This Act may be cited as the Income Tax Assessment Act 1997.
1‑2 Commencement
This Act commences on 1 July 1997.
1‑3 Differences in style not to affect meaning
(1) This Act contains provisions of the Income Tax Assessment Act 1936 in a rewritten form.
(2) If:
(a) that Act expressed an idea in a particular form of words; and
(b) this Act appears to have expressed the same idea in a different form of words in order to use a clearer or simpler style;
the ideas are not to be taken to be different just because different forms of words were used.
Note: A public or private ruling about a provision of the Income Tax Assessment Act 1936 is taken also to be a ruling about the corresponding provision of this Act, so far as the 2 provisions express the same ideas: see section 357‑85 in Schedule 1 to the Taxation Administration Act 1953.
1‑4 Application
This Act extends to every external Territory referred to in the definition of Australia.
1‑7 Administration of this Act
The Commissioner has the general administration of this Act.
Note: An effect of this provision is that people who acquire information under this Act are subject to the confidentiality obligations and exceptions in Division 355 in Schedule 1 to the Taxation Administration Act 1953.
Part 1‑2—A Guide to this Act
Division 2—How to use this Act
Table of Subdivisions
2‑A How to find your way around
2‑B How the Act is arranged
2‑C How to identify defined terms and find the definitions
2‑D The numbering system
2‑E Status of Guides and other non‑operative material
Subdivision 2‑A—How to find your way around
2‑1 The design
This Act is designed to help you identify accurately and quickly the provisions that are relevant to your purpose in reading the income tax law.
The Act contains tables, diagrams and signposts to help you navigate your way.
You can start at Division 3 (What this Act is about) and follow the signposts as far into the Act as you need to go. You may also encounter signposts to several areas of the law that are relevant to you. Each one should be followed.
Sometimes they will lead down through several levels of detail. At each successive level, the rules are structured in a similar way. They will often be preceded by a Guide to the rules at that level. The rules themselves will usually deal first with the general or most common case and then with the more particular or special cases.
Subdivision 2‑B—How the Act is arranged
2‑5 The pyramid
This Act is arranged in a way that reflects the principle of moving from the general case to the particular.
In this respect, the conceptual structure of the Act is something like a pyramid. The pyramid shape illustrates the way the income tax law is organised, moving down from the central or core provisions at the top of the pyramid, to general rules of wide application and then to the more specialised topics.
Chart showing a pyramid consisting of four levels. From the top down, the levels are: Core Provisions (Checklists), General Provisions, Specialist Groupings (including, as examples only, Corporate taxpayers and corporate distributions, rules for particular industries and occupations, international aspects of income taxation, financial transactions and superannuation), and Administration (Dictionary of terms and concepts)
Note: The Taxation Administration Act 1953 contains the provisions on collection and recovery of tax and provisions on administration.
Subdivision 2‑C—How to identify defined terms and find the definitions
Table of sections
2‑10 When defined terms are identified
2‑15 When terms are not identified
2‑20 Identifying the defined term in a definition
2‑10 When defined terms are identified
(1) Many of the terms used in the income tax law are defined.
(2) Most defined terms in this Act are identified by an asterisk appearing at the start of the term: as in “*business”. The footnote that goes with the asterisk contains a signpost to the Dictionary definitions starting at section 995‑1.
2‑15 When terms are not identified
(1) Once a defined term has been identified by an asterisk, later occurrences of the term in the same subsection are not usually asterisked.
(2) Terms are not asterisked in the non‑operative material contained in this Act.
Note: The non‑operative material is described in Subdivision 2‑E.
(3) The following basic terms used throughout the Act are not identified with an asterisk. They fall into 2 groups:
Key participants in the income tax system
Item
This term:
is defined in:
1.
Australian resident
section 995‑1
2.
Commissioner
section 995‑1
3.
company
section 995‑1
4.
entity
section 960‑100
4A.
foreign resident
section 995‑1
5.
individual
section 995‑1
6.
partnership
section 995‑1
7.
person
section 995‑1
8.
trustee
section 995‑1
9.
you
section 4‑5
Core concepts
Item
This term:
is defined in:
1.
amount
section 995‑1
2.
assessable income
Division 6
3.
assessment
section 995‑1
3A.
Australia
Subdivision 960‑T
4.
deduct, deduction
Division 8
5.
income tax
section 995‑1
6.
income year
section 995‑1
7.
taxable income
section 4‑15
8.
this Act
section 995‑1
2‑20 Identifying the defined term in a definition
Within a definition, the defined term is identified by bold italics.
Subdivision 2‑D—The numbering system
Table of sections
2‑25 Purposes
2‑30 Gaps in the numbering
2‑25 Purposes
Two main purposes of the numbering system in this Act are:
To indicate the relationship between units at different levels.
Note: For example, the number of Part 2‑15 indicates that the Part is in Chapter 2. Similarly, the number of section 165‑70 indicates that the section is in Division 165.
To allow for future expansion of the Act. The main technique here is leaving gaps between numbers.
2‑30 Gaps in the numbering
There are gaps in the numbering system to allow for the insertion of new Divisions and sections.
Subdivision 2‑E—Status of Guides and other non‑operative material
Table of sections
2‑35 Non‑operative material
2‑40 Guides
2‑45 Other material
2‑35 Non‑operative material
In addition to the operative provisions themselves, this Act contains other material to help you identify accurately and quickly the provisions that are relevant to you and to help you understand them.
This other material falls into 2 main categories.
2‑40 Guides
The first is the “Guides”. A Guide consists of sections under a heading indicating that what follows is a Guide to a particular Subdivision, Division etc.
Guides form part of this Act but are kept separate from the operative provisions. In interpreting an operative provision, a Guide may only be considered for limited purposes. These are set out in section 950‑150.
2‑45 Other material
The other category consists of material such as notes and examples. These also form part of the Act. They are distinguished by type size from the operative provisions, but are not kept separate from them.
Division 3—What this Act is about
Table of sections
3‑5 Annual income tax
3‑10 Your other obligations as a taxpayer
3‑15 Your obligations other than as a taxpayer
3‑5 Annual income tax
(1) Income tax is payable for each year by each individual and company, and by some other entities.
Note 1: Individuals who are Australian residents, and some trustees, are also liable to pay Medicare levy for each year. See the Medicare Levy Act 1986 and Part VIIB of the Income Tax Assessment Act 1936.
Note 2: Income tax is imposed by the Income Tax Act 1986 and the other Acts referred to in the definition of income tax in section 995‑1.
(2) Most entities have to pay instalments of income tax before the income tax they actually have to pay can be worked out.
(3) This Act answers these questions:
1. What instalments of income tax do you have to pay? When and how do you pay them?
See Schedule 1 to the Taxation Administration Act 1953.
2. How do you work out how much income tax you must pay?
See Division 4, starting at section 4‑1.
3. What happens if your income tax is more than the instalments you have paid? When and how must you pay the rest?
See Division 5 of this Act and Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.
4. What happens if your income tax is less than the instalments you have paid? How do you get a refund?
See Division 3A of Part IIB of the Taxation Administration Act 1953.
5. What are your other obligations as a taxpayer, besides paying instalments and the rest of your income tax?
See section 3‑10.
6. Do you have any other obligations under the income tax law?
See section 3‑15.
7. If a dispute between you and the Commissioner of Taxation cannot be settled by agreement, what procedures for objection, review and appeal are available?
See Part IVC (sections 14ZL to 14ZZS) of the Taxation Administration Act 1953.
3‑10 Your other obligations as a taxpayer
(1) Besides paying instalments and the rest of your income tax, your main obligations as a taxpayer are:
(a) to keep records and provide information as required by:
the Income Tax Assessment Act 1936; and
Division 900 (which sets out substantiation rules) of this Act; and
(b) to lodge income tax returns as required by:
the Income Tax Assessment Act 1936.
Tax file numbers
(2) Under Part VA of the Income Tax Assessment Act 1936, a tax file number can be issued to you. You are not obliged to apply for a tax file number. However, if you do not quote one in certain situations:
you may become liable for instalments of income tax that would not otherwise have been payable;
the amount of certain of your instalments of income tax may be increased.
3‑15 Your obligations other than as a taxpayer
Your main obligations under the income tax law, other than as a taxpayer are:
in certain situations, to deduct from money you owe to another person, and to remit to the Commissioner, instalments of income tax payable by that person.
See Part 4‑5 (Collection of income tax instalments),
starting at section 750‑1.
Part 1‑3—Core provisions
Division 4—How to work out the income tax payable on your taxable income
Table of sections
4‑1 Who must pay income tax
4‑5 Meaning of you
4‑10 How to work out how much income tax you must pay
4‑15 How to work out your taxable income
4‑25 Special provisions for working out your basic income tax liability
4‑1 Who must pay income tax
Income tax is payable by each individual and company, and by some other entities.
Note: The actual amount of income tax payable may be nil.
For a list of the entities that must pay income tax,
see Division 9, starting at section 9‑1.
4‑5 Meaning of you
If a provision of this Act uses the expression you, it applies to entities generally, unless its application is expressly limited.
Note 1: The expression you is not used in provisions that apply only to entities that are not individuals.
Note 2: For circumstances in which the identity of an entity that is a managed investment scheme for the purposes of the Corporations Act 2001 is not affected by changes to the scheme, see Subdivision 960‑E of the Income Tax (Transitional Provisions) Act 1997.
4‑10 How to work out how much income tax you must pay
(1) You must pay income tax for each *financial year.
(2) Your income tax is worked out by reference to your taxable income for the income year. The income year is the same as the *financial year, except in these cases:
(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.
Note 1: The Commissioner can allow you to adopt an accounting period ending on a day other than 30 June. See section 18 of the Income Tax Assessment Act 1936.
Note 2: An accounting period ends, and a new accounting period starts, when a partnership becomes, or ceases to be, a VCLP, an ESVCLP, an AFOF or a VCMP. See section 18A of the Income Tax Assessment Act 1936.
(3) Work out your income tax for the *financial year as follows:
Start formula Income tax equals open bracket Taxable income times Rate close bracket minus Tax offsets end formula
Method statement
Step 1. Work out your taxable income for the income year.
To do this, see section 4‑15.
Step 2. Work out your basic income tax liability on your taxable income using:
(a) the income tax rate or rates that apply to you for the income year; and
(b) any special provisions that apply to working out that liability.
See the Income Tax Rates Act 1986 and section 4‑25.
Step 3. Work out your tax offsets for the income year. A tax offset reduces the amount of income tax you have to pay.
For the list of tax offsets, see section 13‑1.
Step 4. Subtract your *tax offsets from your basic income tax liability. The result is how much income tax you owe for the *financial year.
Note 1: Division 63 explains what happens if your tax offsets exceed your basic income tax liability. How the excess is treated depends on the type of tax offset.
Note 2: Section 4‑11 of the Income Tax (Transitional Provisions) Act 1997 (which is about the temporary budget repair levy) may increase the amount of income tax worked out under this section.
Income tax worked out on another basis
(4) For some entities, 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.
See section 9‑5.
4‑15 How to work out your taxable income
(1) Work out your taxable income for the income year like this:
Start formula Taxable income equals Assessable income minus Deductions end formula
Method statement
Step 1. Add up all your assessable income for the income year.
To find out about your assessable income, see Division 6.
Step 2. Add up your deductions for the income year.
To find out what you can deduct, see Division 8.
Step 3. Subtract your deductions from your assessable income (unless they exceed it). The result is your taxable income. (If the deductions equal or exceed the assessable income, you don’t have a taxable income.)
Note: If the deductions exceed the assessable income, you may have a tax loss which you may be able to utilise in that or a later income year: see Division 36.
(2) There are cases where taxable income is worked out in a special way:
Item
For this case ...
See:
1.
A company does not maintain continuity of ownership and control during the income year and does not satisfy the business continuity test
Subdivision 165‑B
1B.
An entity is a *member of a *consolidated group at any time in the income year
Part 3‑90
2.
A company becomes a PDF (pooled development fund) during the income year, and the PDF component for the income year is a nil amount
section 124ZTA of the Income Tax Assessment Act 1936
3.
A shipowner or charterer: has its principal place of business outside Australia; and carries passengers, freight or mail shipped in Australia
section 129 of the Income Tax Assessment Act 1936
4.
An insurer who is a foreign resident enters into insurance contracts connected with Australia
sections 142 and 143 of the Income Tax Assessment Act 1936
5.
The Commissioner makes a default or special assessment of taxable income
sections 167 and 168 of the Income Tax Assessment Act 1936
6.
The Commissioner makes a determination of the amount of taxable income to prevent double taxation in certain treaty cases
section 24 of the International Tax Agreements Act 1953
Note: A life insurance company can have a taxable income of the complying superannuation class and/or a taxable income of the ordinary class for the purposes of working out its income tax for an income year: see Subdivision 320‑D.
4‑25 Special provisions for working out your basic income tax liability
Subsection 392‑35(3) may increase your basic income tax liability beyond the liability worked out simply by applying the income tax rates to your taxable income.
Note: Subsection 392‑35(3) increases some primary producers’ tax liability by requiring them to pay extra income tax on their averaging components worked out under Subdivision 392‑C.
Division 5—How to work out when to pay your income tax
Table of Subdivisions
Guide to Division 5
5‑A How to work out when to pay your income tax
Guide to Division 5
5‑1 What this Division is 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.
If your assessment is amended so that you must pay income tax, or pay more income tax than under the previous assessment, this Division explains:
(a) when you must pay the additional tax; and
(b) when any associated interest charges must be paid.
Note: For provisions about the collection and recovery of income tax and other tax‑related liabilities, see Part 4‑15 in Schedule 1 to the Taxation Administration Act 1953.
Subdivision 5‑A—How to work out when to pay your income tax
Table of sections
5‑5 When income tax is payable
5‑10 When shortfall interest charge is payable
5‑15 General interest charge payable on unpaid income tax or shortfall interest charge
5‑5 When income tax is payable
Scope
(1) This section tells you when income tax you must pay for a *financial year is due and payable.
Note: The Commissioner may defer the time at which the income tax is due and payable: see section 255‑10 in Schedule 1 to the Taxation Administration Act 1953.
(2) The income tax is only due and payable if the Commissioner makes an *assessment of your income tax for the year.
(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.
Note: This is to ensure that general interest charge begins to accrue from the same date for all like entities. General interest charge on unpaid income tax is calculated from when the tax is due and payable, not from when the assessment is made: see section 5‑15.
Original assessments—self‑assessment entities
(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.
Note: Example: If your income year is the same as the financial year, your income tax would be due and payable on 1 December.
Original assessments—other entities
(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.
Note: For rules about income tax returns and when they are due, see Part IV of the Income Tax Assessment Act 1936.
(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.
Amended assessments
(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.
Note: Shortfall interest charge may be payable, on any amount of extra income tax payable as a result of the amended assessment, for each day in the period that:
(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.
5‑10 When shortfall interest charge is payable
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.
Note: Shortfall interest charge is imposed if the Commissioner amends an assessment and the amended assessment results in an increase in some tax payable. For provisions about liability for shortfall interest charge, see Division 280 in Schedule 1 to the Taxation Administration Act 1953.
5‑15 General interest charge payable on unpaid income tax or shortfall interest charge
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.
Note 1: The general interest charge is worked out under Part IIA of the Taxation Administration Act 1953.
Note 2: Shortfall interest charge is worked out under Division 280 in Schedule 1 to that Act.