BUSL320 Taxation Law and Practice Assignment: Anna McCartney

This report analyzes the taxation obligations of Anna McCartney, a financial analyst, based on the Australian Income Tax Assessment Act of 1997. The report examines various aspects of her income, including salary, sign-on bonus, and bonuses, determining their assessable nature. It delves into the taxation of superannuation accounts, considering factors like age and contributions, and assesses the tax implications of allowances, such as travel allowances, as well as accrued expenses. The report also addresses the tax treatment of compensation for injuries and emphasizes the importance of proper allocation of losses and damages. The conclusion summarizes the key findings, highlighting the assessability of ordinary income and the differing treatment of allowances and superannuation under the Australian tax laws.

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Taxatation Law & Practice
Name
Institution
Submission Date

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Executive summary
According to the income tax assessment act of 1997 D6 on assessable income and exempt
income, all ordinary income that is received by an individual or a firm is assessable to taxation.
This report provides the legislative evidence to Anna's transactions assessable nature for both
revenues received from salary, bonuses, accrued expenses as well as accepted allowances.
Introduction
In Australia, several tax obligations are applied upon the nature of the transaction that a
person or a company gets involved in. Example of the general tax obligation in the country is
income tax. This tax applies to all the civil servant and people working in private sectors.
Moreover, income tax is also applicable to companies upon the sale of assets or the sale of their
services and goods (Australian Income Tax Legislation 2011 p89). The tax office of Australia
defines taxable income as the total assessable income less all those available deductions that are
allowable by the law. In case there is a loss incurred a carry forward is recommended if the test
on carrying forward are approved. Assessable income in Australia includes; wages and salaries,
the business generated income, dividends, interest, and rent.
According to the tax, office deductions are generally expenses which a person or a firm
have incurred in the process of gaining and producing income. Moreover, the AASB provides
some allowance for several deductions upon taxation. In Australia, deductions are not allowable
for personal expenses or on capital income (Reuters, 2014 pp45-76). Another commonly imposed
tax obligation is the tax on a capital gain. This tax is only applicable during the sale of both
tangible and intangible capital assets including patent rights. Physical assets such as motor
vehicles, personal residence, and personal use assets are allowed a full tax exemption. Where a

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capital gain has been owned by the trader for moiré than twelve months a resident of Australia is
permitted a 50% discount on taxation obligation upon its sale. The tax office has amended the
law so as the non-residents can no longer enjoy the discount on the sale of their assets.
According to the income tax assessment act of 1997 D6 on assessable income and exempt
income, all ordinary income that is received by an individual or a firm is assessable to taxation.
Moreover, statutory pay, are also assessable income and are subject to income tax rates. An
ordinary income refers to any money received which does not qualify to be classified as a capital
gain (Library, 2018 p987). Examples of average income are wages, bonuses, and salary. Hence by
receiving a sign in bonus payable by the end of the probation period, Anna bonus will be sassed
as an ordinary income which according to D6 is subject to income taxation. Although this bonus
was like an award to seduce her to work for the company Anna must include the amount
received as $5,000 during filling her tax returns as the gift will be classified as part of Anna's
ordinary income and hence must be taxed.
D6 on assessable income and exempt income explains well that as an Australian resident
a person's assessable income includes ordinary income that the person derived indirectly or
directly from all his income sources during the year. Having received her salary Anna was to be
subjected to income taxation. Moreover, a salary being classified as an ordinary income in
Australia it was assessable, and she has to include it while she will be filling her returns by the
end of the year (Henderson, Peirson, Herbohn and Howieson, B 2015 p76). In addition to her salary,
Anna received two bonuses which are also classified as ordinary income and hence they are
assessable under the Australian tax law. Having received her salary and reward in the bank,
Anna also had to include the interest earned by the amount deposited, and hence the interest
received will also be classified and assed as an ordinary income.

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Taxation on superannuation account differs according to different factors which must be
considered. Among the determining factor of the tax rate that should be affected on a person, the
super account includes; age, the contribution made in the account and other factors. Taxation on
superannuation account is mostly done in four stages, the first stage is when the money is
received in the super account, and the second one is the period the money is in the super account,
thirdly, the time when a person withdraws the money from the super account and finally the date
at which the super account owner dies (Woellner, Barkoczy, Murphy, Evans, and Pinto, 2010
pp123-133). The following factors are to be considered when assessing super account upon the
deposit of the money; tax rate of concessions the contribution towards super account which
includes salary sacrifice and money paid on behalf are generally taxed at a rate f 15% as far as
the person earns less than $250,000 annually.
The second factor is the concern on how non-concessions are taxed. Super account
money is not subject to tax as they constitute part of income that was taxed non-concession
includes money paid to super account by a third party like a spouse. The third factor to consider
is how low-income individuals are subjected to taxation. Finally, how high-income individual
earners are taxed. Anna being a high-income earner in Australia s she earns more than $250,000
her concessional contribution towards her super account will be taxed at an additional of 15%
will lead to a 30% tax rate (Australian Superannuation Legislation, 2012 pp230-245). Although this
will be less her required marginal tax rate of 45% the remaining Anna's 15% will be recognized
as Division293 tax.
Any payment that is received by an individual with the aim of not-for-profit
organizational volunteer refers to a special allowance which is always predetermined to cater for
all the estimated costs in the event on which the compensation is given. Stipends are paid

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regardless of whether ten people provided will spend all the money offered for that specific
reason or occasion. The question of whether an allowance is assessable or not to the volunteer
who is given the money depends on the grounds which surround the payment of the benefit and
the relationship between they not-for-profit organization and the volunteer. In the case where an
individual receives an allowance with no actual expenses to be incurred, and there exists no
requirement to repay any monies which are upset, the contribution provided will be assessable in
the accounts of the volunteer for taxation purposes (Ahmadi Pirshahid, Kaidonis, Mand Rudkin,
2013 pp124). Having received a well allocated travel allowance of $2,000 which was aimed to
help her cater for incidental costs and also the fee, as well as the transport cost provided for
Anna's benefit, will not be subjected to assessment for tax purpose. As the Australian tax office
defines, benefits which are well allocated and broken down to all the expenses expected to be
catered for the benefit will not be assessed for taxation purpose on the accounts of the volunteer.
Accrued expenses are not assessable under the Australian tax standards. The accrued
incomes are only recognized and assessed ion the basis of the receiver's company. They are
having being paid for by the company the act of Anna redeeming the flayers to travel back to her
sister's wedding in Bali will be considered as a personal expense. According to the AASB, In
Australia deductions are not allowable for personal expenses or on capital income (CCH
Australia, L. 2011 p90). Hence the accrued liability of Anna will be assessable for tax purposes. If
Anna could have redeemed the flayers for work-related travel purpose, then the accumulated
expense would not have been assessable for taxation. The accrued cost incurred by her employer
to pay for the flayers was purposely for work related travels and hence having used the flayers
for a personal purpose will be assessable on account of Anna for taxation purposes.

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Work-related travel allowances as stated in Division 2 of the income tax Act of 1997
could be assessed under two conditions if the benefit given was not reasonable whether it was
not enough or it was excess (Australian Income Tax Legislation, 2012 pp120-145). If the car
allowance or the transport allowance provided was not shown in the payment summary, and also
was neither equal to nor less than the reasonable amount expected as an allowance for the
circumstance, then the benefit received is not supposed to be included in the taxable income
statement. Moreover, if the offered allowance was fully used on the required circumstance, then
it is not required to be included in her taxable income statement. Having received an 80% fuel
and car allowance Anna's allowance was not assessable as the allowance was not enough to
cover for the costs she incurred in work-related travels.
The compensation of injuries received from the accidents is only assessable by Anna.
This is because the range to which she suffered the pain is only known to her and hence a lesser
compensation without a breakdown of how each injury is accounted for should not be accepted.
The plans that Anna had from the wage and allowances she used to receive are also known to her
only. Hence there should be a well and structured and allocation of the losses she has already
suffered as well as the future loses, moreover the pain and suffering costs should be well
allocated (Taylor, 2012 p90). This is because receiving a lesser sum to Anna might attract
several tax obligations on the interest rates that might be gained by the compensated amount.
Conclusion
In conclusion, it is evident that all ordinary income is assessable for taxation purposes in
Australia. Examples of ordinary incomes are wages as well as bonuses. Allowances and payment
in the super account are treated differently according to the AASB standards. During

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compensation, an individual should not receive a lesser amount of money which is not well
elaborated on payments for each damage received.

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References
Ahmadi Pirshahid, F., Kaidonis, M. and Rudkin, K., 2013. Superannuation policy processes: the
Australian Income Tax Legislation 2011: Income Tax Assessment Act 1997 (sections 1-1
- 717-710). (2011). CCH Australia.
Australian Superannuation Legislation, 2012, 16th ed. (n.d.). CCH Australia.
case of MySuper and SuperStream.
CCH Australia, L. 2011. Australian Master Tax Guide 2011. CCH Australia.
CCH Australia.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. 2015. Issues in Financial Accounting.
legislation.
Library, T. L. 2018. Income Tax Assessment ACT 1997 (Australia) (2018 Edition).
Melbourne, Australia: Pearson Higher Education AU.
Reuters, T. 2014. Australian Tax Legislation 2014: Income Tax Assessment Act 1997: Div 768
services, Crimes (taxation offences), Fringe benefits, Financial transaction reports,
Pending
Staff, C. A. (2012). Australian Master Tax Guide 2012. CCH Australia.
Taylor, M., 2012. Is it a levy, or is it a tax, or both?. Revenue Law Journal, 22(1), p.188.
to end, Income tax assessment regulations 1997, Taxation Administration Act 1953, Tax
agent
Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2010. Australian taxation
law. CCH Australia.

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