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Assignment of Taxation Law

   

Added on  2020-03-23

11 Pages2024 Words46 Views
Running head: TAXATIONTaxationName of the Student:Name of the university:Authors Note:

TAXATION1Table of ContentsAnswer to Question 1......................................................................................................................2Case Introduction.........................................................................................................................2Laws and regulations...................................................................................................................2Analysis of Assessable Income...................................................................................................2Deductions...................................................................................................................................5Computation of Net tax liability..................................................................................................5Answer to Question 2......................................................................................................................7Reference.........................................................................................................................................9

TAXATION2Answer to Question 1Case IntroductionIn this case, the issue is to determine the Income tax Liability of both Jordan andCameron. The case provides that Jordan works from home for an IT company and Cameronworks as marketing executives. They have two children one is financially independent andanother is still dependent financially on them (Gitman et al. 2015). The main aim of thediscussion is to provide a detailed computation of the income tax liability. In addition to this,provide an explanation for including or excluding items from the computation. Laws and regulationsThe following legislations and laws govern the income tax liability of an individual:Income tax Assessment Act 1936;Income tax Assessment Act 1997;Taxation rule;Case laws;Analysis of Assessable IncomeThe section 4-1 of the Income tax Assessment Act 1997 provides that every individual,company and other entities are required to pay tax on their taxable income. The taxable incomeis calculated by deducting allowable deduction from the assessable income as per section 4-15 ofthe Income tax Assessment Act 1997. The assessable income of a taxpayer is classified into theordinary income under section 6-5 of the ITAA 97 and the statutory Income as per section 6-10of the ITAA 97. The section 6-5 states that any income according to the ordinary concept istermed as ordinary income (Saad 2014). The assessable income that are not ordinary income are

TAXATION3the statutory income under section 6-10 of the ITAA 97. In this case, the income that should beincluded or excluded from the computation of the assessable income is discussed. The income received from salary by Jordan and Cameron is $180000 and $120000.These amounts should be included in the assessable income as per section 6-5 of the ITAA 97.The employment income includes the amount that is received from employer by the employee(Forsyth et al. 2014). This includes many incomes in addition with the salary and wages. Thesection 15-2(1) of the Income Tax Assessment Act 1997 states that the assessable income of thetaxpayer should include the value of benefits or allowances received that is directly or indirectlyconnected to the employment. The allowances are the separately identified payment made by theemployer to employee. It should be noted that the allowances or benefits should be included inthe assessable income whereas the fringe benefit provided by the employer to employee shouldnot be included in the assessable income as per section 23L (1). In the current case, the employerof Jordan has paid $4000 for insurance and provided a car for private use (Cheshire et al. 2014).The benefits that are provided falls within the meaning of fringe benefits and hence this shouldnot be included in the assessable income of Jordan. The income that the taxpayer earns from the investment should be included in theassessable income. The taxpayer is required to declare the full amount of rent received or entitledto be received. In the current case, they have received rental income from the holiday home$4000 (Kucukvar et al. 2014). They have also received income from rental property of $22000during the current financial year. The rental income that is received should be included in theassessable income as per section 6-5 of the Income tax Assessment Act 1997. The interest earned by the taxpayer during the financial should be included in theassessable income of the taxpayer under section 6-5 of the Income Tax Assessment Act 1997. In

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