Income Tax Assessment Act (ITAA) Australia Paper

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Added on 2020-04-21

Income Tax Assessment Act (ITAA) Australia Paper

Added on 2020-04-21

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1Name:Course Professor’s nameUniversity nameCity, StateDate of submission

Income Tax Assessment Act (ITAA) Australia Paper_1

2IntroductionThis paper sets out to examine principles of deductibility, income and tax accounting under the 1936 income tax Assessment Act of Australia. It shall also explore on security of income tax contrary to avoidance- and also tax nonpayment where the law requires it. In Australia, a person’s home is exempt from any form of tax. However, investment property such as rental houses, property flipping amongst others have tax implications. Some of the taxes in this segment include goods and service tax (GST) and capital gains tax (CGT). If one rents out a property or invests in a rental property , he or she is required to keep records right from the start. In a tax return, one is supposed to work out the total amount of expenses that can be claimed as deductions(Engdahl, 2011).In this regard, when a property is disposed there is tax deducted for the capital gain. In this case, the property was not earning any income therefore, the property is still subject to capital gains tax. You cannot claim tax deductions because the property dis not generate any tax. However, costs of ownership can be included which can reduce liability brought by capital gains tax liability when you sell it.There are deductible expenses that are deducted from rental income(Woodson and Lewis, 2004). Deductible ExpensesFor the determination of the net return of the real estate capital, all the necessary expenses for obtaining it can be deducted from the full income, as well as the amounts destined to the amortization of the real estate and of the other assets assigned with it, provided that they respond to its depreciation. effective

Income Tax Assessment Act (ITAA) Australia Paper_2

3Expenses necessary to obtain the returns: interest and other financing expenses and conservation and repair expenses The following are considered among the expenses necessary to obtain the returns, among others:1. Interest and other financing expenses Interest and other financing costs of the foreign capital invested in the acquisition or improvement of the property, right or faculty of use or enjoyment as well as, as the case may be, of the assets transferred with the same(Lakshmanan, 2015).2. Conservation and repairThe expenses of conservation and repair of the goods producing the yields are deductible. For these purposes, they have this consideration:a) Those carried out regularly in order to maintain the normal use of material goods, such as painting, renovation or arrangement of facilities.b) Replacement elements, such as heating installations, elevators, security doors or others.The amounts destined to the expansion or improvement of the assets are not deductible for this concept, as they constitute a higher acquisition value whose recovery is effected through the corresponding amortizations.The maximum total amount to be deducted for interest and other financing expenses and for conservation and repair expenses may not exceed, for each asset or right, the amount of the full income obtained(Papadimitriou, 2006).The excess may be deducted in the following four years,

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Income Tax Assessment Act (ITAA) Australia Paper