Australian Income Tax Calculation

This assignment presents a detailed example of calculating income tax in Australia. It outlines various components like income, allowable deductions, low-income tax offset, Medicare levy, and ultimately arrives at the total tax payable. The example is useful for understanding how Australian income tax works.

Running head: TAXATION LAW OF AUSTRALIA
Taxation Law of Australia
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Part i:..........................................................................................................................2
Answer to Part ii:.........................................................................................................................2
Answer to Part iii:........................................................................................................................3
Answer to Part iv:........................................................................................................................3
Answer to Part v:.........................................................................................................................4
Answer to Part vi:........................................................................................................................4
Answer to Part vii:.......................................................................................................................5
Answer to Part viii:......................................................................................................................5
Answer to Part ix:........................................................................................................................6
Answer to Part x:.........................................................................................................................6
Answer to Question 2:.....................................................................................................................7
References:....................................................................................................................................11

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Answer to Question 1:
Answer to Part i:
The condition mainly identifies that there are pertinent benefits given to a business
analyst availing Webjet. Under the normal scenario, such benefits that the airline firms have
provided are not taken into account under taxable income, as laid out in “Taxation Ruling of TR
1999/6”. However, the ruling of Australian taxation depicts that certain criteria are evident that is
required to be met before allowing the expenditure in the form of tax exemption. The total
benefit that Webjet has provided is not taken into account under fringe benefit tax or taxable
income until such influential dynamics are proved. An association between an employer and an
employee exists, when they treat each other as family members. Moreover, the reward points are
provided to the staffs in relation to the agreement of employment. Finally, Webjet has made
certain arrangements for the flight points. However, dissection of the scenario primarily depicts
no agreement between the staffs and Webjet or the employer and Webjet, in which the benefit is
excluded from taxable income (McGregor-Lowndes 2014).
Answer to Part ii:
According to the case study, the organisation has received a pertinent compensation from
a customer in lieu of damages carried out on the capital asset. In compliance with the taxation
law of Australia, the payment of total damage could not be taken into consideration under
taxable income. In addition, there are various criteria that an organisation should follow for
excluding the payment of damage related to capital assets in the form of capital income. Initially,
the organisation needs to utilise its assets effectively that would help in minimising the taxable
income. The second measure depicts that the capital asset is listed on the annual report, in which

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the conduction of sufficient depreciation is made. This is extremely significant, since it enables
the taxation authority of the nation in understanding that the organisation uses the capital asset
for above a fiscal year (Bryan, Vann and Thomas 2017).
Answer to Part iii:
According to the provided scenario, the manager of the nightclub has been provided with
a pertinent holiday package on the part of the alcohol supplier. The pertinent arrangement
primarily denotes that the alcohol supplier has provided a gift or benefit having relatively greater
value. In accordance with the taxation authority of Australia, the gifts of low budget are
exempted from taxable income, while the gifts of high budget are included in taxable income.
This enables in reducing any type of unscrupulous actions carried out on the part of owners and
staffs. Along with this, the scenario denotes that the holiday package has greater value, in which
the nightclub manager is needed to include benefits in the taxable income. As remarked by
McKerchar, Bloomquist and Pope (2013), the individual staffs receiving advantages from the
employers are adjudged mainly as fringe benefit tax, which is incurred on the part of the
employer.
Answer to Part iv:
According to the case study, pertinent fund is returned to the members of the Canoe Club,
since the collection of additional amount is made. The monetary return from the club is primarily
a refund and it could be adjudged as member income. In accordance with the taxation law, any
type of expenditure carried out on clubs for private entertainment is not deductible in nature.
Hence, the total fund returns could not be highlighted that the Canoe Club members have
received. It could be stated that the fund return of the members of the Canoe Club could not be
taken into account.

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Answer to Part v:
The television organisation has paid a football player to participate in the sports field
diligently, under the circumstances that the sportsperson is responsible for adding the amount in
taxable income. The “Taxation Ruling TR 1999/17” mainly states this situation, in which it is
represented that any type of advantage that the sports person has obtained in Australia would be
adjudged as taxable income. Hence, as per the ruling, the sports person needs to take into
account the benefits provided on the part of the television firm in the taxable income and
pertinent access to the government of Australia. As stated by Lang (2014), the measure of
taxation is utilised in minimising unscrupulous measures for reducing the taxable income.
Answer to Part vi:
The circumstance many states that general costs are been directed in the building, where
applicable costs is been considered from the student. As per the Australian tax assessment law,
the circumstance for the most part expresses that student is specifically viewed as under the
remuneration of building work. The measures that are utilized as a part of distinguishing the
costs of building are delineated under the tax assessment decision of TR 95/22, where pertinent
costs and pay are straightforwardly uncovered (Barkoczy 2016). As per the tax assessment
administer applicable costs should be considered before recognizing the understudy as a building
worker. The primary measure primarily expresses that development site is looked at when as a
boss work is being led on the premises. The second measure expresses that works were utilized
for building the premises is thought to be a representative. The third measure expresses that
important learners, disciple and woodworkers are considered under the utilized works. In
addition, a development site is likewise considered where venture chief is utilized for finishing
and directing applicable measures for the development of the building. In this manner, from the

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assessment it could be comprehended that costs led on student is considered as work
remuneration for the building and can be deducted in the yearly report.
Answer to Part vii:
Costs is been led on here and now course to become a workmanship executive, which has
an important arrangements in the Australian tax collection office. Short course that is utilized by
a person to improve his vocation in the brief timeframe is basically thought to be imposing
deductible cost. This sort of assessment deductible cost is just considered when the investigation
courses is short, for long examination courses there is no exemptions in the assessable pay
(Snape and De Souza 2016). Also applicable measures as delineated by the Australian tax
assessment office should be assessed by the assessable individual. At that point it is to be
insignificant instruction module and programming for the course. What's more, charges for the
course should be for brief length has applicable dinners and travel costs ought to be incorporated.
These measures are given by Australian tax assessment office should be assessed before utilizing
the fleeting course, as a duty deductible cost. Subsequently, important expense conclusion is led
by the artisanship executive, which helps in decreasing the assessable pay.
Answer to Part viii:
There are significant costs directed on both cosmetics and dresses on a person,
which is a deductible in nature as said by the Australian tax assessment office. Be that as it may,
there are sure criteria, which should be fulfilled earlier enabling the costs to be assessing
deductible. The costs led on Makeup and dresses for the performing craftsman are predominantly
deductible in nature. Additionally, performing craftsman is thought to be a mystical performer,
vocalist, on-screen character, circus entertainer, assortment craftsman, and an artist (Braithwaite
2017). Any sort of costs directed on these people are thought to be an assessment reasoning cost.

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In this way, the situation expresses that significant costs are directed on cosmetics and dresses,
however no divulgence is given with respect to on whom the costs are led. Henceforth, important
suspicions are made that the consumption are led on performing craftsman, which could be
deductible from the assessable salary and enable the person to diminish the expense payable.
Answer to Part ix:
Costs directed by the person by making a trip from home to work environment, is for the
most part thought to be a movement of work (Cao et al. 2015). However there is no certain
confirmation gave in the situation which could help in distinguishing the lawfulness, where costs
are led for office purposes. The Australian tax assessment office basically expresses that any sort
of costs led by a person with the end goal of office is deductible in nature from its assessable
pay. In any case, any sort of thought process instead of office costs is not deductible under the
tax collection law in this specific situation. Along these lines, the individual needs to distinguish
real cost intention before utilizing it as assessable derivations. Saad (2014) contended that
without sufficient observing it is extremely unlikely where government could distinguish the cost
led by people in their pay impose record. Consequently, it could be expressed that if the costs
directed for office purposes then it could be deducted from the assessable pay. In any case, this
won't lessen if the costs are directed for individual utilize.
Answer to Part x:
The circumstance for the most part expresses that important costs are been led by a
person from heading out to one representative to another. This principally expresses the
individual is directing individual cost and setting out starting with one place then onto the next
looking for work, as one individual cannot be utilized by two organizations. In this manner it
could be comprehended that this sort of travel cost is an individual attempt, which can't be

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deducted from the assessable salary. As per the Australian tax assessment law, the individual
can't deduct the costs from its assessable pay. Taylor and Richardson (2013) specified that with
the assistance of laws gave by the Australian tax assessment expert, the Australian government is
essentially ready to decrease the general tax avoidance directed by person. In this manner it
could be comprehended that the costs led by the person on venture out starting with one worker
then onto the next is not deductible in nature, which couldn't diminish its general assessable
salary.
Answer to Question 2:
The provisions of the Income Tax Assessment Ac 1936 and 1997 govern the
determination of income tax payable in Australia. In addition to this the Taxation Rulings,
judgment of the cases and the ATO interpretive directions also plays an important role in
ascertaining the income tax liability of the taxpayer. The section 4-1 of the Income tax
Assessment Act 1997 states that an individual, companies and other entities are required to pay
tax on their taxable income. The section 4-15 of the ITAA 97 states that taxable income should
be calculated by reducing the deduction that are allowed under tax from the assessable income.
The act classifies the income according to the ordinary income under section 6-5 of the Income
Tax Assessment Act 1997 and the statutory income under section 6-10 of the ITAA 97. The
section 6-5(2) and section 6-10(4) of the ITAA 97 provides that if the taxpayer is an Australian
resident in that case income from all the sources should be included in the assessable income. In
case the taxpayer is non-resident then income received from Australian, sources are included in
the assessable income. Therefore, it can be seen that it is necessary to determine the residential
status of the individual before determining the income tax liability (Pearson 2017).

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The term Australian resident is defined under section 995-1 of the ITAA 1936 and it
means a person who is resident in Australia as per the act. The definition of the term resident
provided in section 6-1 of the ITAA 1936 mentions four tests that can be applied in determining
the residential status. The para 32 of the Taxation Ruling98/17 states that the four tests for
determining the residential status of individual are:
 Determining residency according to the ordinary concept;
 Test of residency based on domicile;
 The 183 days test;
 Superannuation test;
In this case, Manpreet came to Australia for studies and so he is not a resident according to
the ordinary concept. Therefore, his residential status should be determined by applying statutory
tests. The Para 50 of the Taxation Ruling 98/17 provides that an individual entering Australia
to take up employment opportunity or a study course for more than 6 months is considered as
resident for the purpose of tax. Therefore, based on the above discussion it can be said that
Manpreet was a resident of Australia for the purpose of tax. That means income received from
Australian sources should be included in assessable income under Division 6 of the ITAA 97.
Manpreet has enrolled in a course and has incurred substantial expenditure for the self-
education purpose. In order to determine whether the self-education expenses will be deducted is
determined by the Taxation Ruling 98/9. The section 8-1 of the ITAA 97 provides that expenses
that areconnected to self-education expenses that related to the income earning activity are
allowed as education. The Para 13 of the Taxation Ruling 98/9 states that if the income earning
activity of the taxpayer is based on certain skill and the self-education helps in improving those
kills then the expenses incurred in the self-education expenses are allowed as deduction. The

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Para 14 of the Taxation Ruling 98/9 provides that if the self-education helps the taxpayer in
increasing the income then it is allowed as deduction (Petty et al. 2015). The Para 23 of the
Taxation ruling 98/9 provides that in case the self-education expenses are allowed as deduction
then the expenses that are allowed as deduction are:
 Course fees;
 Journals, textbook and stationery;
 Airfare for overseas students;
In the case of Lunney V FC of T. Haley V FC of T(1958) 100 CLR 478it is stated that the
expenses are allowed as deduction if the expenditure is helpful in generating income. In case of
Manpreet the expenses in self-education has not helped him in increasing the income hence the
expenses related to education are not deductible (Harris 2013).
Tax payable Computation
Particulars Amount Amount
Gross Salary $ 45,000.00
Foreign Income
Income From Trust $ 10,000.00
Total Income $ 55,000.00
Deductions
Purchase of mobile work purpose $ 500.00
Total Deductions $ 500.00
Taxable Income $ 54,500.00
Total tax $ 9,259.50

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Low income tax offset $ 182.50
Medicare Levy $ 1,090.00
Tax Payable $ 10,167.00

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References:
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Bryan, M., Vann, V. and Thomas, S.B., 2017. Equity and trusts in Australia. Cambridge
University Press.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. and Wende,
S., 2015. Understanding the economy-wide efficiency and incidence of major Australian
taxes. Treasury WP, 1.
Harris, P., 2013. Corporate tax law: Structure, policy and practice. Cambridge University Press.
James, S., Sawyer, A. and Wallschutzky, I., 2015. Tax simplification: A review of initiatives in
Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1), p.280.
Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.
McGregor-Lowndes, M., 2014. The not for profit sector in Australia: Fact sheet. ACPNS Current
Issues Information Sheet 2014/4.
McKerchar, M., Bloomquist, K. and Pope, J., 2013. Indicators of tax morale: an exploratory
study. eJournal of Tax Research, 11(1), p.5.
Pearson, G., 2017. Further challenges for Australian consumer law. In Consumer Law and
Socioeconomic Development (pp. 287-305). Springer, Cham.