TAX LAW IN ONE PAGE by arnold1



1. These rules apply to all enterprises, including Companies,
Trusts, Partnerships, and Sole Practitioners.

2. All enterprises will be taxed on an annual basis, with the year
from July 1 to June 30. Postal and electronic transfers at the end
of the financial year will be deemed to have occurred on the working
day following the day on which the cheque was posted, providing the
cheque is honoured. The financial year in which the transfer is
recorded must be the same for both payee and payer.

3. All transfers in kind are to be translated to equivalent monetary
value at market (arm’s length) rates, and included in returns for
payer and payee at the same value, and same year. Transfers between
related parties must be at market (arm’s length) rates. Where a
payment is made to a third party for goods or services to the benefit
of an employee (or another person), a transfer must be included to
add the cost of the benefit to the employee’s salary.

4. All money received is taxable as Income.
     4.1 Money received on condition that it be repaid at some time
     in the future, is taxable in the year the money is repaid or
     in the year the debt forgiven.
     4.2 All other money received is taxable in the year it is

5. All money paid out is deductable from taxable Income.
     5.1 Money paid for assets used to produce goods and/or services
     is deductable in equal instalments over the predicted remaining
     useful life of the asset (depreciation).
          5.1.1 Assets which have an indeterminate life, such as
          land, works of art, collectables, and antiquities, shall
          be depreciated over 50 years.
          5.1.2 Assets costing less than $5,000 each may be
          considered to have a life of one year, and so fully deducted
          in the year of purchase.
          5.1.3 When assets subject to depreciation are sold, the
          remaining un-claimed purchase cost will be included as a
          deduction in the year of sale.
     5.2 Money paid on condition that it be returned at some time
     in the future is deductable in the year in which it is repaid
     or in which the debt forgiven.
     5.3 All other money paid out is deductable in the year in which
     the payment is made.

6. Where money is paid to a person or enterprise, and there is an
expectation that tax will be due on that money, and there exists no
other assurance that that tax will be paid, the payer must retain
the estimated tax payable, and forward it to the
Taxation Commissioner within 90 days.

7. Tax is payable at the following rates:-
     Companies:               36%
Tax Law in One Page                                      1
A submission to the Review of Business Taxation
by Russell Keays                              January 1999
     Trusts:                    36%
     Superannuation Funds:      15%
     Overseas corporations:     11% (withholding tax rate)
     Natural persons:           Include income with personal
                              income to calculate tax payable.

8. Tax must be paid within 3 months of the end of the financial year
in which it is due. If tax is paid early or late, interest at Reserve
Bank rates is payable.

9. If no tax is due in a particular year because Deductions exceeded
Income, the Deductions may be carried forward by the Enterprise. If
the Enterprise is dissolved, remaining Deductions may be sold at
market value, like any other asset.

10. The Taxation Commissioner may make Regulations to provide “deemed
to comply” procedures to simplify compliance with the law.

11. Existing Enterprises may change immediately or continue with the
existing system for a maximum of five years.

Tax Law in One Page                                      2
A submission to the Review of Business Taxation
by Russell Keays                              January 1999
Explanation of “TAX LAW IN ONE PAGE”

     The Tax Law of Australia is extremely complex, and does not
encourage sound business practice. Expert assistance is required to
ensure compliance. This expert assistance would be better directed
to assisting the business operator in aspects more directly related
to on-going prosperity.
     This paper sets out one possible means of reducing business tax
to a very simple set of rules. It does this by considering only the
transactions actually completed in the financial year. Generally,
it allows deductions earlier than at present, and deferral of income
not actually received. This means the year of introduction will
result in reduced tax collection, but following years should see a
move back to current levels of revenue.

     The rules apply only to “non-persons”. Once the money moves to
the hands of an individual (usually as wages, interest, or
dividends), there are no further deductions applicable, apart from
the common existing deductions for minor expenses. Where an
individual carries out a business where application of these rules
is of benefit, an “enterprise” must be set up.

TIMING (Clause 2)
     All enterprises are to be taxed on the same financial year, so
that deferral by transfer between entities with different year-end
dates is not possible. It is expected there will be a lot of activity
at year’s end, as cash is paid out to ensure income is not taxed

     This is a standard process for dealing with bartering, and
transfers not at arms length. It also covers fringe benefits to
employees, which will now be included in the employee’s taxable

INCOME (Clause 4)
     Every dollar received in the financial year is taxable in that
year’s Return, except for loans and share capital. They say that there
are only two certainties in life - death and taxes. The great
uncertainly with both is exactly when each will happen! This proposal
removes the uncertainty with taxes - tax is due now!

     In the same way that Income appears in the year the money was
received, Deductions will normally appear in the year the money is
paid out.
     The exceptions are items of a capital nature, which are
depreciated over the working life of the asset, and share capital
and loans (where a contra to the Income rule is needed). Nominal
deductions are allowed for enduring assets (such as land).
Collectables are included here, but with the provision that they are
used to provide goods and/or services, as otherwise they would have
Tax Law in One Page                                         3
A submission to the Review of Business Taxation
by Russell Keays                                January 1999
been purchased for the benefit of an employee and so considered to
be a benefit to the employee, and covered by the fringe benefits
     Note that dividends to shareholders are a deductable expense
to the Company, and fully taxable in the hands of the shareholder
- a much more sensible and direct means that the current Dividend
Imputation rules. (Dividend Imputation is no longer useful when the
tax will be collected in the recipient’s hands in the same year.)

     Existing systems of PAYE Tax, Prescribed Payments, and Dividend
Withholding Tax will continue to exist as before, but now the rules
will be much simplified. The existing rules could be reissued as
“deemed to comply” regulations. If there is a problem with the
paperwork on minor payments, reference back to the basic rule should
sort out the problem allowing immediate payment in full if a Tax File
Number has been provided.

TAX RATES (Clause 7)
     These are as at present. Trusts that do not wish to pay tax must
ensure all remaining income is distributed in June.

     Every Company’s books should be completed within three months
leaving accountants to advise on proper business practice for the
remaining 9 months of the year.

TAX LOSSES (Clause 9)
     Losses can be carried forward within an organisation. At wind-up
they can be sold at market rates. The market rate will end up close
to the actual value of the loss!

OTHER LAWS (Clause 10)
     This Clause is to simply establish the preeminance of the new

     Existing corporations will have five years to make the
transition to the new system. This leaves ample time to rearrange
affairs and to consume existing Franking Credits.

Tax Law in One Page                                      4
A submission to the Review of Business Taxation
by Russell Keays                              January 1999

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