Assessable Income and Taxation Laws in Australia

Running Head: ASSESSABLE INCOME 1
Assessable Income
Student’s Name
Institution Affiliation
Date Submitted

ASSESSABLE INCOME 2
Assessable Income
Part A
As per the Australian tax laws, there are various methods that can be used to value stock such as
the cost price method that includes all the insurance, excise and custom duties among other
expenses involved in stick valuation. Next is the replacement value method that is meant to
compare the set product with what is already available in the market. Finally is the market selling
value method that the stock’s current value is used to determine the net income (Australian
Taxation Office, 2017). All three methods are allowed according to the law and one can select
the easiest or one that gives the minimum assessable income to reduce on taxes. Jane should
value the trading stock at cost as it minimizes her assessable income.
Part A
Using cost method.
Using
Replacemen
t Value
Method
Sales $ 600,000.00 Sales $ 600,000.00
Less Cost of goods sold Less Cost of goods sold
Opening stock $ 300,000.00 Opening stock $ 300,000.00
Purchase $ 250,000.00 Purchase $ 250,000.00
Less closing stock $ (400,000.00) Less closing stock $ (450,000.00)
Cost of goods sold $ (150,000.00) Cost of goods sold $ (100,000.00)
Gross profit $ 450,000.00 Gross profit $ 500,000.00
Using market selling value method
Sales $ 600,000.00
Less Cost of goods sold
Opening stock $ 300,000.00
Purchase $ 250,000.00
Less closing stock $ (500,000.00)
Cost of goods sold
$
(50,000.00)

ASSESSABLE INCOME 3
Gross profit $ 550,000.00
Part B
Under the taxation laws, for all the fixed assets, there needs to be a calculation of the capital
allowances which is an allowable expense that reduces assessable income. The fixed assets are
classified into four classes and furniture and fittings falls under class IV which means that the
percentage of capital allowance is 12.5% (Australia, 2016). With the fittings ownership of
100,000 then Jane will have an increase in assets leading to increase in capital allowance of
12.5% which is an allowable expense thus reducing the assessable income. The reimbursement
on relocation cost of $10, 000 increases the assessable income by the same amount since it is
added back.
Part C
In accounting, sale of shares on a gain leads to income that is taxable hence the assessable
income increases, the loss on sale of shares is a disallowable expense that increases the taxable
income (Gitman, Juchau, & Flanagan, 2015). Additionally, sale of land on a profit is a
nontaxable income that reduces the assessable income. Both the sale of shares and the land
would have an impact on the assessable income. The Sale of shares in ABC NL, at $100,000
results into capital gains of $60,000 which is taxable income hence increasing the assessable
income. Gains on sale on revalued land is nontaxable income hence reduces the assessable
income.