Taxation Law

This document provides advice on taxation law, including work related income and deductions, capital gains, rental property, income and deductions from other sources, tax payable, offsets and levies. It also includes work papers and references for further reading.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Letter of Advice:........................................................................................................................2
Work Papers:..............................................................................................................................3
Work Related Income and Deductions:.................................................................................3
Capital gains:..........................................................................................................................4
Rental Property:.....................................................................................................................5
Income and Deduction from Other Sources:..........................................................................5
Tax Payable, Offsets and Levies:...........................................................................................6
References:.................................................................................................................................7

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Letter of Advice:
To Isuruni
From Tax Consultants
Date: 14th January 2019
Dear Isuruni
We would like to address your taxation related problems through our letter of advice.
This letter seeks to inform you that you reported the gross salary of $140,000 and total tax
withheld of $42,232. The gross salary that is reported by you will be treated as ordinary
income under the ordinary concepts of sec 6-5, ITA Act 1997. However you can claim tax
offset for the tax withheld from your gross salary for reducing your income tax liability.
The information furnished by you also includes personal superannuation contribution.
The superannuation value can be claimed as allowable deduction to offer your true income.
You reported the capital gains from the sale of BHP shares. You should note that the shares
of BHP will be treated as Pre-CGT asset because you purchased the share before 20th
September 1985 and the same cannot be included for assessment. While your sales proceeds
from MYR shares produced capital losses. The capital loss can be carried forward by you
until a capital gains is made from the disposal of shares to set-off against the same.
The letter seeks to recommend that you must balance your income against your
expenses as this helps in enhancing your financial position with better savings ability. You
also reported the use of car for business purposes. The 80% of the car running expenses
incurred by you can claimed as deduction under section 8-1, ITAA 1997 as they were
occurred while generating your assessable income.

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You also rented your rental property to your daughter following its construction. Any
rent that is made by an individual to relatives then the rent should be charged at general
commercial rate. Therefore, you should charge from your daughter based on general
commercial rent.
We anticipate that the information generated has helped in serving your purpose and
we are looking forward to hear your response soon.
Thank You
Work Papers:
Work Related Income and Deductions:
The work related income and deduction work paper consists of the gross salary,
allowances and superannuation contributions that the employer has made. Referring to
section 6-5, ITAA 1997 gross salary forms the part of assessment (Sadiq et al. 2018).
Additionally, the dividends received is included under section 44 (1), ITAA 1997 as taxable
income. The expenditure occurred for the work purposes as allowed for deduction under sec
8-1, ITAA 1997.

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Work Related Income and Deductions Amount ($) Amount ($)
Income from Employment
Gross Payments 140000
Less: Tax Withheld 42232
Phone Allowance ($88 x 12 months) 1056
Less: Superannuation Contributions 12000 86824
Australian Sourced Dividend Income
Digital Feet Pty Ltd
Fully Franked Dividend 168000
Gross Up for Franking Credits (168000 x 30/70) 72000 240000
CBA Shares
Fully franked Dividend From CBA Shares 693
Gross Up for Franking Credits (990 x 30/70) 297 990
COH Shares
Fully franked Dividend From COH Shares 910
Gross Up for Franking Credits (1300 x 30/70) 390 1300
FLT Shares
Fully franked Dividend From FLT Shares 280
Gross Up for Franking Credits (400 x 30/70) 120 400
TLS Shares
Fully franked Dividend From TLS Shares 108.5
Gross Up for Franking Credits (155 x 30/70) 46.5 155
Total Employment Income 329669
Work Related Deductions
Fuel & Oil 5560
Servicing 960
Registration 608
Insurance 1440
Tyres 1120
Excess of Insurance Claims 600
Car Washing 960
Total Work Related Deductions 11248
Working Papers
Capital gains:
The capital gains that is made from the sale of BHP shares is excluded from
assessment because the shares are PRE-CGT assets that is bought before 20th September
1985. While the capital loss made from MYR shares are carried forward to offset the same
against the capital gains.

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Capital Gains from Investment
Gross Sales Proceeds from Sale of MYR Shares 10800
Add: Brokerage Fees 50
Total Sales Proceeds 10850
Purchase Price for MYR Shares 32800
Net Capital Loss from Sale of MYR Shares -21950
Net Capital Loss from Sale of MYR Shares -21950
Rental Property:
When a taxpayer rents the property to one of its family member then the rent must be
charged in accordance with the general commercial rates (Woellner et al. 2018). The
expenses incurred during the let out period of property are allowed for deduction. Here the
client has rented the property to his daughter and the rent should be charged on general
commercial rate.
Income from Rental Property
Gross Rental Income 22880
Allowable Rental Deductions
Body Corporate Fees 1350
Council rates 950
Water rates 340
Insurance 685
Loan Repayment 8400
Quantity surveyor report fees 699
Capital Allowance (Depreciation) 4932
Total Rental Deductions 17356
Net Income from Rental Property 5524
Income and Deduction from Other Sources:
The income from other sources includes the receipt of accidental compensation.
While the deduction includes expenses occurred relating to laundry of work suits and
expenses occurred for donations. These expenses and income are included in the work paper
for deduction and assessment purpose.

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Income and Deduction from Other Sources
Other Income
Accidental Compensation Received 8000
Total Other Income 8000
Other Deductions
Dry Cleaning of works suits 650
Personal Contributions on Superannuation 12000
Donations
Cancer Council of Australia 1200
Sea Shepherd 1200
Finance Advisors Membership Fees 940
Subscription to The Economist 120
Vegan Living Subscription 150
Fees paid to bank for loan 800
Insurancen policy 2000
Total Other Deductions 19060
Tax Payable, Offsets and Levies:
Tax Payable, Offsets and Levies
Taxable Income 367116
Tax Payable on Taxable Income 1,38,434.00
Less: Offsets
Private Health Insurance Offsets 83
Add: Medicare Levy 7342.32
Sub Total 1,45,859.32
Less: Credits
Tax Withheld 42232
Franking Tax Offsets (Refundable) 72853
Sub Total 115085
Estimated Tax Refund 30774.5

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References:
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., Teoh, J. and Ting,
A. 2018. Principles of taxation law.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. 2018. Australian taxation
law 2018.