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Bachelor of Business (Accounting) BACC07 Assignment

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Bachelor of Business (Accounting) (BACC07)

   

Added on  2020-04-21

Bachelor of Business (Accounting) BACC07 Assignment

   

Bachelor of Business (Accounting) (BACC07)

   Added on 2020-04-21

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Running head: TAXATIONTaxationName of the Student:Name of the University:Authors note:
Bachelor of Business (Accounting) BACC07 Assignment_1
TAXATION2Table of ContentsIntroduction......................................................................................................................................3Deductions related to rental property..............................................................................................6Treatment of interest expenses related to rental property................................................................8Conclusion.....................................................................................................................................10Reference.......................................................................................................................................11IntroductionThis report is based on the analysis of the treatment of claiming deductions with respectto interest and expenses under rental property. Through this report an attempt has been made to
Bachelor of Business (Accounting) BACC07 Assignment_2
TAXATION3correctly identify the cause of the issue that was stated in the case study and therefore analyzingevery aspects of the issue to suggest the best possible solution to the problem. As this case dealswith the issue which is related to allowable deductions with respect to interest and expense ofrental property. Therefore, an extended approach has been made to explain and describe thebasics of assessable incomes, the deduction that are considered as allowable deduction and alsothose are linked with rental property and on the basis of such analysis appropriaterecommendation has been suggested.IssueAfter studying the case study, it can be observed that the issue is such that a client of thefirm has filed a tax return. Besides this, the client had recently purchased a rental property and inthat tax return the firm has claimed for deduction relating to the rental property which he hasrecently acquired. However, afterward it was found that the client has returned the tax returnwithout signing the same stating that an error was made at the time of making a claim withrespect to deduction for interest and expenses regarding the first four months of the ownership ofthat rental property (Gurran and Phibbs 2015). This was so because the client believes that, asduring that period the client was not drawing any income from that property, thus as permatching principle he cannot claim any deduction for the same. Hence, here the issue arises andthe primary objective of the report is to analyze the issue and make the client understood theappropriate procedures for making the tax return and address the same properly as per tax lawsprevailing in the country.Assessable Income
Bachelor of Business (Accounting) BACC07 Assignment_3
TAXATION4As per Section 4-1 of the Income Tax Assessment Act 1997, it is required that each andevery individual or business or company or any other entity who is deriving an income from anysource and such income is assessable and subject to payment of tax shall pay the income tax byfiling income tax return each year. In addition to this section 4-15 of the ITAA 1997, alsoexplains the complete process of how to work out one’s income that is taxable. In that verysection, it is stated that taxable income shall be computed after subtracting the total deductionsfrom the assessable income (Easthope 2014).Assessable income can be referred to that income which is subject to payment of tax andwhich exceeds an individual’s tax-free income limit. According to the Income Tax AssessmentAct 1997, the assessable income has been further divided into two categories. One is the ordinaryincome under assessable income and the other is the statutory income. Section 6-5 of theIncome Tax Assessment Act 1997 define ordinary income as such income that has been drawnby the assesse in an ordinary concept (Baum and Crosby 2014). In other words, the incomederived by any Australian resident, whether directly or indirectly from every sources that mightbe from Australia or may be outside in a particular financial year is known as ordinary income.Similarly, the definition of statutory income is set out under section 6-10 of the Income TaxAssessment Act 1997. It states that there are certain income that cannot be termed as ordinaryincome but still they are included in an individual’s assessable income. Such incomes are termedas statutory income (Duffy et al. 2017).In case if any such income that an individual might have received which is neither anordinary income nor a statutory income then such income cannot form a part of that individual’sassessable income. This means that the individual will not require paying tax on such income.Allowable deductions
Bachelor of Business (Accounting) BACC07 Assignment_4

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