Taxation Systems for Business Entities

1. Why do we tax business entities instead of just taxing their owners?
3. What is the difference between the 'corporate taxation' model and the 'flow-through' model of entity taxation?
5. What are the major differences between the 'classical' system of company taxation and the 'imputation' system?
7. What entities fall within the definition of 'company' for taxation purposes?
9. Are partnerships 'companies' for taxation purposes?
11. What is a non-entity joint venture?
13. Why are clubs taxed as companies (assuming that they are not exempt from tax under a specific provision of the Acts anyway)?
15. When will a company be 'resident' in Australia for income tax purposes?
17. When will a company 'carry on business in Australia'?
19. What is meant by 'central management and control'?
21. How can a company have dual residence?
23. If a company has dual residence how is its tax liability determined?
25. What are the major differences in the ways in which companies and individuals are treated for taxation purposes?
27. How would you tell whether a company is public or private for taxation purposes?
29. Briefly explain the '20/75 rule'.
33. Briefly explain the two (2) circumstances in which companies can carry forward losses and offset them, for taxation purposes, against later year profits? Provide a section reference/s.

1. How do you determine whether a company satisfies the 'same owners' test?

1. When do you use the 'primary test' and when do you use the 'alternative test'?

1. What is the 'primary test'?

1. What is the 'alternative test'?

1. In determining whether a company satisfies the 'same owners' test what is the 'ownership test period'?

1. What is the significance of the 'ownership test period' in determining whether the company satisfies the 'same owners' test?

1. What is the 'same business' test?

1. Briefly explain how the 'same business test' has been interpreted by the courts and by the Commissioner.

1. In determining whether a company satisfies the 'same business' test what is the 'same business test period'?

1. In determining whether a company satisfies the 'same business' test what is the 'test time'?

1. In determining whether a company satisfies the 'same business' test what is the 'same business test period'?

1. In determining whether a company satisfies the 'same business' test what is the relationship between the 'test time' and the 'same business test period'?

1. What is the effect of s 165-210(3) on the 'same business' test?

1. A buys all the shares in X Ltd from B in December of tax year 1. Over the ensuing 6 months X Ltd trades badly and loses $100,000. In desperation A decides to change what X Ltd does and the change of business proves successful. In tax year 2 X Ltd makes a profit of $200,000 from its new operations. Can X Ltd write off the year 1 loss against the year 2 profit? Under what provision?

1. What conditions must be fulfilled before any taxpayer can claim a deduction for bad debts which he/she has written off?Provide a section and/or case reference/s.

1. What additional conditions must be fulfilled by a company taxpayer seeking a deduction for bad debts which it has written off? Provide a section reference/s.

1. In what way are public and private companies treated differently for the purposes of obtaining deductions for bad debts written off during a tax year? Provide a section reference/s.
3. To which entities does the consolidations regime apply?
5. A Ltd is the head company in a company group consisting of the following companies:

1. B Ltd, a resident company in which A Ltd owns all of the shares;
2. C Ltd a non-resident company in which A Ltd owns all the shares;
3. D Ltd a resident company in which A Ltd owns 90% of the shares; and
4. E Ltd, a resident company in which A Ltd owns 80% of the shares and B Ltd owns 20% of the shares.
6. Which companies can be members of the consolidated group? Why?
8. How do companies enter the consolidations regime?
10. What are the disadvantages of not coming within the consolidations regime?
12. What is the effect of consolidating for tax purposes on the income tax liability of the head company and each of the subsidiary members?
14. What is the effect of consolidation on the taxation of any intra-group dividends?
16. What is the effect of consolidation on the franking accounts of each of the members of the group?
18. What is the effect of consolidation on the FBT liability of each member of the group?
20. A Ltd, a resident company, receives a $100,000 fully franked dividend from B Ltd, another resident company. What is A Ltd's tax liability in respect of that dividend? Why?

1. C Pty Ltd, a resident company receives a $50,000 unfranked dividend from D Ltd. What is its tax liability on that dividend receipt? Why?
3. E Pty Ltd lends its sole shareholder and managing director $100,000. What are the taxation consequences for:

a. E Pty Ltd;

b. the managing director?

1. F Pty Ltd pays the wife of its managing director $100,000 a year for her services as a casual filing clerk. How are these payments treated for taxation purposes?

1. What things are included in the ITAA's definition of 'dividends'?
3. In the context of s 44 what is the difference between 'profits derived by the company' and 'income of the company'?

1. If a company earns taxable income of $100,000 in a particular tax year and pays tax at the company tax rate of 30% what entry will be made in its franking account.
3. When will that entry be made?

1. How do you calculate the 'gross up' of a dividend received by a shareholder?

1. Which shareholders are required to 'gross-up' their dividend income?

1. How do you calculate the offset to which a shareholder might be entitled as the result of receiving a franked dividend?

1. In what cases will non-resident shareholders be entitled to that offset?
3. Fred, a non-resident, receives a $70 fully franked dividend from BHP. What is his Australian tax liability on that dividend?
5. Fred also receives a $70 unfranked dividend from Telstra. What is his Australian tax liability on that dividend?

1. What offset are resident companies entitled to in respect of their Australian sourced dividends?

1. G Ltd receives a fully franked $70,000 dividend from H Ltd. What is its income tax liability on that dividend? What happens to the franking credits?