Australian Tax Calculation for Manpreet

This assignment requires you to calculate the Australian income tax liability for Manpreet for the 2016-17 financial year. You will need to consider his salary, deductions for travel expenses, clothing, and superannuation contributions, as well as relevant tax thresholds and rates. The calculation should include Medicare levy and any applicable tax credits.

Answer 1
Case 1
In the given case, business analyst employed by the consultancy firms receives Web jet frequent
flyer points from travels which they make relation to their business related work. The payment
for this travels are being made by the consultancy firm. The employees are channelizing these
business expenses through their personal cards and enjoying the benefits of card point’s
wallpapers news without any tax liability. Australian tax authorities have shown their concern
towards the misuse of these points. As per the case laws, if any points has been received my
employee by making a business method expense, the employee will be eligible to pay fringe
benefit tax in relation to these points. However, if there is a salary arrangement between the
employee and the employee, that any reward points that has been earned by an employee in
relation to business travel will form part of a salary, the same will be taxable in the hands of the
employee. (Tax ruling 1999/6 flight rewards)
In the given case, the employees and the business analyst getting frequent flyer points for the
business related travels, thus in this scenario the amount of flyer points that my dear reply or the
business analyst will be treated as fringe benefits provided by employer to the employee and thus
the employer is eligible to pay fringe benefit tax on this amount.
Case 2
In the given case, the customer has damaged a crane which has been provided to him by a crane
hire company. The customer paid claim to the company for the damaged caused by him. The
amount so received by the company for the claim amount will be treated as income in the hands
of the company. The Crane is an asset for the company thus the same will not be reflected in the

income tax return. But being the same has been damaged and the company has received the
claim in its respect, the same will be treated as income and thus will be taxable in the hands of
the company.
Considering the provision discussed above, the amount of claim received by the company will be
treated as taxable income and will be taxed in his hands. (ATO)
Case 3
In the given case, a manager of a nightclub has received the free holiday package from a
supplier. As per the provision of Australian tax laws, if any gift or benefit that has been received
by an employee which is of a small amount in relation to his birthday or at a family event will
not be taxable in the hands of the employee. On the other hand, if a large amount has been paid
to an employee or to a contractor from the employer or from through an indirect source in
relation to his employment will be treated as taxable income in the hands of the employee.
The holiday package received to the manager of the nightclub is in relation to his employment
and thus will be taxable in the hands of the manager. (ATO)
Case 4
In the given case, a caneo club has raised funds from its members for the purpose of purchasing
caneo. However the fund that has been raised for the excess, thus the club decided to refund the
excess amount that has been raised from its members. As per the provision Australian tax laws
the Asset and liabilities amount will not be reflected in income tax return of a company or of an
individual. The amount raised by the club from its members, is liability for the club and thus the
same will not be reflected in income tax return for the club. Being the club has decided to return

the excess amount, the club is reducing is liabilities and the same has nothing to do with the
income generation activity of the club. There has been no inclusion or exclusion of income in
relation to the above transaction that has been made by the club for refund of excess amount that
has been raised from its members.
Considering the above provision, the return of excess amount has been raised by the club from
its members will not direct any income tax liability neither in the hands of the club nor in the
hands of its members, (ATO)
Case 5
In the given case, a television station has paid a certain amount to Australian footballer after
being named as the best footballer in the Australian Federation League. The amount that has
been paid by the television station to the footballer is a reward for his success. As per the
provision of Australian tax laws, the reward that has been received by the footballer is a cash
prize award for its good performance in the Australian Federation League. The amount so paid
by the television station is not a relation to its business. As per the provision of Australian tax
laws, for an expense to be allowed as deduction in the books of a company it is important that the
same should be spent in relation to the business activities. The amount that has been paid by the
company to the Australian footballer is not a relation to any business activity thus the same will
not be allowed as deduction for the television station. On the other hand, the cash price so
receive by the footballer will be treated as income in the hands of the sportsman and will be
taxed in his hands. (Tax ruling TR 1999/17)
Case 6

In the given case, the businesses incurred expenditures in qualifying a business apprentice. A
business apprentice is a person who has been train from is qualified and skilled person and ready
to work for a certain period at low wages. The business apprentice that has been hired by the
company for low wages will be working for the company and the amount that has been spent by
the company on his salary and on getting him trained is in relation to the business.
Thus, the amount that has been spent by the company in relation of qualifying the business
apprentice will be treated as an expense that has been made by the company in relation to its
business. Thus, the amount so spend will be allowed as deduction for the company.
Case 7
In the given case, certain amount has been spent by a person in doing an art course of
Management in the hope of becoming an art director. For an expense to be allowed as deduction,
it is important that the same has been spent in relation to the business. IN the given case, the
amount that has been spent is in relation to acquire a sustainable position in the company. The
amount has been spent to procure an art course of management which is a degree and the same is
not in relation to any business.
Thus, the amount that has been spent by the person in doing an art course, with the hope of
becoming an art director is not in relation to business and thus the same will not be allowed as
deduction.
Case 8
In the given case, the company has been spending considerable amount in makeup and dresses of
the employees. As per the provision of Australian tax laws, if any amount has been spent by the

company in relation to clothes of the employees which is important and specific to the
occupation and business that the company is into with and will help in recognizing its employees
and it is important for the safety and well being of the employees will be allowed as deduction.
Any makeup that has been done to the Employees in relation to the recognition from the other
people and which is important for the business will be allowed as deduction.
In the given case, the company has been making considerable expenditure in the makeup and
dresses of the employees. These makeup and dresses has been done in relation to be business and
which is specific to the business occupation will be allowed as deduction while calculating the
income for the company. (ATO)
Case 9
In the given case, an employee makes considerable expenditure in travelling between home and
workplace. As per case law "Case C47 71 ATC 219; 17 CTBR (NS) Case 44" any expenditure
incurred contract between home and workplace is not a relation to business and will not help in
any income generation activity for the company. Thus, any amount that is being spent in this
relation will not be allowed as deduction. The amount spent by the employee will be treated as
private expenses. However if the person is working from home as well, and is travelling from his
home to his workplace, then in that scenario the amount that has been spent on travelling will be
allowed as deduction.
Overall in normal scenario, any expense that has been incurred by the employee in relation to
travel from home to work place will not be allowed as deduction. (FC of T v. Collings 76 ATC
4254; (1976) 6 ATR 476 ( Collings' case)).

Case 10
In the given case, any expense that has been incurred by an employee in relation to its travel
from home to his work place will not be allowed as deduction as the same will be considered as
personal expenses. On the other hand if any expense has been incurred by employee in travelling
between one place to another workplace will be treated as a business travel and that will be
allowed as deduction. The company can claim deduction only for those troubles that has been
incurred by an employee in performing his business duties. If the amount has been spent partially
in business travels and for personal Travels the company can claim deduction only for the
expensive that has been incurred in relation to the business travels.
Overall, normal scenario if any expenses that have been incurred in relation to travel from one
employee to employer will be treated as travels made for business purposes and thus the
company can claim deductions for the expenses. (ATO)
Answer 2
In the given case, an international student Manpreet was pursuing an accounting degree at
Sydney. During the year 2016, he started doing part time accounting work to gain experience. He
earned $45,000 part time job. Bring the same here he received $20,000 from his parents from
India and $10,000 as distribution income from trust created by his grandmother. He paid $1,000
as tax on the distribution income from the trust. He incurred expenditure on educational purposes
and spent $500 on purchase of mobile phone used for his work.
Any international student pursuing education degree in Australia will be treated as an Australian
citizen if he stays in the country for more than 6 months for taxation purposes. (Beattie G, 2016).

The amount received by Manpreet from his parents will not be treated as taxable income in his
hands. On the other hand the distribution income that he has received from the trust worth
$10,000 will be eligible for taxation. The amount Manpreet has received from carrying out part
time accounting activities will be eligible for taxation as well. The amount Manpreet has spent
on education purposes and for acquiring mobile phone will not be allowed as deduction.
The amount of foreign tax worth $1000 that has been paid by Manpreet on the distribution that
has been received from the trust created by his grandmother will be considered at time of
computing the tax liability for Manpreet. He can claim credit for the tax amount paid in advance.
The taxation rates applicable on Australian residents are as follows:
Taxable income Tax on this income
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000
Thus, in light to the provision of Australian tax laws, the taxability of Manpreet will be
calculated as follows:
Particular Amount
Salary income received from
Accountant office
$
45,000
Trust income $

10,000
Total taxable income
$
55,000
Taxable income Tax on this income
Taxable
income
$55,000
$18,201 – $37,000 19c for each $1 over $18,200 $ 3,572
$37,001 – $87,000
$3,572 plus 32.5c for each $1 over
$37,000 $ 5,850
$87,001 – $180,000
$19,822 plus 37c for each $1 over
$87,000
$180,001 and over
$54,232 plus 45c for each $1 over
$180,000
$ 9,422
Medicare levy (@2%) $ 1,100
Total tax $ 10,522
Tax credit $1,000
Net tax liability $9,522
Thu, in normal scenario, Manpreet will be eligible to pay tax worth $9522 for the financial year
2016-17.

References
ATO.Gov.au, Tax ruling 1999/6- Taxing consumer loyalty program rewards, viewed on 28th Aug
2017, retrieved from
http://law.ato.gov.au/atolaw/view.htm?docid=PSR/GA20044/NAT/ATO/00001
ATO.Gov.au, Insurance payouts, viewed on 28th Aug 2017, retrieved from
https://www.ato.gov.au/Individuals/Dealing-with-disasters/Damaged-or-destroyed-property/
Insurance-payouts/
ATO.Gov.au, Amounts not included as income, viewed on 28th Aug 2017, retrieved from
https://www.ato.gov.au/Individuals/Income-and-deductions/Income-you-must-declare/Amounts-
not-included-as-income/
ATO.Gov.au, Tax ruling 1999/17- Income tax: sportspeople - receipts and other benefits
obtained from involvement in sport, viewed on 28th Aug 2017, retrieved from
http://law.ato.gov.au/atolaw/view.htm?Docid=TXR/TR199917/NAT/ATO/00001
ATO.Gov.au, Tax ruling 95/22- Income tax: employee building workers - allowances,
reimbursements, long service payments, redundancy trust payments and work-related deductions,
viewed on 28th Aug 2017, retrieved from
http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9522/NAT/ATO/00001
ATO.Gov.au, Travel between home and work and between workplaces, viewed on 28th Aug
2017, retrieved from https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-