TAXATION LAW IN AUSTRALIA
TAXATION LAW IN AUSTRALIA
SOURCE COVERAGE CONTROL

Legislation & Authority Coverage Audit

This is the anti-omission control for the draft manuscript. It is intentionally mechanical and comprehensive.

Purpose: each item below came from the supplied Forums/Tutorials and is also carried into the relevant chapter's statutory or authority map. During later editing, this page is used to verify that no section, subsection, paragraph, case or ruling has disappeared.

Chapter 1 — Foundations of Australian Taxation Law and the Income Tax Formula

Source: Forum 1 Notes(1) (2).txt + Week 2 Tutorial Questions v2 (2).txt

Statutory source lines (54)

  1. If you see s 25(1), how should you read this?
  2. How do you read s 26(e)?
  3. for part of the income year, their tax-free threshold is apportioned for
  4. become, or cease to be, a resident) using the following formula (s 20(1)
  5. resident child (aged under age 18 on 30 June 2026) under Div 6AA ITAA36:
  6. ordinary resident individual tax rates apply to that part of income.
  7. A company is a base rate entity for an income year if (s 23AA ITRA86):
  8. Examples of base rate entity passive income include (see s 23AB ITRA86
  9. are liable to pay the Medicare Levy: s251S ITAA 36.
  10. (see Subdiv 61-D ITAA97). It is an important tax offset to know because
  11. ITAA 97 s4-1 and s4-10 - on your taxable income for the income year
  12. ITAA 97 s4-10(3):
  13. sections 251R and 251S of the ITAA 36.
  14. capacities: s 960-100(3) ITAA97. For example, an individual can act in
  15. ITAA 97 s4-15: Taxable Income = Assessable Income - Deductions
  16. s6-5 Ordinary Income (note jurisdictional rules)
  17. s6-10 Statutory Income (note jurisdictional rules)
  18. s6-15 What is not assessable income
  19. s6-20 Exempt Income. Examples:
  20. Exempt fringe benefits: s 23L(1A) ITAA36
  21. full-time service): s 51-5 ITAA97 (item 1.4)
  22. Maintenance payments to a spouse or child: s 51-30 (item 5.1), and 51-
  23. s6-23 Non Assessable Non Exempt Income (NANE Income). Examples include:
  24. GST payable on a taxable supply (s 17-5 of the ITAA 97);
  25. fringe benefits (s23L(1) of the ITAA 36); and
  26. others (see Subdivision 11-B of the ITAA 97).
  27. s6-25 Relationship between rules about income (ie No double taxation &
  28. s8-1 General deductions
  29. s8-5 Specific deductions
  30. s8-10 No double deductions
  31. See the list in ITAA 97 s13-1.
  32. Eg ITAA 36 Subdiv 61-D Low Income Tax Offset (see above)
  33. Eg ITAA 97 s207-20(2) Dividend imputation offset
  34. subject to the refundable tax offset rules (see Division 67 ITAA 97 -
  35. for in the Taxation Administration Act 1953 (Cth) (TAA53), Sch 1.
  36. formula in s 4-10(3) ITAA 97), a credit is available for the tax that
  37. s 36-10 How to calculate a tax loss for an income year.
  38. s 36-15 How to deduct tax losses of entities other than corporate tax
  39. s 36-17 How to deduct tax losses of corporate tax entities (subject to
  40. ruling from any adverse consequences: Div 357 TAA53, Sch 1.
  41. for the year ending 30 June). See sections 4-1, 4-5 and 4-10 of the 1997
  42. Substituted accounting periods - see section 18 of the 1936 Act.
  43. Section 21 ITAA36 - if consideration is not in cash, the “money value” of
  44. Note that section 21 is a valuation rule and does not make consideration
  45. Section 96 of the 1936 Act - Generally speaking, trustees are not liable
  46. Section 59-30 ITAA 1997 - amounts that must be repaid
  47. Section 17-5 ITAA97 - GST on a taxable supply - this section also
  48. Role of sections 6-5(4) and 6-10(3) of the 1997 Act - the constructive
  49. The application of sections 21A and 26(e) of the 1936 Act, section 15-2
  50. capital gains are not regarded as NANE income (see sections 768-910 and 768-
  51. Alex had a net capital gain for the CIY of $5,000 (see s 102-5 ITAA97).
  52. Advise Alex whether the above receipts are assessable income for the CIY. Provide a reason to support your answer for each receipt. (This will be a key part of the discussion so please prepare a considered answer).
  53. Assume Alex had a poorly performing, passive investment in the PIY that resulted in his total assessable income for the PIY being $100,000 and his total deductions for the PIY being $110,000. Alex disposed of that investment towards the end of the PIY. Would these additional facts change your answer to question 2 at all for the CIY, and if so, how? (Consider s 36-10 and 36-15 ITAA97).
  54. consider whether s 21A ITAA 1936 would alter the outcome if the facts happened today.

Cases / rulings / authorities (14)

  1. Matthews v Chicory Marketing Board (1938) 60 CLR 263.
  2. It must be contestable and not arbitrary: MacCormick v FCT 84 ATC 4230.
  3. FCT v The Myer Emporium Ltd 87 ATC 4363.
  4. * Zobory v FCT 95 ATC 4251
  5. *Federal Coke Company Pty Ltd v FCT 77 ATC 4255.
  6. *FCT v Cooke & Sherden 80 ATC 4140
  7. *Payne v FCT 96 ATC 4407
  8. Eisner v Macomber (1920) 252 US 189 - capital was compared to a tree and
  9. Constable v FCT (1952) 86 CLR 402
  10. FCT v La Rosa 2003 ATC 4510 (26-54 ITAA97 now overrides the deductibility
  11. income producing activities. Eg Martin v FCT (1954) 90 CLR 470
  12. 1. What if the taxpayer is in the business of gambling? Eg Case K25 78
  13. Eg Kelly v FCT 85 ATC 4283
  14. Explain why the receipts in FCT v Cooke & Sherden 80 ATC 4140 and FCT v Payne 96 ATC 4407 were not assessed to the taxpayers as ordinary income.

Chapter 2 — Jurisdiction, Residency, Source and Derivation

Source: Week 2 Forum Notes(1) (2).txt + Week 3 question v2 (2).txt

Statutory source lines (12)

  1. Note the application of sections 6-5(2), 6-5(3), 6-10(4), 6-10(5) ITAA97.
  2. Section 995-1(1) ITAA97 defines an “Australian resident” as ‘a person who is a resident for the purposes of the ITAA36.
  3. For individuals, s 6(1) ITAA36 defines a "resident" or resident of Australia to mean a person who resides in Australia and includes a person:
  4. Domicile of choice - According to s 10 Domicile Act 1982 (Cth), the intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.
  5. A person is a "temporary resident" (as defined in s 995-1(1) ITAA97) if:
  6. However, a person is not a temporary resident if they have been an Australian resident (as defined in s 6(1) ITAA36), and any of paragraphs (a), (b) and (c) above are not satisfied.
  7. A company is a resident under s 6(1) ITAA 36 if it:
  8. Section 44(1) ITAA36 provides the source rule.
  9. Where a royalty is paid by an Australian business to a non-resident, then s 6C ITAA36 deems it to have an Australian source.
  10. Sections 6-5(2) and 6-5(4) ITAA97: when is ordinary income derived?
  11. For dividends, see s 44(1) ITAA36. Dividends are recognised when ‘paid’ and paid is defined in section 6(1) to mean ‘credited or distributed’.
  12. Hillary was experiencing cash flow difficulties in June 2026 due to the need to pay a four-week bond on her Sydney apartment. On 15 June 2026, Hillary requested that the firm pay part of her June salary in advance to meet immediate needs, namely:

Cases / rulings / authorities (24)

  1. Read Taxation Ruling TR 2023/1. The ATO says in TR 2023/1 (at paras19-21, 29-30]:
  2. *Lysaght v IRC [1928] AC 234
  3. *Levene v IRC [1928] AC 217
  4. Consider the following Example 1 from TR 2023/1 (at paras 111 to 113):
  5. *Applegate v FCT 79 ATC 4307 - 'Permanent' in the context of the domicile test does not mean 'everlasting' but, rather, something that is 'more than temporary or transitory'.
  6. FCT v Jenkins 82 ATC 4098 - a stay outside Australia for a fixed period can still be “permanent” rather than “temporary” if the period is of a substantial duration (eg 3 years in this case, although the taxpayer returned early after 18 months due to ill health).
  7. The ATO says in TR 2023/1 (at 65-66, and 77]:
  8. The ATO says in TR 2023/1 (at 90]:
  9. Consider Taxation Ruling TR 2018/5.
  10. The ascertainment of the actual source of a given income is a practical, hard matter of fact: Nathan v FCT (1918) 25 CLR 183.
  11. *FCT v French (1957) 98 CLR 398 - in this case, the source of personal exertion income was the place where work is performed.
  12. But see FCT v Mitchum (1965) 113 CLR 401, where the High Court held that there is no rule of law that wages are always sourced where work is performed. In that case, the nature of the contract raised doubt whether it was simply wages for work performed in Australia.
  13. The location of the fund of profits which is distributed as a dividend is the place where those profits are made: Esquire nominees Ltd v FCT 72 ATC 4076.
  14. DCT (SA) v Executor Trustee and Agency Co of South Australia Ltd (Carden’s case) (1938) 63 CLR 108 - sole medical practitioner.
  15. Henderson v FCT (1970) 119 CLR 612 - large accounting practice.
  16. FCT v Firstenberg 76 ATC 4049 - sole practitioner with one employee.
  17. FCT v Dunn 89 ATC 4141 - sole practitioner with a few employees (mostly family)
  18. Barrat & Ors v FCT 92 ATC 4275 - partners in a pathology practice, with many staff who generated sizeable income.
  19. The case law and the Tax Office (see, for example, Taxation Ruling TR 1998/1) have established that the following factors are relevant to deciding which method to use:
  20. The point of derivation usually occurs when a recoverable debt is created (ie when the taxpayer is legally entitled to an ascertainable amount as a result of having performed an agreed task (see paras 9-11 of Taxation Ruling TR 98/1)).
  21. Ballarat Brewing Co v FCT (1951) 82 CLR 364.
  22. *Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314.
  23. Interest - note that interest credited to an account is received constructively. There are obviously exceptions here. For example, the interest income of financial institutions is usually derived on a daily accrual basis (Taxation Ruling TR 93/27).
  24. Do these additional facts change the timing of when Hillary’s June 2026 salary is included in her assessable income? If so, how? Provide reasons to support your answer, including with reference to Brent v FCT 71 ATC 4195.

Chapter 3 — Income from Personal Exertion, Employment, Gifts, Prizes and Benefits

Source: Forum 3 Notes (3).txt + Week 4 question (2).txt

Statutory source lines (35)

  1. An amount is ordinary income under section 6-5(1) ITAA97 if there is a sufficient nexus (or connection) with an earning activity. In the context of personal exertion, the nexus test will be satisfied if an amount is characterized as a product or incident of employment or a reward for services rendered.
  2. 1. Section 15-2 ITAA97
  3. From 1 July 2006, section 26(e) ITAA36 has been repealed, and new section 15-2 of the ITAA 97 has become operative.
  4. Section 15-2 of the ITAA 97 provides:
  5. an amount that is assessable as ordinary income under section 6-5;
  6. an employee share scheme interest to which Subdivision 83A-B or 83A-C applies.
  7. Note: Section 23L of the Income Tax Assessment Act 1936 provides that fringe benefits are nonassessable nonexempt income. [emphasis added]
  8. 4 requirements to trigger s 15-2:
  9. Section 995-1(1) ITAA97 defines to "provide" an economic benefit as including: to allow, confer, give, grant or perform the benefit.
  10. What is one of the key differences between former s 26(e) and s 15-2?
  11. Can s 15-2 apply to benefits that are not convertible into money?
  12. If section 15-2 is triggered, the amount to include in assessable income is the “value to you” meaning the ‘value to the taxpayer’. This was the equivalent valuation rule in former s 26(e) ITAA36.
  13. Contrast this with the valuation rule under s 6-5 ITAA97. The valuation rule under s 6-5 is the ‘realisable value’ of the relevant benefit: Donaldson v FCT 74 ATC 4192. Presumably this means the amount that a willing but not anxious purchaser would be prepared to pay for the relevant benefit (akin to the market value?). Also consider s 21 ITAA36 and the “money value” of the consideration provided.
  14. From 1 July 2006, would s 15-2 apply in the following cases?
  15. Valuation issues in former s 26(e): an impetus for reform - Fringe Benefits Tax (see below)
  16. 2. Section 15-3 ITAA97
  17. Section 15-3 ITAA97 includes in a taxpayer’s assessable income:
  18. FBT is a tax imposed on employers on the value of ‘fringe benefits’ (as defined in s 136(1) Fringe Benefits Tax Assessment Act 1986 (Cth) (FBT Act)) provided to employees or to associates of employees in respect of their employment for the FBT year (1 April to 31 March).
  19. Elements of the definition of ‘fringe benefit’ in s 136(1) of the FBT Act:
  20. That is not covered by the exclusions in the s 136(1) ‘fringe benefit’ definition
  21. In relation to the last point above, examples of exclusions from the section 136(1) definition of fringe benefit are:
  22. Paragraph (f) - ie payments of ‘salary or wages’ (See the section 136(1) definition of ‘salary or wages’ and the cross-reference within that definition to Schedule 1 of the Taxation Administration Act 1953 (Cth). In particular, note the type of payments covered by section 12-35 in Schedule 1 to the Tax Admin Act).
  23. Question: Therefore, what are regarded as ‘salary or wages’ that will be excluded from the definition of ‘fringe benefit’ in section 136(1)?
  24. Once you are satisfied that your benefit satisfies the definition of ‘fringe benefit’ in s 136(1), you need to then ask: what type of fringe benefit have I got? This is because the FBT Act contains specific valuation rules depending on the classification of your ‘fringe benefit’.
  25. minor benefits with a notional taxable value of less than $300 (see s 58P FBT Act).
  26. the provision of certain eligible work-related items like portable electronic devices, computer software, protective clothing, briefcases, and tools of trade provided they are used primarily in the employee’s employment (see s 58X FBT Act - subject to some exceptions).
  27. subscriptions to trade or professional journals (s 58Y FBT Act)
  28. certain taxi travel (s 58Z FBT Act).
  29. Consider the relationship between sections 6-5, 6-25 and 15-2 ITAA97.
  30. Note the exclusions from the definition of ‘fringe benefit’ in the s 136(1) FBT Act definition. Importantly, note paragraphs (f) and (g) of the definition of ‘fringe benefit’ in section 136(1). What does this mean? What are ‘salary or wages’?
  31. To prevent fringe benefits from being subject to further tax, s 23L(1) ITAA36 makes ‘fringe benefits’ non-assessable, non-exempt income in the hands of employees. Note the distinction between subsections (1) and (1A) in section 23L(1). When does each sub-section in section 23L apply? What is the practical difference between exempt income and non-assessable non-exempt income (refer to s 6-23 and Division 36 ITAA97)?
  32. If an amount is assessable as ordinary income under s 6-5, it can not be included in assessable income under section 15-2 ITAA97. Note the initial phrase “[u]nless the contrary intention appears” in section 6-25(2) ITAA 97. Does s 15-2 ITAA97 express a contrary intention? What is the practical effect of this?
  33. What valuation rule does s 6-5 impose compared to s 15-2 ITAA97?
  34. Consider how s 15-2 ITAA97 or the FBT Act might apply, if at all, to any of these cases.
  35. Advise Jackson whether the $24,000 would be included in his assessable income pursuant to s 6-5 or s 15-2 ITAA97, and if so, when it is included. In doing so, consider Higgs (Inspector of Taxes) v Olivier (1951) 1 Ch 899.

Cases / rulings / authorities (15)

  1. The nexus test may still be satisfied even if an amount is consideration for past or future services (Hochstrasser v Mayes [1960] AC 376); is paid by a 3rd party (Kelly v FCT 85 ATC 4283, Dean & Anor v FCT 97 ATC 4762); or is the product of an isolated act of service (Brent v FCT 71 ATC 4195).
  2. *Brent v FCT 71 ATC 4195
  3. *Scott v FCT (1966) 117 CLR 514
  4. *Kelly v FCT 85 ATC 4762
  5. Calvert (Inspector of taxes) v Wainwright (1947) 27 TC 475
  6. *FCT v Dixon (1952) 86 CLR 540
  7. The meaning given to the phrase ‘value to the taxpayer’ by Bowen CJ in Donaldson v FCT 74 ATC 4192 is ‘what a prudent person in [the taxpayer’s] position would be willing to give for [the item] rather than fail to obtain [it].’
  8. Contrast this with the valuation rule under s 6-5 ITAA97. The valuation rule under s 6-5 is the ‘realisable value’ of the relevant benefit: Donaldson v FCT 74 ATC 4192. Presumably this means the amount that a willing but not anxious purchaser would be prepared to pay for the relevant benefit (akin to the market value?). Also consider s 21 ITAA36 and the “money value” of the consideration provided.
  9. *FCT v Cooke and Sherden 80 ATC 4140
  10. *Smith v FCT 87 ATC 4887
  11. *Payne v FCT 96 ATC 4407
  12. *Kelly v FCT 85 ATC 4283
  13. *Case Z9 92 ATC 144
  14. *Higgs v Olivier [1951] Ch 899
  15. Advise Jackson whether the $24,000 would be included in his assessable income pursuant to s 6-5 or s 15-2 ITAA97, and if so, when it is included. In doing so, consider Higgs (Inspector of Taxes) v Olivier (1951) 1 Ch 899.

Chapter 4 — Business Income, Non-Cash Benefits and Isolated Profit-Making Transactions

Source: Week 4 Forum Notes (2).txt + Week 5 Question (2).txt

Statutory source lines (13)

  1. You only make a capital gain or loss if a CGT Event happens (see s 102-20 ITAA97)
  2. Most common CGT Event is CGT Event A1 - disposal of a CGT asset (see s 104-10 ITAA97)
  3. Assessable income includes net capital gains (s 102-5 ITAA97)
  4. Capital losses can only be utilised against capital gains (ie quarantining rule for capital losses). There is no deduction for net capital losses. Net capital losses can only be carried forward and offset against future capital gains (sections 102-10 and 102-15).
  5. Consider the definition of trading stock in s 70-10 ITAA97. Does the sale of trading stock generate any ordinary income? Why?
  6. Section 21A ITAA36:
  7. Reductions under s 21A(3) and s 21A(4)
  8. If the facts of the above cases occurred today, how might section 21A ITAA36 apply, if at all, to these cases? Refer to the discussion in Forum 2.
  9. Consider the effect of section 23L(2) ITAA36 -exemption for certain benefits in the nature of income. Would this section change your answer in the above example (eg if you removed a “zero” from each of the relevant prices)?
  10. *FCT v Cooke & Sherden 80 ATC 4140 and s 21A ITAA36.
  11. Section 15-10 ITAA97 - Bounties and Subsidies. When does this section apply? You could also refer to Taxation Ruling TR 2006/3.
  12. “A loss from an isolated transaction is generally deductible under subsection 51(1) [now s 8-1 ITAA97] if:
  13. You are not required to apply capital allowance provisions in Div 40 ITAA97 to this scenario.

Cases / rulings / authorities (29)

  1. Martin v FCT (1953) 90 CLR 470
  2. Case K25 78 ATC 243
  3. Ferguson v FCT 79 ATC 4261
  4. FCT v Walker 85 ATC 4179
  5. *Stone v FCT 2005 ATC 4234
  6. Also, see Taxation Ruling TR 97/11 at paragraph 13 for a helpful summary.
  7. *FCT v Cooke & Sherden 80 ATC 4140
  8. *Payne v FCT 96 ATC 4407
  9. *Federal Coke Company Pty Ltd v FCT 77 ATC 4255
  10. *FCT v Cooke & Sherden 80 ATC 4140 and s 21A ITAA36.
  11. *The Squatting Investments Co Ltd v FCT (1954) 88 CLR 413 (Privy Council)
  12. Section 15-10 ITAA97 - Bounties and Subsidies. When does this section apply? You could also refer to Taxation Ruling TR 2006/3.
  13. Example: *Memorex Pty Ltd v FCT 87 ATC 5034
  14. *Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (904) 5 TC 159
  15. Rutledge v IRC (1929) 14 TC 490
  16. FCT v Whitfords Beach Pty Ltd 82 ATC 4031
  17. *FCT v Myer Emporium Ltd 87 ATC 4363
  18. Taxation Ruling TR 92/3
  19. Taxation Ruling TR 92/4
  20. *Westfield v FCT 91 ATC 4234
  21. FCT v Myer Emporium Ltd 87 ATC 4363
  22. The Commissioner’s views on the application of the decision in Myer are contained in Taxation Ruling 1992/3. The extract below is a summary of the Commissioner’s view as set out in paragraphs 15 and 16 of the Ruling.
  23. In relation to the situation where a taxpayer makes a loss on an isolated transaction, the Commissioner outlines his view in Taxation Ruling 1992/4 as follows:
  24. According to paragraphs 12 and 13 of TR 92/3, the ATO considers that “[f]or a transaction to be characterised as a business operation or a commercial transaction, it is sufficient if the transaction is business or commercial in character.
  25. The following examples are extracted from Taxation Ruling TR 92/3 and Taxation Ruling TR 92/4.
  26. The profit made on the sale of the shares is not income. The transaction was merely an investment, not a business operation or commercial transaction.” [See Example 1 from TR 92/3.]
  27. Mr Leary's profit is not income because the acquisition and sale of the residential property was not a business operation or commercial transaction. It was the acquisition and sale of an investment, even if a significant purpose of Leary in acquiring the property was profit-making.” [See Example 2 from TR 92/3.]
  28. The profit of $10,000 is income and assessable under s [6-5]. It can be inferred from the objective circumstances (especially the quick sale following a rise in price and the fact that the asset had no immediate use other than as an object of trade) that profit-making was a significant purpose of Goldfinger in acquiring the gold bars. Furthermore, the substantial amounts of money involved and the nature of the asset traded lead to the conclusion that the transaction was commercial in nature.” [See Example 4 from TR 92/3.]
  29. What if the gold bars had been sold for $85,000? Consider TR 92/4.

Chapter 5 — Returns from Property, Compensation Receipts and Periodicity

Source: Week 5 Forum Notes (2).txt + Week 6 Question (2).txt

Statutory source lines (8)

  1. Section 6(1) ITAA36 defines a dividend as including:
  2. However, sections 44-47 ITAA36 mainly govern the tax treatment of dividends. What is the role of section 6-25 ITAA97 in this context?
  3. Section 15-20 ITAA97 can apply to royalties that are not ordinary income under s 6-5.
  4. Certain annuities are now subject to s 27H ITAA36, which makes the return of capital component in an annuity tax-free.
  5. At common law, a compensation receipt generally takes the character of that which it replaces so if it replaces ordinary income it is normally income under s 6-5.
  6. The compensation receipts principle is also relevant to s 15-30 ITAA97 - assessable income includes certain insurance or indemnity amounts.
  7. Section 70-115 ITAA97.
  8. Note the application of Division 52 of the 1997 Act - certain pensions, benefits and allowances are exempt (or partly so) from income tax.

Cases / rulings / authorities (17)

  1. A lease premium is usually characterized as capital because it is a payment to secure access rather than use of a premises: Case C2 71 ATC 8. However, the the application of the CGT provisions needs to be considered in this context (eg CGT Events F1 to F5).
  2. the taxpayer is in the business of receiving lease premiums: Kosciusko Thredbo Pty Ltd v FCT 84 ATC 4043; or
  3. the lease premium is a disguised payment of additional rent: Case E34 73 ATC 282.
  4. McCauley v FCT (1944) 69 CLR 235: a royalty payment is a payment that is calculated based on the quantity/value of a substance taken or the usage of intellectual property rights.
  5. The McCauley case is often contrasted with the decision in Stanton v FCT (1955) 92 CLR 630.
  6. Egerton-Warburton & Ors v DFCT (1934) 51 CLR 568: the full amount of the regular annuity payments were treated as ordinary income.
  7. McLaurin v FCT (1961) 104 CLR 381 - whole sum treated as capital. Where a payment is received for unliquidated damages, courts are reluctant to apportion the sum into income and capital components.
  8. *C of T (Vic) v Phillips (1936) 55 CLR 144
  9. *FCT v Smith 81 ATC 4114
  10. *Heavy Minerals v FCT (1966) 115 CLR 512
  11. Van Den Berghs Ltd v Clark [1935] AC 431
  12. Californian Oil Products Ltd v FCT (1934) 52 CLR 28
  13. FCT v Wade (1951) 84 CLR 105
  14. FCT v The Myer Emporium Ltd 87 ATC 4363 - 2nd strand: compensation for the interest that would have been received was income.
  15. C of T (Vic) v Phillips (1936) 55 CLR 144
  16. FCT v Dixon (1952) 86 CLR 540
  17. *Keily v FCT 83 ATC 4248

Chapter 6 — Capital Gains Tax: Events, Assets, Cost Base, Losses and Discounts

Source: Forum 6 Notes (3).txt + Week 7 Question - final calculation notes (2).txt

Statutory source lines (82)

  1. Assessable income includes net capital gains: section 102-5
  2. Calculating net capital gains: section 102-5
  3. Working out net capital losses and their application: sections 102-10 and 102-15
  4. You can only make a capital gain or loss if a CGT Event happens: section 102-20.
  5. Summary of CGT Events: section 104-5
  6. A1 - most common CGT Event - disposal of a CGT asset: s 104-10
  7. C1 - loss or destruction of a CGT asset: s 104-20
  8. C2 - cancellation, surrender and similar endings: s 104-25
  9. D1 - creating contractual or other rights: s 104-35
  10. F1 - granting a lease: s 104-110
  11. Order of application of CGT Events: section 102-25
  12. In most cases, capital gains or losses on pre-CGT assets are disregarded. See for example section 104-10(5)(a). Does this mean that a CGT Event does not happen in relation to a pre-CGT asset? See section 102-23.
  13. Example 4: Michael and Jim are best friends. Michael needed some cash to pay for some medical expenses for his daughter. Michael borrowed $5,000 from Jim for 12 months at nil interest. Unfortunately, Michael’s daughter passed away and 9 months later, Jim forgave the debt (that is, by releasing or discharging Michael from the obligation to repay the loan). Note, however, s 108-20(2)(d) and s 108-20(1).
  14. Definition of a ‘CGT asset’ - section 108-5.
  15. What does ‘property’ mean in section 108-5(1)(a)?
  16. Legal or equitable rights that are not property: section 108-5(1)(b).
  17. Note that a CGT asset includes part of, or an interest in, a CGT asset: section 108-5(2)(a).
  18. Collectables: sections 108-10, 108-15, 108-17 and 118-10(1)
  19. Personal use assets: sections 108-20, 108-25, 108-30 and 118-10(3)
  20. Example 11: Nigella purchased a Mini Cooper motor vehicle 5 years ago for $50,000. She sold it on 1 June 2026 for $28,000. Nigella has a gross capital gain on shares during the 2025/26 year of $100,000. Consider s 118-5.
  21. What is the treatment if a post CGT structure is built on pre-CGT land? See section 108-55(2).
  22. A building or structure on land, or a capital improvement to land, is deemed to be a separate CGT asset from the land if the depreciation provisions (in Div 40 ITAA97 - studied in a later Forum) apply to the asset: s 108-55(1) and s 108-70(1). The legislation provides the following example (in s 108-70(1)):
  23. You own land that you use for pastoral operations. You build some fences that are destroyed by fire. The fences are depreciating assets and are subject to a balancing adjustment on their destruction under Division 40 [meaning the depreciation provisions in the ITAA97]. The fences are taken to be a separate CGT asset from the land.
  24. A depreciating asset that is part of a building or structure is deemed to be a separate CGT asset from the building or structure: s 108-60. The legislation provides the following example (in s 108-60):
  25. What is the effect of s 118-24(1) in this context (assuming the asset is used 100% to produce assessable income)? Which regime has “priority” regarding such depreciating assets? What does this mean, for example, if the taxpayer has a prior year net capital loss?
  26. Acquisition rules - see sections 109-5 and 109-10
  27. Most CGT Events provide for the calculation of a capital gain or capital loss by comparing 2 different amounts. The amount of the gain or loss is the difference between these 2 amounts. See section 102-22.
  28. In many cases, we need to calculate the difference between the capital proceeds, and the cost base or reduced cost base. See, for example, the calculation for CGT Event A1 at section 104-10(4).
  29. Note, however, that this is not the universal calculation under the CGT rules. See, for example, the calculation for CGT Event D1 at section 104-35(3). Why does the calculation for CGT Event D1 differ? The point is that you must always check the legislation for the calculation formula for each CGT Event.
  30. General Rules: section 116-20(1) - eg the money (or market value of property) you received, or are entitled to receive, in respect of the CGT Event happening.
  31. Market value substitution rule - section 116-30 - read this section in detail.
  32. Apportionment rule - section 116-40
  33. Example 14: Jeff purchased a block of land in January 2006 for $200,000 near where he lives. He wants to help his adult daughter build a house to live in on the land. On 1 June 2026, Jeff gifts the land to his daughter (meaning for nil consideration). The market value of the land on 1 June 2026 is $800,000. What is Jeff’s capital proceeds (consider s 116-30)? What if instead he transferred the land to his daughter for $1? What is his daughter’s cost base (consider s 112-20)?
  34. Other modifications to the general rule for capital proceeds in s 116-20 apply. Read the examples in s 116-45 (non-receipt rule), s 116-50 (repaid rule), and s 116-55 (assumption of liability). There is also a misappropriation rule in s 116-60.
  35. According to section 110-25, the 5 elements of cost base are:
  36. 2nd - incidental costs (eg accountancy, agent & legal fees, costs of transfer, stamp duty, certain advertising costs, valuation costs, search fees, conveyancing kits, borrowing expenses) - see section 110-35. Note the overriding requirements in ss 110-35(1).
  37. Where indexation applies, the cost base of a CGT asset includes indexation of the elements (except the 3rd element): s 110-36(1).
  38. Market value substitution rule - section 112-30 - read this section in detail
  39. Apportionment rule - section 112-30
  40. Generally, expenditure does not usually form part of the cost base or reduced cost base to the extent that a taxpayer has deducted or can deduct it. There are some timing rules regarding this principle: see s 110-40 and s 110-45.
  41. In relation to the reduced cost base, see section 110-55(4). Note, also, section 110-55(9).
  42. If indexation is applicable to the cost base, the third element of the cost base is not indexed: see section 960-275(4).
  43. Split, changed or merged assets: section 112-25
  44. For CGT assets purchased on or before the 1999 Announcement time, indexation of the asset’s cost base is only relevant for individuals trusts and complying super funds if they choose to index the cost base for the purposes of section 110-25.
  45. That is, indexation is frozen as at 30 September 1999. At that time, inflation data was published on a quarterly basis, and the quarter ending 30 September 1999 is the relevant reference point because indexation was abolished for assets acquired after the 1999 Announcement time: s 114-1. This is why the numerator for the indexation factor (see below) always refers to the index number for the quarter ending 30 September 1999. The legislation still requires the quarterly indexation figure to be used.
  46. If indexation is relevant, in order to index the cost base of a CGT asset, the asset must be held for at least 12 months before the time of a CGT Event that happens: section 114-10.
  47. Indexing amounts: see sections 960-270, 960-275 and 960-280.
  48. CGT Event must happen after the 1999 Announcement time - the capital gain must result from a CGT event happening after the 1999 Announcement time (see section 115-15).
  49. No indexation in calculating the capital gain - the capital gain must have been worked out by reference to a cost base whose elements have not been indexed (see section 115-20).
  50. Must hold the CGT asset for 12 months - the capital gain must result from a CGT event happening to a CGT asset that was acquired by the entity making the capital gain at least 12 months before the CGT event (see section 115-25).
  51. Capital gains from some CGT events do not give rise to discount capital gains. For example, CGT Events D1, F1, F2, F5 and H2 (see section 115-25(3)).
  52. The discount percentage for an amount of a discount capital gain is 50% if the gain is made by an individual or trust; and 33.33% (recurring) if the gain is made by a complying superannuation fund (see section 115-100).
  53. See the Method Statement in section 102-5. You need to appreciate the methodology adopted in section 102-5 in detail. See Example 17 below.
  54. Working out your net capital loss - see section 102-10.
  55. How to apply net capital losses - see section 102-15.
  56. Kate sold the land with the building on it for $1,600,000 on 16 April 2026. The real estate agent’s commission on the sale was $30,000. Assume Kate sold no other CGT assets during the CIY and that she has no prior year net capital loss. (Ignore any possible Capital Allowance Deductions under s 43-10 of ITAA 1997).
  57. Example 17: Example of the 5-step, net capital gain calculation (in s 102-5 ITAA97)
  58. In this example, it is much more tax effective to utilise the current year capital loss against Asset 1 first as this will ultimately produce the lowest overall amount in the taxpayer’s assessable income. See Note 1 in Step 1 in s 102-5, which permits a choice to be made about the order in which capital gains can be reduced by capital losses for the CIY.
  59. Notice that the taxpayer has a choice about the order in which this is done (see Note 2 in Step 2 in s 102-5).
  60. The $3,000 will enter the taxpayer’s assessable income as statutory income under s 102-5.
  61. Question: What if an amount is assessable as ordinary income under section 6-5 and as a capital gain because of the same CGT Event?
  62. Note the application of section 118-20 - reduce the capital gain by amounts otherwise assessable. Read, in this order, subsections 118-20(1), 118-20(3), and then 118-20(2).
  63. How do these provisions rest with section 6-25? What conclusions can you make?
  64. Does section 118-20 apply in this situation? Why?
  65. How do the reduced cost base rules work to prevent double counting? Consider sections 110-55(9) and 110-55(4).
  66. cars and motor cycles (section 118-5)
  67. collectables and personal use assets (see section 118-10 - discussed previously)
  68. depreciating assets (see section 118-24)
  69. trading stock (see section 118-25)
  70. capital gains and losses from gambling, a game or a competition with prizes (section 118-37(1)(c))
  71. certain compensation receipts and damages payments (see section 118-37)
  72. An important exemption in practice is the CGT main residence exemption (see Subdivision 118-B ITAA97). Please ensure you review the rules as summarised in the textbook and understand the effect of sections 118-110, 118-15, 118-120, 118-140, 118-145, 118-185, 118-190, and 118-192. Also refer to the examples provided on the ATO website at: Treating former home as main residence.
  73. Section 102-5 ITAA 1997 is proposed to be revised by expanding the net capital gain calculation from 5 into 7 steps. This change accommodates 4 new categories of capital gains, distinguishing between:
  74. See: Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, Sch 1, and the related Explanatory Memorandum to the Bill; and Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026.
  75. 5-step, net capital gain calculation (in s 102-5 ITAA97)
  76. The calculation below shows how s 102-5 ITAA97 applies to the facts. Please ensure you review this section carefully. For a further example, see Example 17 in the Week 6 Forum notes.
  77. Summary (before applying s 102-5 ITAA97)
  78. Priya also has a net capital loss from collectables for the CIY of $600 which will be carried forward to reduce her capital gains from collectables in the next income she has such gains: s 108-10(4) ITAA 97.
  79. Applying s 102-5 ITAA97
  80. In this example, it is much more tax effective to utilise the current year capital loss against the non-discount capital gains first as this will ultimately produce the lowest overall amount in the Priya’s assessable income. See Note 1 in Step 1 in s 102-5, which permits a choice to be made about the order in which capital gains can be reduced by capital losses for the CIY.
  81. Notice that Priya has a choice about the order in which this is done (see Note 2 in Step 2 in s 102-5).
  82. The $431,150 will enter Priya’s assessable income as statutory income under s 102-5 ITAA97.

Cases / rulings / authorities (3)

  1. Another example is the building in Wangaratta Woollen Mills v FCT 69 ATC 4095, which is regarded as ‘plant’ (discussed in a later Forum).
  2. Take the example of Mr Goldfinger from Taxation Ruling 1992/3:
  3. Example: Take the example of Mr Goldfinger from Taxation Ruling 1992/3. What are the tax implications if Mr Goldfinger acquired the gold bars for $100,000 and sold them 10 days later for $70,000?

Chapter 7 — General Deductions: Nexus, Positive and Negative Limbs, Apportionment and Boundaries

Source: Forum 7 Notes (2).txt + Week 8 Question(1) (2).txt

Statutory source lines (17)

  1. Overview of sections 8-1, 8-5 and 8-10 ITAA97.
  2. Tests of deductibility under s 8-1 ITAA97:
  3. Section 8-1 ITAA97 is very important!
  4. Various judicial tests have been established to show the nexus, yet ultimately they do not displace the statutory test under s 8-1(1)(a).
  5. More recently, in Hall v FCT [2026] FCAFC 43, Thawley J (in the Full Federal Court) said the following of the first positive limb of s 8-1:
  6. “The [first] positive limb in s 8-1(1) asks a question of connection or occasion: whether the loss or outgoing is incurred in gaining or producing assessable income; “it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income” - see: Ronpibon Tin NL v Commissioner of Taxation [1949] HCA 15; 78 CLR 47 at 57. Mere formal connection is not sufficient. It is necessary to look to the essential character of the expenditure, rather than the subjective purpose for which an item of expenditure has been incurred: Lunney v Commissioner of Taxation [1958] HCA 5; 100 CLR 478 at 497-9.
  7. “[Section 8-1(1)(a)]…does not require that the purpose of the expenditure shall be the gaining of the income of that year, so long as it was made in the given year and is incidental and relevant to the operations or activities regularly carried on for the production of income.
  8. It is no part of the function of the Act or of those who administer it to dictate to taxpayers in what business they shall engage or how to run their business provitably or economically.
  9. FCT v La Rosa 2003 ATC 4510 - see (now) s 26-54 ITAA 97
  10. FCT v Anstis 2010 ATC 20-221 - see (now) s 26-19 ITAA97
  11. Additional requirements for deductibility under s 8-1 - Note the application of the substantiation provisions in Division 900 of the 1997 Act (via the 4th negative limb).
  12. Importance of the words ‘to the extent’ in section 8-1.
  13. *FCT v Payne 2001 ATC 4027 and section 25-100 of the ITAA 97.
  14. 1. What is the distinction between (i) a home office; and (ii) the usage of part of the home as a place of ‘business’?
  15. Question: Is expenditure in any of these 3 areas deductible under section 8-1?
  16. FCT v Anstis 2010 ATC 20-221, and s 26-19 ITAA97
  17. If a taxpayer’s tuition fees are deductible, how are any related FEE-HELP repayments treated? Distinguish between the time the self-education cost is incurred vs the time when the repayments are made - see s 26-20 ITAA97.

Cases / rulings / authorities (34)

  1. *The Herald & Weekly Times Ltd v FCT (1932) 48 CLR 113
  2. *Charles Moore & Co (WA) Pty Ltd v FCT (1956) 95 CLR 344
  3. *Lunney & Hayley v FCT (1958) 100 CLR 478
  4. In Ronpibon Tin NL v FCT; Tongkah Compound NL v FCT (1949) 78 CLR 47, the High Court said:
  5. More recently, in Hall v FCT [2026] FCAFC 43, Thawley J (in the Full Federal Court) said the following of the first positive limb of s 8-1:
  6. “The [first] positive limb in s 8-1(1) asks a question of connection or occasion: whether the loss or outgoing is incurred in gaining or producing assessable income; “it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income” - see: Ronpibon Tin NL v Commissioner of Taxation [1949] HCA 15; 78 CLR 47 at 57. Mere formal connection is not sufficient. It is necessary to look to the essential character of the expenditure, rather than the subjective purpose for which an item of expenditure has been incurred: Lunney v Commissioner of Taxation [1958] HCA 5; 100 CLR 478 at 497-9.
  7. Does the expenditure need to be incurred in the same income year in which the income it is intended to produce is derived? No - see Smith v FCT (1987) 164 CLR 513 (re deductibility of premiums for an income protection insurance policy - discussed in Forum 5]:
  8. *FCT v Snowden Wilson Pty Ltd (1958) 99 CLR 431
  9. In Re Magna Alloys & Research Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia [1980] FCA 150, Deane and Fisher J said:
  10. What is required is that the relevant expenditure be appropriate and adapted for the ends of the business carried on for the purpose of earning assessable income: see, Ronpibon Tin NL v FC of T; Tongkah Compound NL v FC of T, supra, 78 CLR at 55-56; 4 AITR at 245; FC of T v Snowden & Willson Pty Ltd, supra, 99 CLR at 444 and 447; 7 AITR at 317 and 320.
  11. “The Act must operate upon the result of a taxpayer's activities as it finds them": per Williams J, Tweddle v FC of T [1942] HCA 40…” [Emphasis added; para breaks inserted]
  12. FCT v La Rosa 2003 ATC 4510 - see (now) s 26-54 ITAA 97
  13. FCT v Cooper 91 ATC 4396
  14. FCT v Day 2008 ATC 20-064
  15. FCT v Anstis 2010 ATC 20-221 - see (now) s 26-19 ITAA97
  16. Example: See *Ronpibon Tin NL v FCT; Tongkah Compound NL v FCT (1949) 78 CLR 47, where the High Court said:
  17. “…It is important not to confuse the question how much of the actual expenditure of the taxpayer is attributable to the gaining of assessable income with the question how much would a prudent investor have expended in gaining the assessable income. The actual expenditure in gaining the assessable income, if and when ascertained, must be accepted. The problem is to ascertain it by an apportionment. It is not for the Court or the commissioner to say how much a taxpayer ought to spend in obtaining his income, but only how much he has spent: see per Ferguson J. in Tooheys Ltd. v. Commissioner of Taxation (1922) 22 SR (NSW) 432, at p 440 ; per Williams J. in Tweddle v. Federal Commissioner of Taxation [1942] HCA 40; (1942) 7 ATD 186, at p 190 . The question of fact is therefore to make a fair appointment to each object of the companies' actual expenditure where items are not in themselves referable to one object or the other. But this must be done as a matter of fact and therefore not by this Full Court.”
  18. FCT v Collings 76 ATC 4254
  19. FCT v Vogt 75 ATC 4073
  20. *FCT v Payne 2001 ATC 4027 and section 25-100 of the ITAA 97.
  21. Taxation Ruling TR 2021/1 When are deductions allowed for employees’ transport expenses?
  22. Taxation Ruling 95/34: Employees carrying out itinerant work
  23. *Handley v FCT 81 ATC 4165; and FCT v Forsyth 81 ATC 4157
  24. *Swinford v FCT 84 ATC 4803
  25. *Hall v FCT [2026] FCAFC 43
  26. Taxation Ruling TR 93/30: Deductions for home office expenses
  27. FCT v Finn (1961) 106 CLR 60
  28. *FCT v Hatchett 71 ATC 4184
  29. *FCT v Studdert 91 ATC 5006
  30. FCT v Anstis 2010 ATC 20-221, and s 26-19 ITAA97
  31. Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual.
  32. FCT v Edwards 94 ATC 4255
  33. Mansfield v FCT 96 ATC 4001
  34. Morris and Others v FCT 2002 ATC 4404 - sun protection items (eg sunglasses, sunhats, and sunscreen) deductible for employees required to work outdoors.

Chapter 8 — Deductions Across Time: Preliminary, Post-Cessation, Interest and Self-Education

Source: Forum 8 Notes (2).txt + Week 9 Question (2).txt

Statutory source lines (17)

  1. In order to claim a general deduction under section 8-1, a taxpayer must show that a loss or outgoing was incurred ‘in gaining or producing your assessable income’ or ‘in carrying on a business’ for that purpose.
  2. The general position is that expenditure incurred before the commencement of a business (including expenditure incurred to diversify an existing business) is not deductible under section 8-1 because it is not incurred in carrying on a business etc (section 8-1(1)(b)) and/or is capital expenditure (and therefore denied deductibility under section 8-1(2)(a)).
  3. Does Subdiv 40-I ITAA97 now provide a capital allowance deduction over time for costs such as feasibility studies. See s 40-840(2)(d)(ii), s 40-832, 40-835, and s 40-855 ITAA97?
  4. Also consider 40-880(2) and 40-880(2A) ITAA97 for business related costs (colloquially known as “blackhole” expenses), but note s 40-880(5) and 40-880(7) ITAA97 (which may be further subject to the non-commercial loss rules in Div 35 ITAA97: s 35-10(2B) ITAA97).
  5. First consider some general propositions about the deductibility of interest under s 8-1 (as confirmed by the High Court in Steele):
  6. Generally, interest on money borrowed for the purpose of acquiring an income producing asset is deductible under s 8-1.
  7. If Steele happened today, query whether Div 35 ITAA97 (deferring deductions from non-commercial business activities conducted by individuals) would quarantine the taxpayer’s losses so they are deductible only against future assessable income from the business activity (see ss 35-10(1) and 35-10(2) ITAA97). However, the real property test in s 35-40 ITAA97 may apply to permit the deduction (if other requirements are satisfied - s 35-10(1(a) ITAA97).
  8. Note that s 26-102 ITAA97 can deny deductions for the holding costs of vacant land (eg interest and council rates) unless the land is in use (or available for use) in carrying on a business.
  9. The general position is that expenditure incurred after the cessation of a business is not deductible under section 8-1 because it is not incurred in carrying on a business etc (section 8-1(1)(b)) and/or is capital expenditure (and therefore denied deductibility under section 8-1(2)(a)). See, for example, Amalgamated Zinc (de Bavay’s) Ltd v FCT (1935) 54 CLR 295.
  10. Part A
  11. Advise Romek whether any of the above expenses, or part thereof, are deductible to him. Support your answer with reference to relevant legislation and case law.
  12. Part B (If time permits)
  13. Advise JBL whether the $8,000 in stolen money is deductible to the firm under s 8-1 ITAA 1997. Support your answer with reference to relevant case law.
  14. Advise Romek whether the other items stolen from him at the café (namely his bag, tie, wallet and $180 in cash) are deductible to him under s 8-1 ITAA97. Support your answer with reference to relevant case law.
  15. As part of your revision, you are encouraged to read all of Taxation Ruling TR 2024/3: Income Tax:
  16. We discussed the view that a law degree is not merely workplace training. Rather, it forms part of the
  17. Note too that while the deductibility of tuition fees depends on the s 8-1 nexus analysis, HELP/FEEHELP repayments are non-deductible: s 26-20 of the ITAA 1997.

Cases / rulings / authorities (23)

  1. The words ‘in gaining or producing’ are read to mean ‘in the course of gaining or producing’: Amalgamated Zinc (de Bavay’s) Ltd v FCT (1935) 54 CLR 295. With the words ‘in carrying on a business’ emphasis is often placed on the ‘carrying on’ component.
  2. FCT v Maddalena 71 ATC 4161
  3. *Softwood Pulp & Paper Ltd v FCT 76 ATC 4439 - Consider:
  4. *Steele v FCT 99 ATC 4242.
  5. Also note that the security for the borrowing is irrelevant in determining the deductibility of the interest: FCT v Munro (1926) 38 CLR 153.
  6. The ATO says in Taxation Ruling TR 2004/4 at para 9, that:
  7. The general position is that expenditure incurred after the cessation of a business is not deductible under section 8-1 because it is not incurred in carrying on a business etc (section 8-1(1)(b)) and/or is capital expenditure (and therefore denied deductibility under section 8-1(2)(a)). See, for example, Amalgamated Zinc (de Bavay’s) Ltd v FCT (1935) 54 CLR 295.
  8. *Placer Pacific Management Pty Ltd v FCT 95 ATC 4459
  9. FCT v Brown 99 ATC 4600
  10. As part of your revision, you are encouraged to read all of Taxation Ruling TR 2024/3: Income Tax:
  11. FCT v Finn (1961) 106 CLR 60
  12. FCT v Hatchett 71 ATC 4184
  13. FCT v Studdert 91 ATC 5006
  14. FCT v MI Roberts 92 ATC 4787.
  15. In TR 2024/3, compare Examples 1, 11, and 13. What is the basis for the ATO’s conclusion in each of
  16. Ting v FCT [2015] AATA 166, and
  17. TR 2024/3 at paras 81 to 85, and Example 21.
  18. Regarding the role of examples in a tax ruling, note paragraph 8 of TR 2024/3, as well as the following
  19. observations of Senior Member Evans-Bonner in YDXM v FCT [2022] AATA 2382 (at para 41):
  20. YDXM v FCT [2022] AATA 2382 - the taxpayer’s JD costs were not deductible.
  21. Assefa v FCT [2009] AATA 2 - the taxpayer’s tuition costs for her nursing degree were not
  22. NT91/37 v FCT [1991] AATA 290 - the taxpayer’s pre-admission course at the College of Law
  23. Masters v FCT [2017] AATA 1042 - the taxpayer was permitted deductions for some of the

Chapter 9 — Capital v Revenue, When Expenditure Is Incurred, Division 40 and Division 43

Source: Forum 9 Notes (2).txt + Week 10 Question(1) (1).txt

Statutory source lines (56)

  1. REVENUE/CAPITAL DICHOTOMY UNDER s 8-1
  2. Section 8-1(2)(a) - denies deductibility for losses or outgoings of capital, or of a capital nature
  3. Overall, it is likely that the payment for the pizza oven would be capital and non-deductible under s 8-1 whereas the electricity payments would not be capital.”
  4. TAX ACCOUNTING FOR DEDUCTIONS UNDER s 8-1
  5. When is a loss or outgoing ‘incurred’ under s 8-1 of the ITAA 97?
  6. a taxpayer need not actually have paid any money to have incurred an outgoing provided the taxpayer is definitively committed in the year of income. Accordingly, a loss or outgoing may be incurred within section 8-1 even though it remains unpaid, provided the taxpayer is 'completely subjected' to the loss or outgoing. That is, subject to the principles set out below, it is not sufficient if the liability is merely contingent or no more than pending, threatened or expected, no matter how certain it is in the year of income that the loss or outgoing will be incurred in the future. It must be a presently existing liability to pay a pecuniary sum; [emphasis added]
  7. (Note s 82KZM ITAA36 would not apply to spread the deduction over the insurance period - see s 82KZM(ba)(ii) ITAA36).
  8. DIVISION 40 OF THE ITAA 1997
  9. Operative provision - section 40-25(1):
  10. You can deduct an amount equal to the decline in value for an income year (as worked out under Division 40) of a depreciating asset that you held for any time during the year.
  11. What is a depreciating asset? See section 40-30
  12. When is a depreciating asset ‘held’? See section 40-40.
  13. Choice of methods to calculate decline in value: see section 40-65.
  14. Prime cost method: see section 40-75; or
  15. Diminishing value method (from 9 May 2006): see section 40-72.
  16. The diminishing value method can not be chosen for some intangible assets. See the types of intangible assets covered by s 40-70(2) (and s 40-72(2)).
  17. Cost or base value (effectively, written down value): see sections 40-85, 40-175, 40-180, 40-185, 40-190.
  18. Note the adjustment for the cost of a car (section 40-230). For the 2025-26 income year, the car limit is $69,674.
  19. Effective life - choice (section 40-95) between Commissioner’s determination (section 40-100) and self-assessment (section 40-105).
  20. As an exercise, search Table A in Schedule 2 of this Determination to find the effective life of a dishwasher in a rental property, and Table B for the effective life of a laptop computer.
  21. Note that you can not self-assess the effective life for certain intangible assets as the legislation prescribes the effective life (see s 40-95(7)).
  22. Taxable purpose is defined in section 40-25(7).
  23. Reduction of deduction for decline in value for a purpose other than a taxable purpose: see section 40-25(2). The legislation requires you to first calculate the decline in value of the asset (s 40-25(1)) and then to “reduce” this by the non- income producing portion (s 40-25(2)).
  24. Section 40-27 ITAA97 provides that individuals can not benefit from excessive deductions related to depreciating assets held to produce residential rental income.
  25. Note that the decline in value of a depreciating asset that you hold is its’ cost, where, inter alia, that cost does not exceed $300 and you use the asset predominately for the purpose of producing assessable income that is not income from carrying on a business (see section 40-80(2)). Read this section carefully for all of the requirements!
  26. Romek is a paralegal for a law firm on the Gold Coast. To match his suit and to keep a professional image, Romek spent $280 on an artificial leather, document wallet designed for the secure transport of confidential and sensitive documents for court events or client meetings. Assuming the wallet is used solely in Romek’s employment, the expense is immediately deductible to him pursuant to s 40-80(2) ITAA97.
  27. Balancing adjustment event: section 40-295.
  28. the asset’s termination value > adjustable value, the difference is included in assessable income (statutory income): section 40-285(1).
  29. the asset’s termination value < adjustable value, the difference is deductible (specific deduction): section 40-285(2).
  30. What is an asset’s termination value? See section 40-300 and 40-305.
  31. Adjustment for the termination value of a car which has a cost calculated by applying the section 40-230 car limit: see sections 40-320 and 40-325.
  32. If a depreciating asset is held 100% for the purposes of producing assessable income, any capital gain or loss arising from the happening of CGT Event A1 as a result of the disposal of the depreciating asset is disregarded (assuming that the disposal is also a balancing adjustment event): s 118-24(1).
  33. Note that although section 118-24(1) disregards capital gains or losses on depreciating assets that are also balancing adjustment events, the exclusion does not apply to capital gains or losses from CGT Event K7 happening (see section 118-24(2)). CGT Event K7 is relevant when a balancing adjustment event occurs for a depreciating asset that you hold and use only partly for a taxable purpose. However, if the depreciating asset is also a personal use asset, any capital loss on its disposal is disregarded.
  34. DEDUCTIONS FOR CAPITAL WORKS (DIVISION 43 OF THE ITAA 1997)
  35. Capital Works (Division 43 of the ITAA 1997)
  36. You can deduct an amount for capital works for the year if the requirements in s 43-10 are satisfied.
  37. What are capital works? A taxpayer can claim deductions under Division 43 for capital expenditure incurred in constructing capital works being a building, or an extension, alteration or improvement to a building: section 43-20(1).
  38. Division 43 also applies to capital works that are structural improvements, or extensions, alterations or improvements to structural improvements: section 43-20(2). Some examples of structural improvements are contained in section 43-20(3). Section 43-20(3) provides an inclusive list of examples of structural improvement and not an exhaustive list.
  39. Example: Although a building might be a depreciating asset, expenditure on buildings is generally deductible under Division 43 (ie the capital works provisions) and not Division 40 - unless it is ‘plant’ (see below).
  40. Section 43-10(2)(a) requires the capital work to have a “construction expenditure area” as one of the prerequisites for obtaining a Division 43 deduction. What is construction expenditure? See s 43-70(1). Note some of the types of expenditure that are excluded in s 43-70(2) (e.g. paragraphs (a), (b), (d), (e)) and therefore could not be added to other construction expenditure costs of the capital work for the purposes of the Division 43 deduction. Also read sections 43-120 and 43-125.
  41. For the purposes of this course, you can assume that most expenditure on capital works to which Division 43 apply are deducted at a rate of 2.5% per annum over 40 years. [Remember part year apportionment issues, where relevant, and the fact that the building must be used for the purposes of producing assessable income.]
  42. The Div 43 deduction for the CIY is calculated using the formula:
  43. There is no deduction until construction is complete: s 43-30. Therefore, you may need to apportion part of the deduction in the first year.
  44. Of course, taxpayers can only get Division 43 deductions if the capital works are used in a deductible way (i.e. for the purpose of producing assessable income). Where only part of capital works are used to produce assessable income, an apportionment is required to reduce the deduction (usually on a floor area basis).
  45. If the taxpayer satisfies the requirements for deductibility under Division 43 (even if the relevant expenditure is in respect of a depreciating asset), then depreciation deductions under Division 40 can not be claimed since Division 40 is deemed not to apply (see sections 40-45(2) and 43-50).
  46. However, if the expenditure on a building (or other capital works) satisfies the definition of ‘plant’, then the capital works expenditure will not be deductible under Division 43 (see sections 43-70(2)(e), 43-10, and 43-15) and instead, will be deductible under Division 40.
  47. Definition of ‘plant’: see section 45-40. You may need to print this out if it is not in your Core Tax Legislation. The s 45-40 definition is an inclusive definition. This means that an item can still be regarded as ‘plant’ if it is not on the list. Therefore, we need to know what the common law regards is ‘plant’.
  48. What happens if an asset is both a Division 40 and a Division 43 asset? Then, if the asset is plant, for example, deductions will be calculated according to Division 40. As you know when you stop holding a Division 40 depreciating asset (eg. selling or scrapping the asset) a balancing adjustment event happens. If Division 40 prevails over Division 43 in respect of the asset, then to the extent that the depreciating asset has been used for a taxable purpose, the gain or loss on sale will be picked up under Division 40 and not CGT.
  49. But what happens if the depreciating asset is part of a CGT asset? For example, the factory (or building) in Wangaratta Woolen Mills v FCT was obviously fixed to land and part of the land. If the owner in Wangaratta sold the land and factory, then the disposal of the factory would be a balancing adjustment event (because it was a Division 40 asset (plant) and the owner no longer holds it). Note the obvious practical point that some of the sale proceeds for the disposal would be attributable to the land and some of them to the building. Is it correct then to put the construction costs of the factory in the CGT cost base of the land? The answer is no. The CGT rules will treat the factory as a separate CGT asset from the land (see s 108-55) so that capital gain or loss on disposal of the factory is disregarded, with the gain or loss only being picked up under the Division 40 balancing adjustment provisions. The same logic applies to a depreciating asset that is part of a building: s 108-60.
  50. On another matter, if Division 43 capital works expenditure forms part of the cost base of a CGT asset (eg 4th element if you incurred it, or 1st element if you purchased the capital work from someone else), then the cost base needs to be reduced to the extent of any Division 43 deductions you have claimed (if the CGT asset was acquired after 7.30pm on 13 May 1997). See s 110-45.
  51. Expenditure does not form part of the reduced cost base to the extent you have deducted it or can deduct it (see section 110-55(4) and 110-55(9)).
  52. Note the application of section 110-45(4): capital expenditure by a previous owner that you can deduct after acquisition.
  53. 1. Does Division 40 apply to the house? Why?
  54. 2. Is the Company entitled to a Division 43 deduction in the 2025-26 income year? Why? How much is the deduction?
  55. Part A
  56. Part B

Cases / rulings / authorities (9)

  1. Vallambrosa Rubber Co Ltd v Farmer (1910) 5 TC 529.
  2. British Insulated & Helsby Cables v Atherton (1926) 10 TC 155
  3. *Sun Newspapers Ltd; Associated Newspapers Ltd v FCT (1938) 61 CLR 337
  4. *Broken Hill Theatres Pty Ltd v FCT (1952) 85 CLR 423
  5. *National Australia Bank Ltd v FCT 97 ATC 5153
  6. The Commissioner in Taxation Ruling TR 97/7 (at para 6] provides a good summary of the relevant principles established by case law on when a loss or outgoing is incurred.
  7. Wangaratta Woolen Mills v FCT 69 ATC 4095
  8. FCT v Faichney 72 ATC 4245
  9. Carpentaria Transport Pty Ltd v FCT 90 ATC 4590

Chapter 10 — Specific Deductions, Borrowing Costs, Repairs and Deduction Denials

Source: Forum 10 Notes (3).txt + Week 11 Question (2).txt

Statutory source lines (63)

  1. Please refer to your Forum 8 notes which explains the test for the deductibility of interest under s 8-1 ITAA97 as confirmed by the High Court in Steele v DFCT 99 ATC 4242. Interest is also not normally a capital expense.
  2. Can interest form part of the CGT cost base or reduced cost base: s 110-25(4) ITAA97? What happens to the CGT cost base if interest has already been deducted under s 8-1 ITAA97? When and how does s 110-45(1B) ITAA97 apply?
  3. Costs incurred in arranging or securing borrowed funds are generally regarded as capital expenses and therefore are not ordinarily deductible under s 8-1 ITAA97. An exception may arise where borrowing money forms part of the taxpayer’s regular business activities (eg a bank).
  4. Section 25-25 ITAA97 provides a specific deduction for borrowing expenses (not interest), where borrowed funds are used for income-producing purposes (and apportionment is required if the funds are used partly for those purposes). The borrowing expenses are generally deductible over the shorter of the period of the loan term or 5 years, with the deduction period commencing on the date the loan is entered into.
  5. Accordingly, if a loan has a term longer than 5 years, the borrowing expenses are spread evenly over the first 5 calendar years from the date of borrowing. Where the loan begins part-way through an income year, the deduction for both the first and last years must be apportioned to account for the fact that the expenses are only deductible for part of those income years.
  6. However, a different rule applies where the total borrowing expenses incurred are $100 or less. In that case, the full amount is deductible in the income year in which it is incurred: s 25-25(6) ITAA97.
  7. Notice that borrowing expenses under s 25-25 ITAA97 may constitute an incidental cost of a CGT asset and be included under the cost base 2nd element: s 110-35(9) ITAA97. However, what if the borrowing cost has already been deducted: can it be included in the CGT cost base? Consider s 110-45(1B) ITAA97.
  8. What is Liam’s s 25-25 ITAA97 deduction for the 2025-26 income year? And what are his deductions for each of the remaining years of the loan?
  9. If Liam repaid the entire loan on 20 June 2027, what is his s 25-25 ITAA97 deduction for the 2026-27 income year?
  10. Section 25-30 ITAA97 allows a taxpayer to deduct costs incurred in discharging (removing) a mortgage where the mortgage relates to money borrowed or property acquired for the purpose of producing assessable income.
  11. Section 25-30I applies to discharges of mortgages that secured a loan from a lender: s 25-30(1). It also applies to a mortgages that secured the purchase price owed to the seller (that is, a vendor finance situation): s 25-30(2). Such costs are capital outgoings and are not deductible under s 8-1 ITAA97, so a specific deduction is needed to provide the deduction.
  12. Example: Jane owns a rental property secured by a mortgage. When Jane sells the property, the bank charges her a $450 mortgage discharge fee. Because the property was used solely to derive rental income, the $450 mortgage discharge fee is deductible under s 25-30 ITAA97.
  13. Can mortgage discharge fees be included in the 2nd element of the CGT cost base? See s 110-35(9) ITAA97? What if they’ve already been deducted? See s 110-45(1B).
  14. Elements of section 25-10 of the 1997 Act.
  15. Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. A repair merely replaces a part of something or corrects something that is already there and has become worn out or dilapidated. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration that has occurred by ordinary wear and tear, by accidental or deliberate damage or by the operation of natural causes (whether expected or unexpected) during the passage of time.
  16. To repair property improves to some extent the condition it was in immediately before repair. A minor and incidental degree of improvement, addition or alteration may be done to property and still be a repair. If the work amounts to a substantial improvement, addition or alteration, it is not a repair and is not deductible under section 25-10.”
  17. “What is a 'repair' for the purposes of section 25-10 is a question of fact and degree in each case having regard to the appearance, form, state and condition of the particular property at the time the expenditure is incurred and to the nature and extent of the work done to the property.
  18. If work done to property goes beyond what is a 'repair' in terms of section 25-10, any expenditure for the work is not deductible. The work may go beyond 'repairs' in terms of the section if it:
  19. “Work done partly to remedy or make good defects, damage or deterioration does not cease to be a repair if it is also done partly - even largely - to prevent or anticipate defects, damage or deterioration (in a mechanical or physical sense) in property or in rectifying defects in their very early stages. Repairs are not confined to rectifying defects, damage or deterioration that have already become serious. Work done to property not in need of repair, however, is not repair work and any expenditure for the work in these circumstances is not deductible under section 25-10.
  20. Some kinds of maintenance work are 'repairs' in terms of section 25-10, for example, painting plant or business premises to rectify existing deterioration and to prevent further deterioration. Other kinds of maintenance work, such as oiling, brushing or cleaning something that is otherwise in good working condition and only requires attention to prevent the possibility of its going wrong in the future, are not 'repairs' in terms of the section . Expenditure on the latter kind of maintenance work may be an allowable deduction under section 8-1.”
  21. “Elle Bashful uses her truck for income producing purposes. She replaces the truck's worn out petrol engine with a diesel engine with a much greater economy of operation. The engine is not an entirety but a subsidiary part of truck. However, the costs relate to an improvement of the truck because the replacement of the engine involved a significantly greater efficiency in the truck's function. The engine is a major and important part of the truck and is a new and better engine with considerable advantages over the old one, including the advantage that it reduces the likelihood of future repair bills. The costs are of a capital nature and are not deductible under section 25-10: cf (1953) 3 CTBR (NS) Case 82. A deduction for depreciation…may be allowable.”
  22. “Mary Fabrica owns a factory in which the bitumen floor laid on a gravel base needs repairing. She replaces it with a new floor consisting of an underlay of concrete topped with granolith (a paving stone of crushed granite and cement). The new floor, from a functional efficiency (rather than an appearance) point of view, is not superior in quality to the old floor. The new floor performs precisely the same function as the old and is no more satisfactory. In fact, the new floor is more expensive to repair than the old. Because the new floor is not a substantial improvement, it is a repair and its cost is deductible under section 25-10: Case T75 (1968) 18 TBRD 377; (1968) 14 CTBR (NS) Case 40.”
  23. “Sam Tabernarius, a shopkeeper, decides to replace the awning of his shop with a more modern and aesthetic equivalent. The awning is in good condition before the work is done; there is nothing to be restored, no decayed or worn out parts to be renewed and nothing loose or detached which requires fixing. The expenditure involved is not for repairs - the awning being in good repair before the work was done - and no deduction is allowable under section 25-10 of the ITAA 1997.”
  24. A repair involvers the replacement or renewal of a subsidiary part of an entirety (or whole).
  25. Mr Fermier is entitled to claim a deduction for the cost of repairing his fencing under section 25-10. The entirety is the total fencing so replacing the fences on the northern boundary is a replacement of a subsidiary part of the whole fencing: cf (1963) 11 CTBR (NS) Case 44.
  26. However, Mr Agricola's expenditure is not deductible under section 25-10 because the whole fencing was replaced, making it a reconstruction of the entirety. The total fencing is not a subsidiary part of the rural property or of anything else. To replace entire fencing with new fencing is to replace one capital asset with another capital asset. The cost is therefore of a capital nature: cf (1962) 10 CTBR (NS) Case 58. Mr Agricola's fences are depreciable 'plant'…”
  27. “[A] taxpayer's beachside apartment may have deteriorated over several years due to wear and tear arising from its use for private purposes. If the taxpayer arranges to 'rent' the apartment to his or her adult child for, say, a month and during that month incurs expenditure to repair and paint the apartment, a deduction may not be allowable, in our view, under section 25-10 for the repair and painting costs. We would take the view in appropriate circumstances that no deduction is allowable either because:
  28. Part IVA of the ITAA 1936 may apply to the arrangement [that is, the general anti-avoidance provisions - which we will discuss in a later Forum],”
  29. Capital expenditure is not deductible under section 25-10 (see section 25-10(3)).
  30. The expenditure incurred in these circumstances to fix the white ant problem existing at the date of purchase is also of a capital nature. It is therefore not deductible under section 25-10. The fact that William was unaware of the problem when he purchased the house, and the fact that he would have paid a lower purchase price if he had known of the need for repairs, do not alter the capital nature of the expense: Case 64 (1944) 11 TBRD (OS) 202 and the W Thomas & Co case.”
  31. See section 25-10(2).
  32. “Josephine Telefix, a television repairer, owns a station wagon that is used for 70% business and 30% private purposes during the taxation year. Repair costs of $10,000 are incurred on the front panels, engine and computer system in the station wagon following a car accident during the running of the business. The full amount of the repair costs of $10,000 is not deductible under section 25-10. Because Josephine uses the station wagon for private and for business purposes, subsection 25-10(2) limits the amount of her deduction to that part of the expenditure that reasonably relates to the use of the station wagon for business purposes, namely, $7,000.”
  33. “Assume the facts [above involving Josephine Telefix] are unchanged except that the accident occurs while Josephine is using the station wagon driving to Church, i.e., for private purposes. We reject the view that no part of the repair costs is deductible under section 25-10. Because Josephine uses the station wagon for private and for business purposes, subsection 25-10(2) limits the amount of her deduction to that part of the expenditure that reasonably relates to the use of the station wagon for business purposes, namely, $7,000.”
  34. What is the relationship between section 25-10 and section 8-1? The ATO provides a summary of this issue in TR 97/23 (at para 74):
  35. “Generally speaking, section 8-1 produces the same result as section 25-10 in relation to the deductibility of repair costs. Section 8-1 has its own tests for deductibility. There may be occasions, however, where section 8-1 allows a deduction for repair expenditure that would otherwise not be deductible under section 25-10. Section 8-1 might allow a deduction, for example, after a taxpayer ceases to hold, etc., property for income purposes even though section 25-10 would not allow a deduction (see Placer Pacific Management Pty Ltd v FC of T 95 ATC 4459; (1995) 31 ATR 253).”
  36. Repairs of a revenue nature may be included in the 3rd element of the CGT cost base: s 110-25(4)(b); but not to the extent they have already been deducted: s 110-45(1B).
  37. If a repair is capital in nature, then consider if the expenditure satisfies the test in the 4th element of the CGT cost base (in s 110-25(5)) so that it may be included under that element? Then, if it can, does Div 43 ITAA97 provide a capital work deduction for the cost in the meantime? If Div 43 applies, do the deductions claimed under that Division need to be removed from the CGT cost base when CGT event A1 happens when the property is disposed? When and how does s 110-45(2) apply?
  38. Tax related expenses (section 25-5)
  39. Borrowing expenses (section 25-25) - see above
  40. Expenses of discharging a mortgage (section 25-30) - see above
  41. Bad debts (section 25-35)
  42. Loss by theft etc. (section 25-45)
  43. Travel between workplaces (section 25-100)
  44. Gifts (section 30-15)
  45. Tax losses (Division 36)
  46. Project amounts (section 40-830) - see your Forum 8 Notes
  47. Business Related Costs (section 40-880) - see your Forum 8 Notes
  48. Penalties (section 26-5)
  49. Leave payments (section 26-10)
  50. HECS and student assistance (section 26-20)
  51. Relative’s travel expenses (section 26-30)
  52. Bribes to foreign public officials (section 26-52)
  53. Bribes to public officials (section 26-53)
  54. Expenditure relating to illegal activities (section 26-54)
  55. Entertainment expenditure (see Division 32 of the 1997 Act)
  56. Section 51AH of the 1936 Act - no deduction allowed where expenses incurred by an employee are reimbursed.
  57. Consider the situations in which section 26-35 might apply (ie amounts paid to related entities). Some issues:
  58. Legislation giving effect to this proposal has been implemented, and the core provision is s 26-155 ITAA97. These reforms are mentioned for your awareness only; you will not be tested on the negative gearing changes in session 262.
  59. See: Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Sch 2, and the Explanatory Memorandum to the related Bill.
  60. ignore any Div 43 ITAA97 and CGT consequences relating to the old timber shed;
  61. ignore the capital allowance regime for small business entities in Subdiv 328-D ITAA97; and
  62. assume Marty is not eligible for any CGT small business concessions in Div 152 ITAA 97.
  63. Calculate Marty’s net capital gain for the 2025-26 income year pursuant to s 102-5 ITAA97. Explain your calculation with reference to relevant legislation, and show all workings.

Cases / rulings / authorities (22)

  1. Please refer to your Forum 8 notes which explains the test for the deductibility of interest under s 8-1 ITAA97 as confirmed by the High Court in Steele v DFCT 99 ATC 4242. Interest is also not normally a capital expense.
  2. Students are encouraged to read Taxation Ruling TR 97/23: Income tax: deductions for repairs.
  3. The ATO summarises the meaning of ‘repairs’ in TR 97/23 as follows (at paras 13 to 16):
  4. And at paras 21 and 22 of TR 97/23, the ATO says:
  5. Can maintenance work be a repair? On this issue, the ATO says in TR 97/23:
  6. The following Example is extracted from TR 97/23 (at para 164):
  7. The following Example is extracted from TR 97/23 (at para 172):
  8. “Mary Fabrica owns a factory in which the bitumen floor laid on a gravel base needs repairing. She replaces it with a new floor consisting of an underlay of concrete topped with granolith (a paving stone of crushed granite and cement). The new floor, from a functional efficiency (rather than an appearance) point of view, is not superior in quality to the old floor. The new floor performs precisely the same function as the old and is no more satisfactory. In fact, the new floor is more expensive to repair than the old. Because the new floor is not a substantial improvement, it is a repair and its cost is deductible under section 25-10: Case T75 (1968) 18 TBRD 377; (1968) 14 CTBR (NS) Case 40.”
  9. The following Example is extracted from TR 97/23 (at para 162):
  10. *Lindsay v FCT (1961) 106 CLR 377
  11. The following Example is extracted from TR 97/23 (at paras 165 to 167):
  12. *FCT v Western Suburbs Cinema Ltd (1952) 86 CLR 102
  13. The following Example is extracted from TR 97/23 (at paras 171):
  14. According to the Commissioner in TR 97/23, you can only deduct repair expenditure if the relevant property was held or used for bona fide income producing purposes.
  15. An example of the circumstances where this might be an issue is in TR 97/23 (at para 72):
  16. The following Example is extracted from TR 97/23 (at para 171):
  17. *W Thomas & Co Pty Ltd v FCT (1965) 115 CLR 58.
  18. The following Example is extracted from TR 97/23 (at paras 177 to 179):
  19. The following Example is extracted from TR 97/23 (at para 186):
  20. The following Example is extracted from TR 97/23 (at para 187):
  21. What is the relationship between section 25-10 and section 8-1? The ATO provides a summary of this issue in TR 97/23 (at para 74):
  22. “Generally speaking, section 8-1 produces the same result as section 25-10 in relation to the deductibility of repair costs. Section 8-1 has its own tests for deductibility. There may be occasions, however, where section 8-1 allows a deduction for repair expenditure that would otherwise not be deductible under section 25-10. Section 8-1 might allow a deduction, for example, after a taxpayer ceases to hold, etc., property for income purposes even though section 25-10 would not allow a deduction (see Placer Pacific Management Pty Ltd v FC of T 95 ATC 4459; (1995) 31 ATR 253).”

Chapter 11 — Tax Planning, Tax Avoidance, Integrity Rules and Part IVA

Source: Forum 11 Notes (1).txt + Week 12 Question (2).txt

Statutory source lines (48)

  1. Eg: Division 6AA ITAA36: Tax rates for minors - See Forum 1.
  2. The tax rates on the “eligible taxable income” of an Australia tax resident child (aged under age 18 on 30 June 2026) under Div 6AA ITAA36:
  3. However, if the child’s income is “excepted” taxable income, then the ordinary resident individual tax rates apply to that part of income. Examples of excepted taxable income include:
  4. In the absence of Div 6AA, what outcome was Susan hoping to achieve? What is the outcome due to Div 6AA ITAA36?
  5. Convertibility issues and s 21A ITAA36
  6. The FBT Act and s 26(e) ITAA36 - valuation issues
  7. Eg: Reducing deductions for amounts paid to related entities: section 26-35 of the 1997 Act. Recall the following example from the Forum 10 notes:
  8. Jeff purchased a block of land in January 2006 for $200,000 near where he lives. He wants to help his adult daughter build a house to live in on the land. On 1 June 2026, Jeff gifts the land to his daughter (meaning for nil consideration). The market value of the land on 1 June 2026 is $800,000. What is Jeff’s capital proceeds (consider s 116-30)? What if instead he transferred the land to his daughter for $1? What is his daughter’s cost base (consider s 112-20)?
  9. The prepayment provisions (in Pt 3, Subdiv 3-H ITAA36) are an example of a specific anti-avoidance or integrity regime because they target a defined tax planning technique: the use of prepayments to accelerate deductions into an earlier income year. The provisions replace immediate deductibility with statutory apportionment over the eligible service period in some situations.
  10. Recall: What is the meaning of “incurred” in s 8-1 ITAA97? See Forum 9 Notes.
  11. The prepayment provisions in ss 82KZL, 82KZM, 82KZMA and s 82KZMD ITAA36:
  12. were enacted to adjust the timing of deductions that would otherwise be available under s 8-1 ITAA97 in certain circumstances. So, the prepaid expense must first meet the nexus requirements in s 8-1 ITAA97.
  13. operate to defer the timing of a deduction otherwise available under s 8-1 ITAA 1997 where the provisions apply, so the expenditure is not deductible in full when incurred This means that the prepayment provisions link with s 8-1 via the 4th negative limb to alter the s 8-1 result that would otherwise apply.
  14. Where expenditure satisfies the ordinary deductibility requirements in s 8-1, the effect of s 82KZM ITAA36 is that a taxpayer may still be entitled to an immediate deduction for a prepayment where:
  15. a “small business entity” (s 328-110 ITAA97), or a medium business entity (s 82KZM(1A) ITAA36), who has chosen not to spread the deduction over the eligible services period.
  16. In other cases, provided the expenditure is otherwise deductible under s 8-1 ITAA97, the deduction is not available in full in the year the amount is incurred. Instead, the deduction is spread over the eligible service period according to the statutory apportionment formula:
  17. For the purposes of the prepayment rules, s 82KZL ITAA36 defines “excluded expenditure” to include expenditure that:
  18. PART IVA OF THE 1936 ACT: THE GENERAL ANTI-AVOIDANCE PROVISIONS
  19. Specific anti-avoidance provisions apply before Part IVA.
  20. Part IVA ITAA36 (ss 177A to 177R ITAA36) is Australia’s general anti-avoidance rule for income tax. Practitioners commonly refer to the provisions as “Part IVA”.
  21. Part IVA is designed to counter schemes that, while technically compliant with the tax law, are entered into or carried out for the dominant purpose of obtaining a tax benefit. Where Part IVA applies, the Commissioner may cancel the relevant tax benefit and make consequential adjustments, including issuing amended assessments.
  22. In broad terms, Part IVA requires the identification of a “scheme”, a “tax benefit” obtained in connection with that scheme, and an objective conclusion that a person entered into or carried out the scheme, or part of it, for the dominant purpose of enabling the taxpayer to obtain that tax benefit. The provisions operate as a safeguard against artificial or contrived arrangements and are central to the integrity of the Australian income tax system.
  23. Part IVA requires the intervention of the ATO before it can operate (meaning that the ATO needs to make a Determination). Compare this with many legislative responses to tax avoidance, including those above, which are “self activating”.
  24. For a Part IVA matter, the ATO can generally amend a taxpayer’s assessment within 4 years after the day on which the Commissioner gives a notice of assessment to the taxpayer, subject to any applicable extension or exception: ss 170 and 177G ITAA36.
  25. Part IVA can only operate where a person has entered into or carried out a scheme for the sole or dominant purpose of enabling a taxpayer to obtain a tax benefit in connection with the scheme.
  26. Section 177A(1) defines a “scheme” to mean:
  27. A scheme includes a unilateral scheme: s 177A(3). For example, an action taken solely by the trustee of a discretionary trust: PSLA 2005/24, at para 56.
  28. In FCT v Hart [2004] HCA 26, the High Court confirmed that a scheme need not comprise the whole transaction or arrangement. It may consist of part of a wider arrangement and, in some circumstances, may be confined to a single step.
  29. The concept of a tax benefit is defined in s 177C and 177CB ITAA36. Examples of types of tax benefits include:
  30. However, a tax benefit does not arise if the benefit is attributable to the making of a declaration, agreement, election, selection or choice, the giving of a notice or the exercise of an option by any person expressly provided for under the ITAA36 or ITAA97. But, this carve out does not apply where a scheme was implemented to put the taxpayer into a position to make such an election, choice, etc, to be made: s 177C(2).
  31. The tax benefit must be determined by having regard to s 177CB. This provision prevents taxpayers from arguing there was no tax benefit because they otherwise would have done nothing.
  32. Under ss 177CB(2) and 177CB(3), the “would have” test requires consideration of what in fact occurred, disregarding the scheme (called the “annihilation approach”). By contrast, the “might reasonably be expected to have” test requires the identification of a reasonable alternative postulate, assessed by reference to the scheme but excluding its tax consequences (called the “reconstruction approach”).
  33. Section 177D(1)
  34. Section 177A(5) - dominant purpose
  35. Section 177D(b) relevant factors - have regard to the following matters:
  36. Section 177F
  37. Compensating adjustments - section 177F(3)
  38. Amendment of assessments - section 177G.
  39. Case studies concerning the application of Part IVA
  40. The Commissioner considers that Part IVA of the ITAA 1936 is likely to apply to cancel any tax benefits obtained in the above circumstances.
  41. Advise Noah and PP whether Part IVA ITAA36 applies in the circumstances above for the 2025-26 and 2026-27 income years.
  42. there is a scheme within the meaning of s 177A;
  43. Noah, PP, or another taxpayer obtained a tax benefit in connection with the scheme within the meaning of s 177C (in doing so, explain the most reasonable alternative postulate);
  44. having regard to the matters in s 177D, it would be concluded that a person entered into or carried out the scheme, or any part of it, for the dominant purpose of enabling a taxpayer to obtain that tax benefit; and
  45. if Part IVA applies, what determination the Commissioner may make under s 177F.
  46. For the purposes of question 1, you need only consider the general anti-avoidance provisions in Part IVA. Also do not consider other tax issues such as CGT, value shifting, Division 7A, and the superannuation guarantee, and also do not consider any company law issues.
  47. (If time permits) Assume the facts of Ure v FCT 81 ATC 4100 occurred today. The Commissioner argues that the excessive interest deduction should be denied under s 8-1 ITAA97. In the alternative, the Commissioner argues that, if the full deduction is otherwise available, Part IVA ITAA36 applies.
  48. How would Part IVA apply to the arrangement? In your answer, identify the scheme, the tax benefit, the most reasonable alternative postulate, and whether the dominant purpose test in s 177D is satisfied. Support your answer by reference to relevant legislation, case law and any relevant ATO guidance.

Cases / rulings / authorities (7)

  1. *Ure v FCT 81 ATC 4100
  2. Fletcher & Ors v FCT 91 ATC 4950
  3. FCT v Cooke & Sherden 80 ATC 4140
  4. In FCT v Hart [2004] HCA 26, the High Court confirmed that a scheme need not comprise the whole transaction or arrangement. It may consist of part of a wider arrangement and, in some circumstances, may be confined to a single step.
  5. *FCT v Spotless Services Ltd 96 ATC 5201
  6. FCT v Hart & Anor 2004 ATC 4599
  7. (If time permits) Assume the facts of Ure v FCT 81 ATC 4100 occurred today. The Commissioner argues that the excessive interest deduction should be denied under s 8-1 ITAA97. In the alternative, the Commissioner argues that, if the full deduction is otherwise available, Part IVA ITAA36 applies.

Chapter 12 — Tax Administration: Returns, Assessments, Penalties, Objections, Rulings and ATO Powers

Source: Forum 12 Notes (1).txt

Statutory source lines (80)

  1. The Commissioner has the general administration of the income tax laws: s 8 TAA36; s 1-7 ITAA97; and s 3A Taxation Administration Act 1953 (Cth) (“TAA53”).
  2. Every person must, if required by the Commissioner by legislative instrument, give to the Commissioner a return for a year of income within the period specified in the instrument: s 161 ITAA36.
  3. The Taxation Laws (Requirement to Lodge a Return for the 2026 Year) Instrument 2026 was made by the Commissioner and registered on 22 May 2026. The instrument sets out who must lodge a return for the 2025-26 income year. For example, it includes all employees who had PAYG withholding applied to their salary or wages for the 2025-26 year: s 6.
  4. Returns must be lodged in the approved form: s 161A ITAA36. See this link to view the approved form for individual tax returns.
  5. Failure to lodge or provide required information may constitute an offence: s 8C TAA53.
  6. Tax return preparation costs may be deductible: s 25-5 ITAA97.
  7. From tax returns and any other information available to the ATO, the Commissioner must make an assessment of (s 166 ITAA36):
  8. See also the definition of an “assessment” in s 6(1) ITAA36. An assessment is the Commissioner’s formal ascertainment of liability, not merely the paper notice: R v DCT; Ex parte Hooper (1926) 37 CLR 368.
  9. When a company or complying superannuation fund (which are each an example of a “full self-assessment taxpayer” ) lodges their return, the Commissioner is deemed to have made an assessment on the lodgment day in accordance with the information in the return, with the return itself becoming notice of the assessment: s 166A(3) ITAA36.
  10. A default assessment may be made where: no return is provided to the ATO; the ATO is not satisfied with a return provided to it; or the ATO has reason to believe that any person who has not furnished a return has derived taxable income: s 167 ITAA36.
  11. Default assessments may be based on estimates, data from third parties, or asset betterment analysis (eg comparing declared income with assets, spending, and lifestyle). If the taxpayer disagrees with the default assessment, they must prove the assessment was excessive or otherwise incorrect, and establish the correct amount: s 14ZZK and s 4ZZO TAA53.
  12. After making an assessment, the Commissioner must serve a notice of assessment on the taxpayer: s 174 ITAA36; which may be by post, delivery or electronic means.
  13. An assessment is not invalid merely because a provision of the tax law has not been complied with: s 175 ITAA36.
  14. The production of a notice of assessment is conclusive evidence that the assessment was properly made and that the amount and particulars of the assessment are correct (unless there is a review or appeal underway under Pt IVC TAA53 relating to the assessment): s 350-10(1), TAA53, Sch 1.
  15. The Commissioner has the power to amend assessments within certain time periods: s 170 ITAA36.
  16. The amendment period is 4 years after the day of giving the taxpayer a notice of assessment if they have more complex affairs (eg if Part IVA ITAA 36 applies) for other taxpayers with more complex affairs
  17. See column 3 of the table in s 170(1) ITAA36 for an outline of what is regarded as “complex” tax affairs. Study s 170(1) ITAA36 carefully.
  18. The applicable amendment period may also be extended in particular circumstances, including where a taxpayer seeks a further amendment to an amended assessment under s 170(3) ITAA36.
  19. For many taxpayers, income tax is due 21 days after the relevant lodgment date or after notice of assessment, depending on the circumstances: s 5-5(5) ITAA97.
  20. For companies and complying superannuation funds, income tax is generally due on the first day of the 6th month after income year-end: s 5-5(4) ITAA97.
  21. Additional tax (and shortfall interest charge) under an amended assessment is generally due 21 days after service of the amended assessment: s 5-5(7) ITAA97.
  22. General interest charge (GIC) applies to late payment of certain tax liabilities: Pt IIA TAA53.
  23. The Commissioner may remit GIC in appropriate circumstances: s 8AAG TAA53.
  24. From 1 July 2025, deductions are no longer available for the GIC under s 25-5 ITAA97.
  25. A taxpayer is liable to pay the shortfall interest charge (SIC) on an additional amount of income tax that they are liable to pay because the Commissioner amended their assessment for an income year: s 280-100 TAA53, Sch 1.
  26. The Commissioner may remit SIC in appropriate circumstances: s 280-160 TAA53, Sch 1.
  27. From 1 July 2025, deductions are no longer available for the SIC under s 25-5 ITAA97.
  28. The Commissioner may sue for and recover unpaid tax as a debt: s 255-5 TAA53, Sch 1.
  29. The Commissioner may continue recovery action despite an objection, review or appeal: s 14ZZM and s 14ZZR TAA53.
  30. As noted previously, a notice of assessment is generally conclusive evidence, which also applies in debt recovery proceedings: s 350-10 TAA53. Sch 1.
  31. The Commissioner may require a third party owing money to, or holding money for, a tax debtor to pay the Commissioner: s 260-5 TAA53, Sch1.
  32. The Commissioner may issue a departure prohibition order (DPO) where a tax debtor may leave Australia without discharging, or making satisfactory arrangements for, a tax liability: s 14S TAA53.
  33. A taxpayer subject to a DPO may apply for a departure authorisation certificate: s 14U TAA53.
  34. A person aggrieved by the making of a DPO may appeal to the Federal Court or a State Supreme Court against the making of the order: s 14V TAA53.
  35. Administrative penalties are contained in Pt 4-25 TAA53, Sch 1 (see, especially, Divs 284, 286 and 288).
  36. Reliance on a tax agent may assist only where the taxpayer provided all relevant information and the agent otherwise acted reasonably (eg s 284-75(6) TAA53, Sch 1).
  37. Statement penalty remission is available under s 298-20 TAA53, Sch1.
  38. Directors may become personally liable for unpaid company amounts under the director penalty regime: Div 269, TAA53, Sch 1.
  39. The Commissioner must issue a director penalty notice before commencing recovery: s 269-25 TAA53, Sch 1.
  40. Promoter penalties apply to promoters of tax exploitation schemes: Div 290 TAA53, Sch 1.
  41. Tax offence provisions are contained in Pt III, TAA53 (ss 8A to 13CA).
  42. Failure to lodge or provide information may be an offence: s 8C TAA53.
  43. Failure to answer questions or produce documents when required may be an offence: s 8D TAA53.
  44. Taxpayers may object to assessments and other reviewable decisions under Part IVC TAA53. See, for example, s 175A ITAA36.
  45. A person making a taxation objection must (s 14ZU TAA53):
  46. lodge it with the Commissioner within the required period (see below - as set out in s 14ZW TAA53); and
  47. If a taxation objection is made because a taxpayer is dissatisfied with their income tax assessment (pursuant to s 175A ITAA36), then they must lodge their taxation objection within the relevant amendment period that applies to the taxpayer under s 170(1) ITAA36: s 14ZW(1)(aa) TAA53.
  48. This means that the time limit for lodging an objections against an income tax assessment is generally 2 years after the day the Commissioner gave notice of the assessment on an individual (or a small or medium business entity). It will be 4 years from that date for taxpayers who have more complex tax affairs under s 170(1) ITAA36.
  49. For amended assessments, if the Commissioner made the amendment and a 2-year or 4-year time limit would otherwise apply to their original assessment, the taxpayer must lodge their objection to the amended assessment by the later of (s 14ZW(1B) and s 14ZW(1BA) TAA53):
  50. If the taxation objection was lodged on time, the Commissioner must decide whether to (s 14ZY TAA53):
  51. A taxpayer can give the Commissioner written notice requiring them to make an objection decision. If the Commissioner has not made the objection decision within 60 days after being given the notice, then it results in a deemed decision by the Commissioner to disallow the taxation objection: s 14ZYA TAA53.
  52. Jade is an individual taxpayer subject to the standard amendment period of 2 years in item 1 of the table in s 170(1) ITAA36.
  53. If the person is dissatisfied with the Commissioner's objection decision, they may either (s 14ZZ TAA53):
  54. In either case, the taxpayer is limited to the grounds stated in their taxation objection. And the taxpayer has the burden of proving that the assessment is excessive or otherwise incorrect, and what the assessment should have been: s 14ZZK and s 14ZZO TAA53.
  55. An application to the ART for review of a taxation objection decision must be made in writing, within 60 days after the person making the application is served with notice of the objection decision by the ATO (unless leave to extend is granted): s 14ZZC TAA53. The application for ART review must also set out a statement of the reasons for the application.
  56. An appeal to the Federal Court against an objection decision must be lodged with the Court within 60 days after the person appealing is served with notice of the decision by the ATO: s 14 ZZN TAA53.
  57. If the taxpayer or the Commissioner is dissatisfied with the ART decision, they can appeal to the Federal Court on a question of law: s 172 Administrative Review Tribunal Act 2024 (Cth).
  58. A tax ruling binds the Commissioner if it applies to the taxpayer and they follow it. If the taxpayer follow the ruling, and the law turns out to be less favourable than the ruling, the taxpayer is protected by the ruling from any adverse consequences: Div 357 TAA53, Sch 1.
  59. Public rulings are an expression of the ATO’s opinion of the way in which the law applies to entities generally or a class of entities. See Div 358 TAA53, Sch 1. Taxpayers cannot object directly to a public ruling.
  60. Private rulings are issued under Div 359 TAA53, Sch 1, and they only apply to the applicant and the specific arrangement or issue identified.
  61. The Commissioner can make oral rulings for individuals about non-business matters under Div 360 TAA53, Sch 1.
  62. Businesses must keep records in English to explain transactions and support tax positions (generally for at least 5 years): s 262A ITAA36.
  63. For the purposes of a taxation law, the Commissioner, or individual authorised by them (s 353-15 TAA53, Sch 1):
  64. The authorised person must provide proof of their authority when requested: s 353-15(2) TAA53, Sch 1.
  65. An occupier of land premises or place commits an offence if all reasonable facilities and assistance for a valid exercise of the access power is not provided: s 353-15(3) TAA53, Sch 1.
  66. For the purpose of the administration or operation of a tax law, the Commissioner may by written notice require a person to (s 353-10 TAA53, Sch 1):
  67. Failing to comply with the notice can be an offence: s 8C or s 8D TAA53.
  68. The Commissioner may require the information or evidence to be given on oath/affirmation and orally or in writing: s 353-10(2) TAA53, Sch 1.
  69. The Commissioner can require offshore information or documents be provided: s 353-25 TAA53, Sch 1. The taxpayer generally has 90 days to comply, and non-compliance may prevent the taxpayer from later relying on the information in a dispute.
  70. Taxation officers are subject to strict confidentiality obligations, unless excepted: Div 355 TAA53, Sch 1.
  71. External advisers engaged by the ATO may effectively be treated as taxation officers and subject to the same confidentiality requirements: s 355-15 TAA53, Sch 1.
  72. A uniform administrative penalty regime applies to all “taxation laws” (unless specifically excluded) as defined in ITAA97 s 995-1(1) (TAA s 3AA). Uniform penalties apply irrespective of the type of tax involved, provided the tax is imposed under a relevant taxation law.
  73. The main regime, TAA Sch 1 Pt 4-25, imposes penalties for:
  74. A penalty unit is $364 for an offence committed on or after 1 July 2026 and $330 for an offence committed between 7 November 2024 and 30 June 2026 (Crimes Act 1914 s 4AA).
  75. Unless otherwise specified, this is the percentage of the shortfall amount or, in the case of failure to make a statement, the percentage of the tax-related liability. The base penalty amount can be reduced under TAA Sch 1 s 284-224 to the extent that a taxation law was applied in an accepted way.
  76. Penalties are doubled for significant global entities (SGEs), as well as group entities of applicable MNE groups in respect of penalties relating to the Minimum Tax law (s 284-90(1A) and (1C)).
  77. For SGE entering into tax avoidance and profit shifting schemes without a reasonably arguable position penalties are doubled (s 284-155(3): ¶29-180, ¶22-630).
  78. The Commissioner is required to provide written notice of a penalty and the reasons why the taxpayer is liable to pay the penalty (TAA Sch 1 s 298-10).
  79. The rules relating to the recovery of income tax (¶25-510) also generally apply in relation to administrative penalties. Assessments of penalties and, with certain exceptions, decisions relating to the remission of penalties are reviewable in accordance with TAA Pt IVC (TAA Sch 1 s 298-30; Huang 2025 ATC ¶20-978; [2025] FCA 1314; ¶28-000, ¶29-410). The Commissioner’s power to assess penalties under s 298-30(1) is not “spent” once exercised; the Commissioner can still amend the penalty after a notice of penalty assessment has been issued (Ziegler; Wellton Holdings Pty Ltd 2025 ATC ¶20-983; [2025] FCAFC 168).
  80. Circumstances that give rise to a liability for penalties may also constitute an offence. Failing to lodge a return or making a false or misleading statement are 2 examples. If a prosecution is initiated, the related administrative penalty is withdrawn under TAA s 8ZE (¶29-700). The remission of administrative penalties would be limited to where related criminal proceedings result in a conviction under proposed reforms noted below…

Cases / rulings / authorities (4)

  1. See also the definition of an “assessment” in s 6(1) ITAA36. An assessment is the Commissioner’s formal ascertainment of liability, not merely the paper notice: R v DCT; Ex parte Hooper (1926) 37 CLR 368.
  2. Example (adapted from TR 2011/5, at para 123 to 125)
  3. Industrial Equity Ltd v DCT (1990) 170 CLR 649 - the High Court held that the Commissioner can use the information gathering powers to collect information in a random audit.
  4. A notice must be sufficiently certain to enable the recipient to identify what is required: ANZ Ltd v Konza [2012] FCAFC 127.

Chapter 13 — Final Examination Revision: Integrated Australian Taxation Law

Source: Week 13 Revision Class Questions.txt

Statutory source lines (4)

  1. For the 2025-26 income year, assume FBC does not apply the simplified depreciation rules in Subdiv 328-D ITAA97.
  2. Sally voluntarily attends a shooting range approximately every 2 months outside her rostered working hours to improve her firearm skills. The practice is not required, directed or supervised by the QPS and does not form part of its official training program. During the 2025-26 income year, Sally incurred $250 in unreimbursed ammunition expenses for this practice. She used a privately owned firearm of the same type as her service firearm, and all ammunition was used exclusively for target practice at the shooting range.
  3. Before lodging FBC’s 2025-26 company income tax return, Sally (on behalf of the company) considers the tax treatment of the $1,800 incurred in travelling to Western Australia to inspect the bus that FBC ultimately decided not to acquire. She searches the ATO’s website and legal database and finds Taxation Ruling TR 2011/6, which concerns deductions for business-related capital expenditure under s 40-880 ITAA97. Sally also finds several documents in the “Edited private advice” section of the ATO’s legal database involving unsuccessful expenditure on proposed acquisitions in apparently similar circumstances.
  4. Calculate FBC’s net capital gain for the 2025-26 income year pursuant to s 102-5 ITAA97. Explain your calculation with reference to key legislative provisions. Show all workings; and

Cases / rulings / authorities (2)

  1. Before lodging FBC’s 2025-26 company income tax return, Sally (on behalf of the company) considers the tax treatment of the $1,800 incurred in travelling to Western Australia to inspect the bus that FBC ultimately decided not to acquire. She searches the ATO’s website and legal database and finds Taxation Ruling TR 2011/6, which concerns deductions for business-related capital expenditure under s 40-880 ITAA97. Sally also finds several documents in the “Edited private advice” section of the ATO’s legal database involving unsuccessful expenditure on proposed acquisitions in apparently similar circumstances.
  2. Advise FBC on the extent to which it can rely on TR 2011/6 and the edited private advice it researched when preparing its 2025-26 company income tax return. What alternative is available to FBC to obtain advice from the ATO, and what protection would that advice provide if FBC relies on it? Support your answer with references to relevant legislation.
COVERAGE AUDIT  |  TAXATION LAW IN AUSTRALIA