA are also discussed.
Contents:
- Returns, assessments, objections and appeals
- The rulings system
- Payment of tax, penalties and interest charges
- Anti-Avoidance
Module 2: Principles of assessable income
Module 2 considers the important core concept of assessable income. The common law principles which distinguish between an income receipt and a capital receipt are discussed in depth. This is followed by a consideration of specific legislative provisions which apply to certain receipts, such as compensation, royalties and foreign exchange gains. The treatment of trading stock is also covered.
Contents:
- The tax equation
- Assessable income — ordinary and statutory income
- Exempt and non-assessable non-exempt income
- Source and derivation of income
- Trading stock
Module 3: Capital gains tax (CGT)
Module 3 discusses the tax treatment of capital gains, the general concepts relating to CGT events and their impact on the capital gain calculation.
Contents:
- CGT events
- CGT assets
- Exemptions and rollovers
- Calculation of CGT
- Special rules for partnerships and deceased estates
Module 4: Principles of general and specific deductions
Module 4 examines the core concept of general and specific deductions. The general deductibility provision together with the concept of capital outgoings are discussed in depth. There are a number of specific provisions which provide for the deductibility of expenditure in certain circumstances, including the rules relating to thin capitalisation.
Contents:
- General deductions
- Specific statutory deductions
- Limitations on deductibility
Module 5: Capital expenditure allowances
Module 5 examines capital allowances, including the depreciation of assets, amortisation of buildings and deductions available for other capital expenditure.
Contents:
- General depreciation rules
- Balancing adjustments and rollover relief
- Capital allowances
- Capital works
Module 6: Small business entities (SBE)
Module 6 explains the eligibility criteria to access the Small Business Entity concessions, and the tax measures included in the regime.
Contents:
- Eligibility for SBE concessions
- SBE taxation concessions
Module 7: Individuals
Module 7 applies the concepts studied in earlier modules to the taxation of individuals. The module outlines and discusses the taxation of individuals, including superannuation and termination payments, personal services income, employee share schemes and tax offsets.
Contents:
- Income
- Deductions
- Taxation offsets applicable to individual taxpayers
- Personal services income
- Employee share schemes
Module 8: Partnerships
Module 8 examines the nature and taxation of partnerships. Partnerships are not separate legal entities, but there are a number of taxation implications which arise from their use as a structure to carry on a business.
Contents:
- Overview of partnerships
- Taxation of partnership income
Module 9: Trusts
Module 9 looks at the components of a trust and the different types of trusts. Tax issues including present entitlement, calculation of net income of a trust, streaming of trust income and availability of trust losses are then explored.
Contents:
- Types of trusts
- Determining trust income
- Taxation of trust income
- Trust losses
- Family trusts
Module 10: Companies and dividends
Module 10 examines companies and applies the various legislative concepts to determine the tax payable by a resident company. It explains the taxation of dividends and the interrelationship with Division 7A for private companies. This module covers the dividend imputation system, with particular emphasis on maintaining a company franking account. Finally, the impact of receiving dividends by different types of taxpayers is examined.
Contents:
- Taxation of companies
- Dividends and the imputation system
- Debt and equity
- Private companies and Division 7A deemed dividends
Module 11: Consolidations
Module 11 sets out the costs, benefits and eligibility criteria which must be considered prior to creating a consolidated group for tax purposes. It identifies the steps that must be applied in forming a consolidated group and discusses the rules concerning the cost base of assets and the utilisation of losses within a group. The module explains key ongoing tax issues which must be addressed by a consolidated group, and discusses the tax treatment of a subsidiary leaving a consolidated group.
Contents:
- Eligibility to consolidate
- Key consolidation rules
- Tax cost-setting of a subsidiary's assets
- Transfer and utilisation of losses
- Tax compliance issues for consolidated groups
- Exiting a consolidated group
Module 12: Transfer pricing
Module 12 discusses the key features of the transfer pricing legislative regime. It outlines the four-step process used to determine the arm’s-length price of international related-party dealings, sets out the five approved transfer pricing methodologies and provides an overview of related ATO compliance issues.
Contents:
- Transfer pricing legislative framework
- Applying the arm’s-length principle
- Approved arm’s-length methodologies
- Key compliance issues
Module 13: Fringe benefits tax (FBT)
Module 13 examines the general scheme for taxing fringe benefits and the valuation of specific benefits for FBT purposes. This tax is paid by the employer.
Contents:
- FBT administration
- Specific fringe benefits
Module 14: Goods and services tax (GST)
Module 14 examines GST, outlining general concepts and compliance issues. Specific GST issues such as the effect on insurance and financial services are also discussed.
Contents:
- Overview of the GST
- Fundamental GST concepts
- GST compliance and reporting
- Special GST issues and transactions