Taxation is a key component of the overall skills base of today's professional accountant.

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 taxation impact on each of them.

This subject is compulsory for candidates who have not completed recognised studies in taxation.

This subject is a prerequisite for obtaining a Public Practice Certificate.

Note: From Semester 2 2018 this subject will have an uplift in content and learning outcomes so it’s in line with postgraduate studies and will contribute to your taxation requirements as a Registered Tax Adviser with the Tax Practitioner’s Board. If you intend to complete Advanced Taxation from Semester 2 2018, or need to defer in Semester 1 2018, we recommend you complete undergraduate taxation study prior to enrolling.

Exam structure

The Advanced Taxation exam generally consists of 100 per cent multiple-choice questions. 

Subject aims

The aims of this subject are:

  • to provide you with an awareness of the key provisions of the relevant taxation legislation
  • enable you to apply the relevant legislative concepts to determine taxation consequences.

General objectives 

On completing this subject, you should be able to:

  • demonstrate an ability to apply the relevant taxation legislation and related legal concepts, precedents and Australian Taxation Office (ATO) rulings
  • analyse events and apply the legislation to determine tax liability
  • provide strategic advice to stakeholders regarding the tax issues arising from common scenarios

Subject content

The "weighting" column in the following table provides an indication of the emphasis placed on each module in the exam, while the "proportion of study time" column is a guide for you to allocate your study time for each module.

Module and study schedule Recommended proportion of study time (%)
Weighting (%)
1. Tax administration 5 5
2. Principles of assessable income 9 9
3. Principles of general and specific deductions
10 10
4. Capital expenditure allowances 8 8
5. Capital gains tax (CGT) 10 10
6. Individuals 12 12
7. Partnerships 5 5
8. Trusts 7 7
9. Companies and dividends 11 11
10. Consolidations 5 5
11. Transfer pricing 5

5

12. Fringe benefits tax (FBT)
6 6
13. Goods and services tax (GST)
7 7

100 100

The subject is divided into 13 modules. A brief outline of each module is provided below.

Note: The Advanced Taxation subject reflects legislation in place by 15 April 2017. Exam questions will be based upon the 2016–17 tax year and the fringe benefits tax (FBT) year ended 31 March 2018.

Module 1: Tax administration

Module 1 discusses the requirement to withhold and pay tax, to lodge a tax return and how (via assessments, objections, reviews and appeals) the final tax liability of a taxpayer is determined. The module also outlines the Australian legal environment, the Taxation Rulings system and other guidance provided by the ATO to assist taxpayers in meeting their tax obligations. The Tax Agent Services Act is discussed, focusing on the registration of tax agents and on the Code of Professional Conduct.

The application of interest charges and penalties and the operation of the general anti-avoidance provisions of Part IVA are also discussed.

Contents

Part A: Australia’s tax law environment

  • Australian parliamentary system 
  • Separation of powers
  • Power to raise taxes
  • Taxation bills
  • The courts
  • Administrative law involving taxation

Part B: Income tax returns, assessment and payment

  • Income tax self-assessment 
  • Tax returns and assessments
  • Payment of income tax 
  • Business Activity Statement, Instalment Activity Statement, and running balance account 

Part C: Rulings and penalties

  • The rulings system 
  • Penalties and interest charges

Part D: Tax agent services regime and the Code of Professional Conduct

  • Tax agent services regime
  • The Code of Professional Conduct – Division 30 TASA 

Part E: Anti-avoidance rules and Part IVA

  • Tax avoidance
  • Part IVA case law 
  • Part IVA and the role of advisers

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 and the eligibility rules to access small business entity tax concessions are also covered.

Contents:

Part A: The tax equation

Part B: Assessable income

  • Assessable income – overview 
  • Residence
  • Source of income
  • Ordinary income – some common law concepts 
  • Distinguishing between income and capital 
  • Derivation of income 

Part C: Income from business

  • Existence of a business
  • Commencement of a business
  • Section 6-5 and income from business
  • Non-cash business benefits

Part D: Compensation

Part E: Assessable income – Statutory extensions

  • Royalties
  • Foreign exchange gains and losses
  • Other statutory income sections

Part F: Trading stock

  • Definition of trading stock
  • Accounting for trading stock on hand
  • Valuation of trading stock (not including livestock)
  • Meaning of cost
  • Meaning of replacement value
  • Meaning of market selling value
  • Assets that become trading stock
  • Obsolete stock
  • Disposal of trading stock
  • Death of owner 
  • Trading stock and Small Business Entities (SBEs)

Module 3: Principles of general and specific deductions

Module 3 examines the core concept of general and specific deductions. The general deductibility provision is discussed in depth, together with the exclusion from general deductibility of capital. Private and domestic 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:

Part A: General deductions (section 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 section 8-1
  • Specific exclusions from section 8-1
  • Effect of GST on deductions

Part B: Specific statutory deductions

  • Repairs
  • Bad debts
  • Specifically deductible expenses
  • Tax losses of previous years

Part C: Limitations on deductibility

  • Entertainment expenses
  • Occupational clothing
  • Payments to related entities
  • Prepaid expenditure
  • Losses from non-commercial business activities
  • Substantiation of expenditure
  • Thin capitalisation

Module 4: Capital expenditure allowances

Module 4 examines capital allowances, including the depreciation of assets, amortisation of buildings and deductions available for other capital expenditure. Particular rules relating to capital allowances concessions for small business entities are also covered.

Contents:

Part A: General depreciation rules

Part B: Balancing adjustments and rollover relief

  • Balancing adjustment events

Part C: SBE capital allowance rules

  • Taxpayers eligible for the SBE concessions

Part D: Special capital allowance rules

  • Project expenditure pools
  • Blackhole expenditure

Part E: Deduction for capital expenditure on capital works

Module 5: Capital gains tax (CGT)

Module 5 discusses the tax treatment of capital gains, and how the CGT regime interacts with other areas of the tax legislation. The module provides detailed commentary on the six-step process to determine the net capital gain or loss of a taxpayer, including application of the various CGT exemptions and concessions.

Contents:

Part A: Overview of capital gains tax (CGT)

Part B: the six-step approach to CGT

Part C: Step 1—identify a CGT event

Part D: Step 2—identify a CGT asset

Part E: Step 3—calculating a capital gain or loss

Part F: Step 4—considering exceptions or exemptions

Part G: Step 5—considering rollover provisions

Part H: Step 6—determining net capital gain/loss

  • Taxpayers subject to capital gains tax
  • Administration

Part I: Special circumstances

Part J: CGT concessions and special rules

Module 6: Individuals

Module 6 applies the concepts studied in earlier modules to the taxation of individuals. The module outlines and discusses the taxation of individuals, calculation of rebates and tax offsets applicable to individual taxpayers, including superannuation and termination payments. The module also considers the tax implications under the personal services income regime and employee share schemes.

Contents:

Part A: Income

  • Requirements to lodge an income tax return
  • Determining taxable income and tax payable
  • Tax rates: Resident individual – non-minor
  • Tax treatment of minors
  • Assessable income

Part B: Deductions

  • Allowable deductions
  • Employee or contractor

Part C: Tax offsets applicable to individual taxpayers

  1. Family situation rebates
  2. Rebates that limit the effective tax rate for a class of receipt
  3. Rebates that effectively increase the tax threshold of recipients
  4. Rebates to prevent double tax
  5. Rebates to encourage government policy

Part D: Levies and other charges

  • Medicare levy
  • Higher education assistance
  • Family tax benefits

Part E: Specific issues

Module 7: Partnerships

Module 7 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:

Part A: Partnerships

Part B: Taxation of partnerships

Module 8: Trusts

Module 8 looks at the components of a trust and the different types of trusts. Tax issues addressed include present entitlement to trust income, taxation of beneficiaries or trustees, calculation of net income of a trust, streaming of trust income and availability of trust losses for recoupment.

Contents:

Part A: Trusts

  • What is a trust?
  • Components of a trust
  • Types of trusts
  • Five basic essentials in creating an inter-vivos trust

Part B: Provisions governing the taxation of trust income from a resident trust

  • Division 6 – key concepts
  • Determining net income of the trust and tax implications on distribution
  • Discrepancy between distributed income of the trust and net income of the trust
  • Capital gains included in trust income
  • Streaming of trust income
  • Family trusts
  • Trust losses
  • Distribution of non-assessable amounts – CGT event E4
  • Expanded trust TFN withholding and reporting rules

Module 9: Companies and dividends

Module 9 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 of the Income Tax Assessment Act 1936 (Cwlth) 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:

Part A: Taxation of companies

  • Concept of a company for tax purposes
  • Classification of companies – public or private
  • Residency
  • Calculation of taxable income
  • Assessment and payment of tax
  • Gross-up and franking credit tax offset
  • Special tax issues

Part B: Taxation of dividends

  • Definition of dividend
  • Deemed dividends
  • Is the dividend assessable?
  • Debt and equity
  • Dividend imputation system

Module 10: Consolidations

Module 10 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, upon an entity becoming a group member. 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:

Part A: Eligibility to consolidate

  • Consolidatable group
  • Head company
  • Subsidiary member
  • Comparison to accounting consolidation rules

Part B: Key consolidation rules

  • Single entity rule
  • Entry history rule
  • Benefits and costs of consolidation

Part C: Joining a consolidated group

  • Tax cost-setting of a subsidiary's assets
  • Calculating the allocable cost amount (ACA) of the joining member
  • Allocating the ACA over a joining member's assets

Part D: Transfer and utilisation of losses

  • Determining losses to be transferred
  • Utilising transferred losses

Part E: Consolidated group's tax compliance

  • Income tax liabilities
  • Other tax compliance issues

Part F: Exiting a consolidated group

  • Resetting costs of membership interests in a subsidiary
  • Exit history rule
  • Calculating the ACA of the leaving entity
  • Allocating the ACA to membership interests on exit

Module 11: Transfer pricing

Module 11 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:

Part A: Transfer pricing legislative framework

  • Overview of subdivision 815-B
  • Key ATO rulings
  • International taxation agreements (ITAs)

Part B: Applying the arm's length principle

  • Arm's length principle
  • ATO approved four-step process
  • Sources of comparable data

Part C: Accepted arm's length methodologies

  • Background
  • Comparable uncontrolled price (CUP)
  • Resale price method (RPM)
  • Cost plus method (CPM)
  • Profit split method (PSM)
  • Transactional net margin method (TNMM)

Part D: Key compliance issues

  • Interaction with thin capitalisation provisions
  • Advance pricing arrangements
  • Documentation requirements

Module 12: Fringe benefits tax (FBT)

Module 12 examines the rules relating to fringe benefits tax, including the 12 categories of fringe benefits including the specific valuation rules for each type of fringe benefit. It also outlines how FBT is calculated and discusses the application of the otherwise deductible rule and how employee contributions can be used to reduce the taxable value of fringe benefits. The module concludes with a discussion of a range of exempt fringe benefits and record keeping requirements.

Contents:

Part A: Fringe benefits tax – core concepts

  • Background
  • Essential features of FBT
  • Who pays FBT?
  • Definition of a benefit
  • Interaction of FBT with other tax legislation
  • Administration
  • Reducing the fringe benefits taxable value of a fringe benefit
  • FBT and GST: The gross-up formula
  • FBT-exempt employers

Part B: Specific fringe benefits

  • Car benefits
  • Car parking benefits 
  • Debt waiver 
  • Loan fringe benefits 
  • Expense payment fringe benefits 
  • Housing 
  • Living away from home allowance (LAFHA) 
  • Board 
  • Property 
  • Residual benefits 
  • Exempt benefits and reduction in taxable value of certain benefits
  • Rebate for exempt employers 

Part C: Administration and reporting of FBT

Module 13: Goods and services tax (GST)

Module 13 examines GST, outlining general concepts and compliance issues. Specific GST issues such as the effect on insurance and financial services are also discussed.

Contents:

Part A: Overview of the GST

Part B: Fundamental GST concepts

  • Taxable supply
  • GST-free and input taxed supplies
  • Taxable importations
  • Calculating the GST
  • Input tax credits

Part C: GST compliance and reporting

  • Timing and accounting for GST liability
  • GST groups, branches, joint ventures, etc.
  • The general anti-avoidance provision

Part D: Special GST issues and transactions

  • Insurance
  • Financial services
  • Incapacitated entities and mortgagees in possession