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Taxation : Sample Assignment PDF

   

Added on  2021-06-17

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TAXATIONSTUDENT ID:[Pick the date]
Taxation : Sample Assignment PDF_1

Question 1a)As per para. 129, TR 2002/14 lists down the following circumstances where a lump sum payment can ne treated as prepaid rent1. Lump sum payment is made In exchange of the tenant being granted the right to stay for a fixed durationA pro-rate refund can be demanded by the tenant for any unexpired term portionThe payment has been made to allow the usage of the property for the personal use and enjoyment of the tenantBased on the given scenario, it does not seem that the above conditions are met and hence thepayment of $ 15,000 received would not be termed as revenue receipts but would rather betermed as capital receipts and hence exempt from any tax. Thus, the payment would not beconsidered as revenue receipts for the tax purpose. b)As per s. 25(1), ITAA 1936, the compensation receipts would contribute to assessableincome if the compensation payment has been made only for the loss of income2.However, in case where compensation receipts are for both capital loss and income loss,then the assessable income would be the component received by taxpayer for loss ofincome a highlighted in Mc Laurin v. FC of T3In the given case, it is apparent that compensation has been received for the loss of a businessasset i.e. warehouse and therefore would be termed as capital receipts and would not betaxable. c)In accordance with paragraph 25-5(1)(a) ITAA 1997, taxpayers are permitted to claimdeduction in respect to the expenditure that the taxpayer incurs with regards to managingtax affairs. In accordance with s. 995-1, ITAA 1997, tax affairs would include lodging oftax returns as well as filing of any objection. Further, this deduction is available in the yearin which the expense has been incurred4.In line with the above understanding, it is apparent that for the year 2016-2017, a totaldeduction of $ 500 + $800 i.e. $ 1,300 would be available in wake of expense on managing1ATO, Income tax: Taxation of retirement village operators (2002) <http://law.ato.gov.au/atolaw/view.htm?locid=%27TXR/TR200214/NAT/ATO%27&PiT=99991231235958>2Barkoczy,Stephen, Foundation of Taxation Law 2015, (North Ryde, CCH, 2015)3Mc Laurin v. FC of T(1961) 104 CLR 3814 Deutsch, Robert, et. al., Australian tax handbook. (Pymont, Thomson Reuters, 2015)
Taxation : Sample Assignment PDF_2

tax affairs. Further, this would be available in the current year even though it pertains to thetax returns of previous year since it has been incurred in 2016-2017.d)In accordance to s. 8(1) business related expenses may be deductible. This section allowsdeduction of expenses that are related to the production of assessable income. However,expenses that are of personal or domestic in nature cannot be deducted under this section5. As per the given situation, when James is working at the hospital, he tends to avail the lunchfrom the hospital cade and spends a total amount of $ 2,000 on the same. This money wouldbe considered as non-deductible owing to the personal nature of the expenses as these are notlinked to production of assessable income.e)The spending that the employer does on providing meals and entertainment outside theoffice premises would be considered as fringe benefits in accordance with FBTAA (Fringebenefit Tax Assessment Act) 1986. In accordance with Division 9A of FBTAA 1986, withregards to meal and entertainment expenses that are incurred on potential or existingclients, no deduction can be claimed6. Also, considering that FBTAA is applicable, henceDivision 32 would not apply which otherwise provides deduction for entertainment relatedexpenses.In line with the above, understanding, it is apparent that the expenses that have been incurredon the prospective clients entertainment would not be tax deductible.Question 2IssueThe key issue is to determine if Usman would be a tax resident of Australia or not for theyear 2016-2017 in accordance with the relevant tax laws.RuleThe tax residency has been highlighted and dealt with in s. 6(1) ITAA 19367. Tax residencyis crucial since the underlying tax rules applicable tend to be different for Australian tax5 Gilders, Frank, et. al., Understanding taxation law 2015. (LexisNexis, Butterworths 2015)6Austlii , FBTAA 1986 (2017) <http://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/fbtaa1986312/>7Austlii, ITAA 1936 – s. 6, (2016) <http://www5.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s6.html?
Taxation : Sample Assignment PDF_3

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