Taxation for Small Businesses

This assignment examines the tax implications for a small business, Jack and Jill's Gifts, planning to sell their soft goods. It calculates the total taxable income and tax payable based on provided figures. The assignment further delves into capital gains tax (CGT) concessions available to small businesses, specifically focusing on the 50% active asset reduction method applicable in this scenario.

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

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Computation of Assessable Income of Jack...............................................................................3
Answer to question 2:.................................................................................................................3
Answer to question 3:.................................................................................................................4
Reference List:...........................................................................................................................5

2TAXATION LAW
Answer to question 1:
Computation of Net Tax Payable from partnership business
Computation of Net Tax Payable
Taxpayer: Jack and Jill
Inclusive of
GST GST
Particulars Amount ($) Amount
($) Section Amount
($)
Purchase 15000 1500 Section 6-5 of
ITAA 97 13500
Purchase outside Australia 1300 130 1170
Assessable Income:
Cash receipts from sale of
trading stock
$
5,000.00
$
500.00
Section 6-5 of
ITAA 97
$
4,500.00
Gross Income $
1,15,000.00 Section 6-5 of
ITAA 97
$
1,15,000.0
0
$
1,130.00
$
1,34,170.0
0
Total Assessable Income
$
1,33,040.0
0
Allowable Deduction:
Wages $
8,000.00
$
800.00
Section 8-1 of
ITAA 97
$
56,112.00
Rates $
250.00
$
25.00
Section 8-1 of
ITAA 97
$
225.00
Insurance $
750.00
$
75.00
Section 8-1 of
ITAA 97
$
1,750.00
Improvements to the gift
stock
$
900.00
$
90.00
Section 8-1 of
ITAA 97
$
810.00
Accounting Fees $
500.00
$
50.00
Section 8-1 of
ITAA 97
$
650.00
Lease Payment on Car $
2,000.00
$
200.00
Section 8-1 of
ITAA 97
$
1,800.00
Other Expenses $
120.00
$
12.00
Section 8-1 of
ITAA 97
$
108.00
Ex-Australian Import Duties $
100.00
Total Allowable Deduction $ $

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1,252.00 61,555.00
Taxable Income $
71,485.00
Tax on Taxable Income $
14,779.00
Gross Tax Payable $
56,706.00
Medicare Levy $
1,429.70
Net Tax Payable $
55,276.30
Computation of Assessable Income of Jack
Computation of Net Tax Payable
Taxpayer: Jack
Particulars Amt ($) Amt ($)
Assessable Income
Income From Partnership Business $ 35,742.50
Total Assessable Income $ 35,742.50
Allowable deductions $ -
Total Allowable deductions $ -
Total taxable income $ 35,742.50
Tax on taxable income $ 11,616.15
Total Tax Payable $ 11,616.15
Answer to question 2:
Computation of Net Tax Payable
Taxpayer: Jack
Particulars Amt ($) Amt ($)
Assessable Income
Income From Partnership Business $ 35,742.50
Total Assessable Income $ 35,742.50
Allowable deductions $ -

4TAXATION LAW
Total Allowable deductions $ -
Total taxable income $ 35,742.50
Tax on taxable income $ 3,332.98
Medicare Levy $ 714.85
Total Tax Payable $ 4,047.83
Answer to question 3:
Small business can access a wide range of concession that comprises of reporting and
payment options (Barkoczy, 2016). From the given scenario, it is found that Jack and Jill are
planning to sell the gift soft and because of this GST, implications might arise when they
dispose of their capital assets. The business of Jack and Jill qualifies for the concession since
their aggregate turnover is below $10 million. In the present case, Jack and Jill can gain the
advantage of 50% active asset reduction as this can help in reducing the capital gain on the
active asset by 50%.
In addition to this, it is assumed that the business assets are owned for a minimum of
12 months or more and they can qualify for the 50% CGT discount on the active asset
(Woellner et al., 2016). Therefore, under the 50% of the active asset reduction method Jack
and Jill will be only required to pay tax on 50% of the capital gain when they dispose the
asset. Furthermore, if the business gains any capital gains from the depreciating asset, an
individual will not be able to make use of the remaining small business CGT concessions.
From the given scenario, it is evident that there is no such depreciating asset for Jack and Jill
and they can further reduce their capital gains under the remaining small business CGT
concessions.

5TAXATION LAW
Reference List:
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., ... & Wende, S.
(2015). Understanding the economy-wide efficiency and incidence of major
Australian taxes. Treasury WP, 1.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation
Law 2016. OUP Catalogue.
ROBIN, H. (2017). AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.
Blakelock, S., & King, P. (2017). Taxation law: The advance of ATO data matching. Proctor,
The, 37(6), 18.
Geljic, S., Koustas, H., & Burke, D. (2016). Small business restructure roll-over. Taxation in
Australia, 50(7), 404.
Barros, C., Teo, E. J., & Hinchliffe, S. (2016). Clash of the deeming provisions: Pre-CGT
concessions, tax consolidation and policy in the federal court. In Australian Tax
Forum (Vol. 31, No. 3, p. 509). Tax Institute.