Australian Income Tax Law - Desklib

Get detailed information on Australian Income Tax Law including topics like property income, capital gain tax, work expenses, personal service income and more. Subject: Taxation, Course Code: N/A, Course Name: N/A, College/University: N/A

TAXATION

TABLE OF CONTENTS
MAIN BODY...................................................................................................................................3
Question 1...................................................................................................................................3
Question 2...................................................................................................................................3
Question 3...................................................................................................................................3
Question 4...................................................................................................................................3
Question 5...................................................................................................................................3
Question 6...................................................................................................................................4
Question 7...................................................................................................................................4
Question 8...................................................................................................................................4
Question 9...................................................................................................................................5
Question 10.................................................................................................................................5
Question 11.................................................................................................................................5
Question 12.................................................................................................................................5
Question 13.................................................................................................................................5
Question 14.................................................................................................................................6
Question 15.................................................................................................................................6
Question 16.................................................................................................................................6
Question 17.................................................................................................................................6
Question 18.................................................................................................................................7
Question 19.................................................................................................................................7
Question 20.................................................................................................................................7

MAIN BODY
Question 1
Property is a very big term in real. It includes money, tangible nag intangible things
which are related to income. It is an item on which person holds a title over it. It can be car,
houses, bonds etc. It is divided into real property and personal property. Income coming from
house property on transfer of house is called income from property. In this property can be self-
occupied or it can be al et-out property.
Question 2
Fully franked dividend = 14000
Employment income= 35000
General deduction= 500
Taxable income = 35000 – 500 - 14000
= 20500
Question 3
Employment income = 45000
50 % franked dividend = 5000 * 50 % = 2500
Taxable income = 45000 – 2500 = 42500
Question 4
So there will not be any taxable income for Bob as he is not having any other income.
Hence, the only employment income will be taxable. Also, the interest paid of $15000 will be
added in the income tax as the interest paid on term deposit is also taxable.
Question 5
The basic consideration factors in differentiate between revenue and capital expenditure
are purpose of expenses, business nature and effect on revenue generated by the company.
Nature of business and purpose: Capital expenditure is taken into consideration to
balance sheet, they are not obtained in the normal course of business function and activities of
the firm whereas revenue is taken into profit and loss account and trading. In order to improve
the quality of existing ones the money is spent by a firm is termed as capital expenditure.
Revenue are for cost of goods sold or expenses of maintenance and repairs. Expenditure which

are ongoing expenses used to run business activities on daily basis is called revenue expenditure.
According to the guidance, expenditure may or not includes cash outflow. It also involves the
capital purchase, purpose of goods sale and getting other services.
Effect on revenue generated by the enterprise: By tracking revenue the company is
allowed to link earned revenue with the business activities expenses incurred during the similar
accounting period. The expenses may reduce profit from a tax and reduce income tax for the
period. Money spent on capital expenditure purchases is not taken into consideration in the
books of income statement. Thus, it is being treated as asset that is reduced over the business
course of several years as a depreciation.
Question 6
Any profit that is gained from sale of a capital asset is called capital gain. The profit that
is received must have taken into income category and a tax that needs to be paid on the received
income is called capital gain tax. This tax can be applied only to capital assets such as bonds,
jewellery, real estate and collection of coin. If the capital gain tax rate applied only to profits
from the sale of assets for more than one year is called long term capital gain whereas if the tax
applied for less than one year is called short term capital gain tax.
Question 7
this type of tax event may be result in as capital loss and capital gain. Additionally, many
capital gain tax events include capital gain tax asset, is can be directly related to capital receipts.
This event happens when the company own shares are being cancelled or redeemed and an asset
owned by company is lost or destroyed and many others. If the company faces more than one
event, then they must use one of the most specific to situation. Along with order, the timing plays
a vital role in capital tax event because it determines in which income year the firm report capital
loss or gain.
Question 8
The vase was sold at a loss of $4000 due to which the Leah is not eligible to pay capital
gain tax. This has been concluded because the individual was unable to earn an income from the
business activity of selling an antique vase. For being eligible to pay the capital gain tax it is
important for the entity to earn profit of the transaction.

Question 9
The difference between the sale of shares is $17000 therefore the capital gain tax for this
individual will be @37% as it is higher than $10000. Hence, the capital gain tax in the scenario
is $6290. This rate of interest in this scenario is chosen because as per the capital gain tax law for
the Australia utilization the if the total capital gain amount is above $10000 the tax rate needs to
be 37%.
Question 10
The income made by Leah from selling the block of land is 205000. For the capital gain in this
scenario the following formula needs to be applied.
(Marginal tax rate * Indexation factor * capital gain)
The marginal tax rate for this scenario is 45% as the capital gain amount is above $180000
The indexation factor for the year of 1985 is 72.7
the capital gain for selling the block of land is 205000.
(45%*1/72.5*205000)
Therefore, the capital gain tax for selling the block of land is 1272.413
Question 11
For the sale of art which are more than $10000 the individual needs to pay capital gain
task. For the arts which are held for more than 12 months the taxable income for the transaction
is directly 50% as capital gain tax. Therefore, in this scenario the taxable income is $28000. The
50% of which is $14000 as capital gain tax.
Question 12
As per the law of capital gain tax the sale of old car is not considered as Capital gain.
They are exempted from the CGT unless it was placed in the business or income purpose. In this
scenario the individual does not do the business of selling cars therefore it cannot be considered
in capital gain taxation.
Question 13
Positive Limbs are:
section 8-1(1), deduct any inadequate profit or loss that.
1. gained in assessing the assessable income.
2. it is important in running of a business for gaining of the assessable income.

Negative Limbs are:
section 8-1 (2) excludes extent.
1. no profit out of capital or from capital nature.
2. not profit out from domestic and private nature.
3. Non-exempt income of the person or non-assessable income.
Question 14
Paragraph 4: The depreciation of a property is basically used to gain the wages and salary
and it is also an expense of the work for the ruling purpose. It is also used for depreciating the
property to produce the assessable income.
Paragraph 5: This is deducted to provide the work expenses of the employees. It includes
occupation-specific expenses and employees guide for the expenses of their work.
Paragraph 6: This is based on general deductibility principles and other relevant things
related to the work expenses or on any particular issue.
Paragraphs 7: An employee can deduct their work expenses for incurring the assessable
income and also to meet the negative limbs like expenses are not loss, expenses are not domestic
or private and expenses deducted is not incurred for non- exempt income or non-assessable
income.
Question 15
The course fee taken for coffee course is not allowable for tax relief. The law states that
no external training or educational course a person undertakes will be allowable for tax relief.
Even if the subject matter is directly linked to the job or business, it not allowed for tax
deductions.
Question 16
Angelo can claim a deduction for the costs he incurs to buy, hire or repair the clothing
because it falls under the category of occupation specific clothing. He can also claim a deduction
for the costs he incurs for dry-cleaning the work clothes.
Question 17
The particular transaction of travelling to rural Victoria will be allowed for deductions
because it is stated in law that conveyance allowance will be granted to meet the expenditure on

conveyance in performance of duties. Moreover, deductions will be allowed in case of travelling
allowance to meet cost of travel on tour or on transfer.
Question 18
Speeding fines are not tax-deductible because it is stated in law that fines and penalties
should not be given tax relief. They are not allowable as deductions against trading income.
Question 19
Patrick's income when he works as a computer consultant will be treated as Personal Service
Income because he is professional practising on his own account without any assistance.
Personal service income is that income which is mainly a reward for a person's personal efforts
and skills. PSI prevents people from reducing their income tax by diverting income they have
received from personal services through companies or partnerships. Patrick's income is classified
as PSI because more than 50% of his income is generated due to high personal efforts. Along
with this, he also has professional indemnity insurance because he is concerned about being held
negligent for his actions.
Question 20
1.
In Australia, if wage accounts for $45000 then according to income tax rules $5992 will
fall under the category of taxation. As per rules average tax rate is 13.3% and marginal tax rate
accounts for 34.5% significantly.
2.
If commission paid by employer for meeting targets, then need report the related income
on line 7 of your Form 1040. As per ATO bonuses and commissions are considered as wage
due to which employee is liable for payroll tax.
Commission: Income tax assessment Act 1936-Sectiom 15-30 of schedule 1
3.
Need to show such income (commission paid by suppliers) under the head of income
from other sources.
4.
It is a big risk if Angelo is an unregistered tax practitioner who prepares and lodges tax
return and statements, provides tax advice and represents in dealings with Australian Taxation
Office. Such service is not applicable by for income tax return.