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Chapter 1

Sources of taxation law

2015 Thomson Reuters (Professional) Australia Ltd. All Rights Reserved.


Jonathan Teoh, Monash University

Understanding tax law:


Accounting standards vs tax legislation

Interpretation of financial accounting standards is different to


tax legislation:

PoTL 2015 paragraphs [1.30] [1.40]

Understanding tax law:


Accounting vs taxation law advice

The level of certainty providing financial accounting advice is


different to taxation law advice:

PoTL 2015 paragraphs [1.50] [1.60]

Technical differences between tax law and


accounting
1. Not all receipts are recognised for tax purposes

PoTL 2015 paragraphs [1.80] [1.100]

Technical differences between tax law and


accounting
2. Income tax law distinguishes between capital and
revenue expenses

PoTL 2015 paragraph [1.110]

Technical differences between tax law and


accounting
3. Income tax law excludes some income and expenses
for policy reasons

Used by politicians to achieve a variety of social and


economic objectives.

PoTL 2015 paragraph [1.120]

Technical differences between tax law and


accounting
Accounting income can be categorised into three boxes for
income tax purposes:

PoTL 2015 paragraphs [1.150] [1.160]

Technical differences between tax law and


accounting
Judicial tests to characterise a gain as ordinary income:

PoTL 2015 paragraph [1.170]

Technical differences between tax law and


accounting
4. Income tax law ignores some transactions on the basis
of anti-avoidance provisions

Accounting measures net profits on an entity-by-entity basis.

Taxation law has tax avoidance provisions that can negate


the tax benefit derived from some transactions.

PoTL 2015 paragraph [1.130]

Technical differences between tax law and


accounting
5. Timing rules differ in income tax law and accounting
principles

PoTL 2015 paragraph [1.140]

Sources of tax law


The main sources of tax law are:

PoTL 2015 paragraph [1.180]

Sources of tax law:


Legislation
Income tax
Two concurrent assessment statutes:
Income Tax Assessment Act 1936 (Cth) (ITAA36)
Income Tax Assessment Act 1997 (Cth) (ITAA97)
Employment fringe benefits
Broadly, a tax imposed on an employer providing fringe benefits
to an employee.
Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA)
Goods and services tax
Consumption tax:
A New Tax System (Goods and Services Tax) Act 1999 (Cth)
PoTL 2015 paragraphs [1.190] [1.260]

Sources of tax law:


Case law
Meaning of words in tax law is derived from judicial precedent
or decisions of courts interpreting past cases.
How binding the precedent depends on the level of the court:
Ranges from the Australian High Court to decisions of the
Administrative Appeals Tribunal (administrative body with
less authority than a court).

PoTL 2015 paragraph [1.270]

Sources of tax law:


Rulings
The statutory officer administering the tax laws, being the
Commissioner of Taxation, issues Rulings.
Various types of rulings include:

PoTL 2015 paragraphs [1.280] [1.300]