Law

Income Tax Assessment Act 1997 – Core Provisions

Core Provisions

Division 4 – How to work out the income tax payable on your taxable income

Section 4-1 Who must pay income tax

4-1 Income tax is payable by each individual and company, and by some other entities. 

Section 4-5 Meaning of you

4-5 If a provision of this Act uses the expression you, it applies to entities generally, unless its application is expressly limited. 

Section 4-10 How to work out how much income tax you must pay 

4-10(1) You must pay income tax for each *financial year.

4-10(2) Your income tax is worked out by reference to your taxable income for the financial year. The income tax year is the same as the previous financial year;

A. For a company, the income year is the previous financial year;

B. If you have an accounting period that is not the same as the financial year, each such accounting period or, for a company, each previous accounting period is an income year.

4-10(3) Work out your income tax for the *financial year as follows: Income tax = (taxable income x Rate) – Tax offsets.

A tax offset reduces the amount of income tax you have to pay.

4-10(4) For some entries, some or all of their income tax for the *financial year is worked out by reference to something other than taxable income for the income year. 

Section 4-15 How to work out your taxable income

4-15(1) Work out your taxable income for the income year like this: Taxable income = Assessable income – deductions.

If the deductions equal or exceed the assessable income, you don’t have a taxable income and this tax loss may be utilised in a later income year. 

4-15(2) There are cases where taxable income is worked out in a special way.

Division 5 – How to work out when to pay your income tax

Section 5-1 What is this Division about

If your assessed income tax liability exceeds the credits available to you under the PAYG system, this Division explains when you must pay the excess to the Commissioner. 

Section 5-5 When income tax is payable

5-5(1) This section tells you when income tax you must pay for a *financial year is due and payable.

5-5(2) The income tax is only due and payable if the Commissioner makes an *assessment of your income tax for the year. 

5-5(3) However, if the Commissioner does make an *assessment of your income tax for the year, the tax may be taken to have been due and payable at a time before your assessment was made.

5-5(4) If you are a *self-assessment entity, the income tax is due and payable on the first day of the sixth month after the end of the income year.

5-5(5) If you are not a *self-assessment entity, the income tax is due and payable 21 days after the day (the return day) on or before which you are required to lodge your *income tax return with the Commissioner. 

5-5(6) However, if you lodge your return on or before the return day and the Commissioner gives you a notice of *assessment (other than an amended assessment) after the return day, the income tax is due and payable 21 days after the Commissioner gives you the notice. 

5-5(7) If the Commissioner amends your *assessment, any extra income tax resulting from the amendment is due and payable 21 days after the day on which the Commissioner gives you notice of the amended assessment. 

A. Starts at the time income tax was due and payable on your original assessment; and

B. Ends the day before the day on which the Commissioner gives you notice of the amended assessment. 

Section 5-10 When shortfall interest charge is payable

5-10 An amount of *shortfall interest charge that you are liable to pay is due and payable 21 days after the day on which the Commissioner gives you notice of the charge.

Section 5-15 General interest charge payable on unpaid income tax or shortfall interest charge

5-15 If an amount of income tax or *shortfall interest charge that you are liable to pay remains unpaid after the time by which it is due to be paid, you are liable to pay the *general interest charge on the unpaid amount for each day in the period that;

A. Starts at the beginning of the day on which the amount was due to be paid; and

B. Finishes at the end of the last day on which, at the end of the day, any of the following remains unpaid:

i. the income tax or shortfall interest charge;

ii. general interest charge on any of the income tax or shortfall interest charge.

Division 6 – Assessable income and exempt income

6-1(1) Assessable income consists of ordinary income and statutory income.

6-1(2) Some ordinary income, and some statutory income, is exempt income.

6-1(3) Exempt income is not assessable income.

6-1(4) Some ordinary income, and some statutory income, is neither assessable income nor exempt income. 

6-1(5) An amount of ordinary income or statutory income can have only one status (that is, assessable income, exempt income or non-assessable non-exempt income) in the hands of a particular entity. 

Operative Provisions

Section 6-5 Income according to ordinary concepts (ordinary income)

6-5(1) Your assessable income includes income according to ordinary concepts, which is called ordinary income. 

6-5(2) If you are an Australian resident, your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether in or out of Australia, during the income year. 

6-5(3) If you are a foreign resident, your assessable income includes: 

A. The *ordinary income you *derived directly or indirectly from all Australian sources during the income year; and

B. Other *ordinary income that a provision includes in your assessable income for the income year on some basis other than having an *Australian source.

6-5(4) In working out whether you have derived an amount of *ordinary income, and if when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct. 

Section 6-10 Other assessable income (statutory income)

6-10(1) Your assessable income also includes some amounts that are not *ordinary income. 

6-10(2) Amounts that are not *ordinary income but are included in your assessable income by provisions about assessable income are called statutory income. 

6-10(3) If an amount would be *statutory income apart from the fact that you have not received it, it becomes statutory income as soon as it is applied or dealt with in any way on your behalf or as you direct. 

6-10(4) If you are an Australian resident, your assessable income includes your *statutory income from all sources, whether in or out of Australia. 

6-10(5) If you are a foreign resident, your assessable income includes:

A. Your *statutory income from all *Australian sources; and 

B. Other *statutory income that a provision includes in your assessable income on some basis other than having an *Australian source.

Section 6-15 What is not assessable income

6-15(1) If an amount of income is not *ordinary income, and is not *statutory income, it is not accessible income (so you don’t have to pay income tax on it).

6-15(2) If an amount is *exempt income, it is not assessable income.

6-15(3) If an amount is *non-assessable non-exempt income, it is not assessable income.

Section 6-20 Exempt income

6-20(1) An amount of *ordinary income or *statutory income is exempt income if it is made exempt from income tax by a provision of this Act or another *Commonwealth law.

6-20(2) *Ordinary income is also exempt income to the extent that this Act excludes it (expressly or by implications) from being assessable income.

6-20(3) By contrast, an amount of *statutory income is exempt income only if it is made exempt from income tax by a provision of this Act outside this Division or another *Commonwealth law. 

6-20(4) If an amount of *ordinary income or *statutory income is *non-assessable non-exempt income, it is not exempt income. 

Section 6-23 Non-assessable non-exempt income

6-23 An amount of *ordinary income or *statutory income is non-assessable non-exempt income if a provision of this Act or of another *Commonwealth law states that it is not assessable income and is not *exempt income.

Section 6-25 Relationships among various rules about ordinary income

6-25(1) Sometimes more than one rule includes an amount in your assessable income:

-The same amount may be *ordinary income and may also be included in your assessable income by one or more provisions about assessable income; or

-The same amount may be included in your assessable income by more than one provision about assessable income. 

However, the amount is included only once per your assessable income for an income year, and is then not included in your assessable income for any other income year. 

6-25(2) Unless the contrary intention appears, the provisions of this Act (outside this Part) prevail over the rules about *ordinary income.

Division 8 – 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 assessable income; or

b. it is necessarily incurred in carrying on a *business for the purpose if gaining or producing your assessable income.

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.

8-1(3) A loss or outgoing that you can deduct under this section is called a general deduction.

Section 8-5 Specific deductions

8-5(1) You can also deduct from your assessable income an amount that a provision of this Act (outside this Division) allows you to deduct.

8-5(2) Some provisions of this Act prevent you from deducting an amount that you could otherwise deduct, or limit the amount you can deduct. 

8-5(3) An amount that you can deduct under a provision of this Act (outside this Division) is called a specific deduction.


Reference List 

Income Tax Assessment Act 1997

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