An Education in Income Tax Law
Point 1
Not all accountants, or tax practitioners, read and understand tax law the same way. That is why, for example, we see so many issues in tax law go to court for the judges to decide on what is right and what is wrong.
It is also interesting to note that it is not uncommon for court decisions on tax related matters to be split 3 in favour and 2 against…or vice versa.
So, if our legal system and the smartest and wisest people in the country cannot be absolutely certain how the tax law should be read, interpreted and applied, then….how can a simple accountant hope to be 100% right, all the time?
Clearly, they cannot.
All they can do is seek opinions from more learned people than themselves and study the law and the court decisions that apply to the law.
Point 2
If you ask an accountant…can I claim this, or that? The answer has to be a yes, or a no.
Accountants are taught and trained to be conservative and so they will often say no as a way of protecting their client.
However, if you ask an accountant “how can I claim this, or that?
Then you are assuming it can be done and the accountant will open his or her mind to find a way for that particular item to be claimed.
This is one of the most important tools an investor can develop.
Point 3
From the ATO Ruling Mt 2042
http://law.ato.gov.au/atolaw/view.h.../00001&recStart=1&recnum=1&tot=1&pn=ALL:::ALL
8. On the other hand, relatively inexpensive Christmas gifts of food or drink that will be consumed by the employees at home (such as a bottle of whiskey or wine or a hamper of food) are not regarded as being the provision of entertainment for the purposes of subsection 51AE(4). Expenditure incurred on such gifts will be treated as an allowable deduction in calculating the taxable income of the employer.
Point 4
INCOME TAX ASSESSMENT ACT 1997
CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS
PART 1-3 - CORE PROVISIONS
Division 8 - Deductions
TABLE OF SECTIONS
8-1 General deductions
8-5 Specific deductions
8-10 No double deductions
SECTION 8-1 General deductions
8-1(1) You can deduct from your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income; or
(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
[
Note:
Division 35 prevents losses from non-commercial business activities that may contribute to a tax loss being offset against other assessable income.]
History
S 8-1(1) amended by No 90 of 2000, s 3 and Sch 1 item 1, by inserting the Note at the end, applicable to assessments for the 2000/01 and later income years.
8-1(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
(a) it is a loss or outgoing of capital, or of a capital nature; or
(b) it is a loss or outgoing of a private or domestic nature; or
(c) it is incurred in relation to gaining or producing your *exempt income or your *non-assessable non-exempt income; or
(d) a provision of this Act prevents you from deducting it.
For a summary list of provisions about deductions, see section 12-5.
History
S 8-1(2) amended by No 66 of 2003, s 3 and Sch 3 item 57, by inserting ``or your *non-assessable non-exempt income'' for ``*exempt income'' in para (c), applicable to assessments for the 2003-04 income years and later income years.
8-1(3) A loss or outgoing that you can deduct under this section is called a general deduction.
For the effect of the GST in working out deductions, see Division 27.
[
Note:
If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20-A. ]
History
S 8-1(3) amended by No 41 of 2005, s 3 and Sch 2 items 2 and 3, by substituting ``Note'' for ``Note 1'' in Note 1 and repealing Note 2, applicable to assessments for the first income year starting on or after 1 July 2005 and later income years. Note 2 formerly read:
"Note 2: A cash accounting regime applies for general deductions, and some other deductions, incurred by STS taxpayers: see Division 328. "
S 8-1(3) amended by No 78 of 2001, s 3 and Sch 2 items 3 and 4, by renaming the note as ``Note 1'' and inserting Note 2, applicable to assessments for the first income year starting after 30 June 2001, and for later income years.
S 8-1(3) amended by No 176 of 1999, s 3 and Sch 3 item 2, by inserting the reference to Division 27 at the end, effective 1 July 2000.
S 8-1(3) amended by No 16 of 1998.
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© Commonwealth of Australia
This work is copyright. You may download, display, print and reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved.
Requests and inquiries concerning reproduction and rights should be addressed to Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca
Point 1
Not all accountants, or tax practitioners, read and understand tax law the same way. That is why, for example, we see so many issues in tax law go to court for the judges to decide on what is right and what is wrong.
It is also interesting to note that it is not uncommon for court decisions on tax related matters to be split 3 in favour and 2 against…or vice versa.
So, if our legal system and the smartest and wisest people in the country cannot be absolutely certain how the tax law should be read, interpreted and applied, then….how can a simple accountant hope to be 100% right, all the time?
Clearly, they cannot.
All they can do is seek opinions from more learned people than themselves and study the law and the court decisions that apply to the law.
Point 2
If you ask an accountant…can I claim this, or that? The answer has to be a yes, or a no.
Accountants are taught and trained to be conservative and so they will often say no as a way of protecting their client.
However, if you ask an accountant “how can I claim this, or that?
Then you are assuming it can be done and the accountant will open his or her mind to find a way for that particular item to be claimed.
This is one of the most important tools an investor can develop.
Point 3
From the ATO Ruling Mt 2042
http://law.ato.gov.au/atolaw/view.h.../00001&recStart=1&recnum=1&tot=1&pn=ALL:::ALL
8. On the other hand, relatively inexpensive Christmas gifts of food or drink that will be consumed by the employees at home (such as a bottle of whiskey or wine or a hamper of food) are not regarded as being the provision of entertainment for the purposes of subsection 51AE(4). Expenditure incurred on such gifts will be treated as an allowable deduction in calculating the taxable income of the employer.
Point 4
INCOME TAX ASSESSMENT ACT 1997
CHAPTER 1 - INTRODUCTION AND CORE PROVISIONS
PART 1-3 - CORE PROVISIONS
Division 8 - Deductions
TABLE OF SECTIONS
8-1 General deductions
8-5 Specific deductions
8-10 No double deductions
SECTION 8-1 General deductions
8-1(1) You can deduct from your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income; or
(b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
[
Note:
Division 35 prevents losses from non-commercial business activities that may contribute to a tax loss being offset against other assessable income.]
History
S 8-1(1) amended by No 90 of 2000, s 3 and Sch 1 item 1, by inserting the Note at the end, applicable to assessments for the 2000/01 and later income years.
8-1(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
(a) it is a loss or outgoing of capital, or of a capital nature; or
(b) it is a loss or outgoing of a private or domestic nature; or
(c) it is incurred in relation to gaining or producing your *exempt income or your *non-assessable non-exempt income; or
(d) a provision of this Act prevents you from deducting it.
For a summary list of provisions about deductions, see section 12-5.
History
S 8-1(2) amended by No 66 of 2003, s 3 and Sch 3 item 57, by inserting ``or your *non-assessable non-exempt income'' for ``*exempt income'' in para (c), applicable to assessments for the 2003-04 income years and later income years.
8-1(3) A loss or outgoing that you can deduct under this section is called a general deduction.
For the effect of the GST in working out deductions, see Division 27.
[
Note:
If you receive an amount as insurance, indemnity or other recoupment of a loss or outgoing that you can deduct under this section, the amount may be included in your assessable income: see Subdivision 20-A. ]
History
S 8-1(3) amended by No 41 of 2005, s 3 and Sch 2 items 2 and 3, by substituting ``Note'' for ``Note 1'' in Note 1 and repealing Note 2, applicable to assessments for the first income year starting on or after 1 July 2005 and later income years. Note 2 formerly read:
"Note 2: A cash accounting regime applies for general deductions, and some other deductions, incurred by STS taxpayers: see Division 328. "
S 8-1(3) amended by No 78 of 2001, s 3 and Sch 2 items 3 and 4, by renaming the note as ``Note 1'' and inserting Note 2, applicable to assessments for the first income year starting after 30 June 2001, and for later income years.
S 8-1(3) amended by No 176 of 1999, s 3 and Sch 3 item 2, by inserting the reference to Division 27 at the end, effective 1 July 2000.
S 8-1(3) amended by No 16 of 1998.
Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited
CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or ommissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.
The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.
© Commonwealth of Australia
This work is copyright. You may download, display, print and reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved.
Requests and inquiries concerning reproduction and rights should be addressed to Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at http://www.ag.gov.au/cca
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