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TABL2751- Final Exam Guide - Comprehensive Notes for the exam ( 156 pages long!)


Department
Taxation and Business Law
Course Code
TABL2751
Professor
Geoffrey Dunn
Study Guide
Final

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UNSW, UNSW Sydney
TABL2751
Final EXAM
STUDY GUIDE

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Business Taxation Notes
Business Taxation (University of New South Wales)
Business Taxation Notes
Business Taxation (University of New South Wales)
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TOPIC 1 – FUNCTIONS AND OBJECTIVES OF TAXATION
What is a tax?
For Commonwealth constitutional purposes, tax is defined as a compulsory exaction of money by a
public authority for public purposes, enforceable by law, and is not a payment for services rendered
Matthews v Chicory Marketing Board (1938) 60 CLR 263 at 270.
Key features: compulsory payment, government purpose, not payment for services, systematic not
arbitrary.
Taxes are a contribution, not a pecuniary penalty. Pecuniary penalties are incurred for failing to
comply with the income tax legislation.
Why do we have taxes?
a) Historical background
English taxation
The 1842 Act has a schedular approach, where different classes of income were taxed according to
specific sets of rules. This allowed for a distinction between earned and unearned income, where
unearned income incurred a higher tax rate.
S 1 of the 1842 Act had 5 schedules:
- Schedule A: property tax applying to income, rents, royalties, tithes, etc, derived from ownership of
freehold, leasehold and land and buildings
- Schedule B: tax on primary production income, e.g. income derived from animal husbandry and the
use and occupation of the land
- Schedule C: income derived from interest, annuities and dividends payable out of the public funds
of the UK, the colonies or any foreign state
- Schedule D: tax on profits generated from trade, manufacture, professional practice or employment
plus any income not included under the other schedules
- Schedule E: tax annuities, salaries, pensions, fees and other employment remuneration
The UK legislation also explains the need to distinguish between ‘income from personal exertion’
and ‘income from property’.
UK Tax law was based on trust law. There was no effort to create a unified tax structure. Instead,
residual provisions were added to cover other types of income which did not fit into the existing
schedule.
Australian taxation
Australia used to adopt the differential approach until it changed to a single-schedule approach. All classes
of income are regarded as income by ordinary concepts (ITAA 1997 (Cth) ITAA 97) and are assessable
income under ITAA97 s 6-5.
State
income tax
Australian colonies and states introduced income tax between 1884 and 1907.
In 1883, the Treasurer wanted to introduce South Australia’s first income tax based on
the UK Act. However, the conservatives in the Upper Houses of Parliament opposed
land and income taxes in order to protect their own wealth. Other people also
campaigned against importing British legislation.
Australian colonies did not completely copy Britain’s Income Tax Act of 1842. The tax
legislation was a mixture of the UK Act and Australian concepts.
Federal
income tax
The first Commonwealth tax was introduced through the Income Tax Assessments
Acts 1915. This was intended to fund the war effort.
S 18(1) states that taxable income is based on the total income derived by the
taxpayer from all sources in Australia, less all losses and outgoings, not being in the
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