ACC3TAX Taxation Group Assignment

TAX CALCULATION AND ADVISE
TAXABLE INCOME ANALYSIS AND ADVICE
FOR JANET BROWN
Name
Course:
Professor’s Name
Institution
City
Date

TAX CALCULATION AND ADVISE
Part A;
Refer to the letter from Janet Brown I wish to say that this part of question requires us to
calculate tax payable amount as per the requirement set in place by the Tax Law in Australia.
Janet Brown tax payable amount is thus calculated by first considering all the revenue income
generated in his course of business then subject it to correspondence allowable expenses as
solved below.
Statement of Taxable the Income
For Janet Brown
For The Year Ending 30Th June 2018
Gross Income
Revenue on renting house property (see note 5) $25000
Capital Gain on Telstra Shares Sale (see note 6) $5000
Gain on sales of dolls (see note 7) $17100
Car Fringe Benefit (see note 3) $25500
Less loss on capital sale of Orica Share (4000)
Cumulative Gross Income= $68600
Less Allowable Expenses
Expense incurred on roof repair $22000
Expense incurred on Installation of new air condition $4000
Interest paid on the property loan acquired see note 6 $9000
Court Fees $25000
Damages $10000
Total Allowable Deductions=22000+9000+4000+25000+10000= ($70000)

TAX CALCULATION AND ADVISE
Net Taxable Income Loss or Profit =$68600-$70000= ($(1400)
Medicare Care Levy=2%*$68600=$1372
The person's income tax brackets outlined in the Australian Tax Office as shown below is
what usable for Janet’s Taxation aspect;
0-$18,200 - Nil
Janet is seen to make a loss of $1400 a figure that is far below the bracket range of 0-$18200
thus making her income gains not taxable at all because she has made a loss of $1400.
This loss made contributes to Janet failure not even being able to pay the expected
Medicare levy of $1372 because there is no revenue at all.
As being noticed, I wish to state that Janet’s revenue in place is minimal on the income tax
bracket threshold thus why the reason the value is as low as zero hence the only subjection of
medical levy that she is entitled. This medical levy claim is according to the information given
that she has never adjusted on anything relating to her private medical scheme. Janet is thus
enjoying the following equality aspect of tax concept that tends to be fair on the person's income.
Notes statement for the solution;
Note 1; any earnings or revenue generated must be imposed to tax as per the requirement of
Australian Tax expectation. The law requires that all the deductible expenses relating to the
revenue should net off the income thus giving a platform for any profit or loss as well as
individual income be taxed. Janet case is classified as one of accounting for taxation of an
individual income in lieu of respective fringe benefits.
Assessable Tax Income=Gross Earning Less Allowable Deductions.

TAX CALCULATION AND ADVISE
Note 2; Medical Levy=2% Of Gross Income calculation only expect 2% of the gross income
preserved for medical health service, this serves the great need of ensuring that there is partly
contribution done by the taxpayer to cater for his or her private health care services. It has a
minimum of the threshold of personal income of $27069 in Australia for those deemed young on
employment basis and to those termed old in employment service or instead of earning more
with the gross figure of $42806.With this cluster, we, therefore, classify Janet to be among the
senior who make the total income of $68600.It is good to note that Medicare Levy is given
propriety than even the tax liability to the extent that even in cases of persons making loss can
forfeit the tax liability but pay Medicare as we see here in this case of Janet.
Note 3; the law allows persons to claim car fringe benefit but only to the extent in which the car
used for business purposes. Janet total cost of the car benefit is 30000, but just 500 used for
private purpose hence the other portioned, i.e., 30000 less 500 was what was utilized for business
purpose thus showing the benefit to be 25500.If the vehicle entirely not used for business
purpose, then car fringe benefit enjoyed partially or not at all.
Note 4; Janet Brown is an Australian tax resident citizen who bounded by all the regulation
guiding calculation of income tax and liability as well as subjection for the income tax rates.
Note5; The rental revenue calculation is by multiplying monthly rent value of 2500 by the
10months period, i.e., from 1St Sep 2017 to June 2018 hence total revenue is $25000, this tax,
however, should be subjected to the interest loan used to generate revenue consequently,
Interest expense=3%*300000=9000, we are only considering part of the credit that was used to
purchase the investment townhouse. The 100000 part portion of interest is not viewed because it
has no relation to the rental property.
Note 6; Capital gained or lost on sale of shares at Telstara forms part of revenue;
Sales proceeds on shares=$10000

TAX CALCULATION AND ADVISE
Less cost of the shares = ($5000)
Capital Gain or loss $ 5000
Capital loss on sale of Orica shares considered to as part of revenue
Sales proceeds 6000
Purchase or cost proceeds (10000)
Capital Loss (4000)
Note 7; Profits made on Sale of Russian Babushka Doll;
Cost per each doll =1000/5=$200
Price for three dolls therefore=$200*3=600
Sales proceeds for one doll is $5900
Sale Proceeds For 3dolls =$5900*3=17700
Profit, therefore, =17700 sales proceeds.
= (600) cost of 3dolls
17100 Gain
Mark, you I wish to state that all the notes above appended and calculation is in compliance with
Australian Tax Office regulation and current state acts guiding accounting for income taxes as
referred by Atkinson (2007.Pg 40).
Part B;
Refer to the letter written by Janet Brown on 23rd August 2018 concerning the legal fees
and damages paid; I at this moment wish to respond to Janet by saying that the Australian Tax
Office ID 2001/27 has outlined when a legitimate expense is deductible and when not. It starts
first by defining what a legal cost is incurred if it relates to employment revenue or property

TAX CALCULATION AND ADVISE
revenue or preferably relates to any course of action instead of employment or rental income
activities of the taxpayer business. Section 8-1of the ITAA 1997, therefore, allows all the court
expenses relating to the taxpayers business activities be considered for legal purposes however of
the legal cost incurred by a private or domestic use.
Looking at the nature of the litigation placed against Janet Brown I wish to say that the
expense was involving a yard that annexed to the rental property that was used to generate
revenue for her. I first want to state that the expenditure incurred was therefore not for neither the
domestic purpose nor capital need but rather for the sole purpose of the rental income. Going
with the rulings of the case study of Herald and Weekly Times Ltd vs. Federal Commissioner of
Taxation. That which ruled that all legal expenses incurred in income-producing activities should
be considered for legitimate tax purpose defends Janet Brown’s concern on claiming the court
fee of $25000 be net off her income, and this is why in part 1 have considered the litigation fee
as part of the expense.
The tax law states that as long as the payment of damages made in piece-meal or lump
sum form for tax purposes, the individual consideration made in the context of the suit. Both the
defendant and the plaintiff are affected by the damages one as a plus the other a negative but
again as stated earlier the case suit matters a lot. Australian Tax Office law says that as long as
the damaged to a lawsuit involving physical injury, hence the injured is deemed intentional, and
thus no persons are entitled to claim or consideration for revenue purposes, but if the suit
involved damages on economic or structural nature, hence contra consideration occurs. The
question thus we need to ask ourselves to know whether the damage worth tax consideration is
what circumstance was the damage awarded, was it out of malice or ill intention as well as how
does it relate to the activities generating income.

TAX CALCULATION AND ADVISE
Janet Brown damage of 10000 dollars I wish to say it was for economic purpose whereby it is a
damage loss paid to the plaintiff on the accusation of the claim that the rental property fence
owned by Janet Brown that which has been seen generating $25000 revenue for ten months has
harmed the yard. I thus say that Janet needs to claim for this damage mainly because in my
thinking that by having the fence restructured it may be lower occupancy level of the rental
property thus minimizing the rental revenue Squelch (2010.Pg 14). Either way just as the
defendant is to recover the damage as part of his income likewise we expect Janet to claim for
deductible allowance for the damage but only during that financial year incurred.
I conclude by informing Janet to proceed and claim for both the legal fees and damage
expenses that she incurred in the case litigation of her fence trespassing the neighbors’
compound.
Kind Regards,
Tax Advisor.
Part C;
There exist tax liability relating to the loss incurred in part A whereby Janet is expected to file
a tax loss return on this loss and claim future set off when she makes the gain. On this she is
therefore not expected to pay any tax liability in this FY June 2018, this thus set to be future
deferred tax liability that awaits pre-settlement. The car benefits and interest expense on loan
granted as the fringe benefit that is seen less the income applicable for tax purposes. All these
together with the legal cost and damages are interest accorded to her to relieve her from the tax
liability.
The Australian Tax Office regulations outline the tax liability benefits that a taxpayer is
entitled to and to what extent and going with the above two-part, i.e., part A and part B all the
relevant treatment of different items in the context for tax purposes done under the law and

TAX CALCULATION AND ADVISE
typical scenario in the background. I otherwise wish to advise Janet to create provisions for
litigation expenses and damages to secure normal operations of the business. Janet Brown is
therefore entitled to account for all the benefits accorded to her by first ensuring that precise
records of the receipts and invoices are kept as well as ensuring that though she has made a loss,
she has file net tax loss or gain the return for compliance purposes.

TAX CALCULATION AND ADVISE
References
Atkinson, A.B. and Leigh, A., 2007. The distribution of top incomes in Australia. Economic
Record, 83(262), pp.247-261.
Squelch J. and Guthrie, R., 2010. The Australian legal framework for workplace bullying. Comp.
Lab. L. & Pol'y J., 32, p.15.