Taxation Law Assessment on Commonwealth Taxes, Tax Liability Calculation, Partnership Definition, GST Consequences, and Tax Returns

This assessment covers six questions on Commonwealth taxes, tax liability calculation, partnership definition, GST consequences, and tax returns. It includes a discussion on the key Commonwealth taxes levied in Australia, calculation of tax liability for an individual, differences between general law and tax law definitions of a partnership, GST consequences of returning faulty goods, and who must lodge tax returns. The assessment is designed to test the student's knowledge of the key topics covered in the Taxation Law course.

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HI6028
TAXATION THEORY, PRACTICE AND LAW
SUPPLEMENTARY ASSESSMENT
TRIMESTER 1, 2021
TIME ALLOWED: 4.5 hours
All answers must be submitted within this time frame. Late submissions are not
accepted.
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Submission instructions are at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of
knowledge of the key topics covered in this unit
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HI6028 Online Supp T1 2021

Question 1 (7 marks)
What are the key commonwealth taxes levied in Australia? Explain at least four taxes and the key
features of these taxes.
ANSWER: ** Answer box will enlarge as you type
The most significant of Commonwealth taxes levied in australia are:
1. Income taxes for individuals and companies: It is the most significant form of taxation in
australia which is collected by the federal government through ATO. Australia maintains a lower
tax burden in cmparison to the other wealthy countries. Australia makes use of progressive tax
scale system for taxing indivdiual snad companies.
2. Superannuation taxes: It taxed in australia by ATO at three points which are contribution
received by the superannuation fund, income on the investment earned by the fund and the last
is the benefit paid by the fund. In Australia, every employee is required to pay minimum level of
superannuation to its employees in order to ensure workers have enough moneyset aside for
their retirement.
3. Customs and excise duties: It is the key source for the purpose taxation which is very easy to
manage and is also less likely to interest negative attention in contrast to the other direct form of
taxation. The rules which are applicable to the customs duty within Australia are very complex
and the importers are required to take advice for every case. The excise duty is being paid by the
producer at the given rate. Also, the respective rate of excise might rise twice in a year in order
to replicate changes due to inflation.
4. Taxes on capital gains: It is imposed on the capital gains which is realised on the sale of assets
and for the taxation purpose the list of assets which are subjected to CGT are very broad. CG is
incorporated within taxpayer’s assessable income and is thus, also taxed at each taxpayer’s
applicable income tax slab rate.
Question 2 (7 marks)
Nick is working for an Indian mining company in an Australian city. Nick is a single resident who
does not have private health insurance. He earned $120,000 and has a $ 15,000 deduction during
the 2020/2021 income year. Calculate his tax liability (income tax, medicare levy, medicare levy
surcharge (if applicable) and low and middle income tax offset for the 2020/2021 income year.
ANSWER:
Income earned = $120000
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Less: Deductions = $15000
Total taxable income = $105000
Computation of tax liability on $105000
No tax on income between $1 - $18,200 $0
19c for every dollar between $18,201 - $45,000 $5092
32.5c for every dollar between $45,001 - $120,000 $19500
Income tax payable $24592
Medicare levy payable @2% of total taxable income $2100
Income after tax & Medicare levy (105000 – 24592 - 2100) $78308
Marginal tax rate 32.5%
Medicare levy surcharge @1% on total taxable income $1050
Question 3 (11 marks)
Ronald runs his own public relations business. During the year he incurred the following
expenses:
(a) salary costs of $350,000;
(b) travel expenses of $7,000 for travel between home and work;
(c) travel expenses of $3,000 for travel from a client's premises to his home;
(d) $1,500 on a new suit to impress his clients;
(e) $700 on membership of the local sports club where he entertains clients;
(f) $8,000 in meal expenses on entertaining clients.
Required:
State whether the above would be allowed as allowable deduction against assessable income.
Provide a justification for your argument based on statute and case law
ANSWER:
a) Salary costs of $350,000
The cost relating to salary is deductible as per section 8-1 of ITAA 1997 as it is inevitably incurred
in respect to carrying out the business in order to gain or prduce quantifiable income and also
does not involved into any of the Negative limbs of Section 8-1.
b) Travel expenses pertaining to travel between home and work
Since the expense is being occurred pertaining to travel between home and work and then these
expenses are non-deductible as it is being incurred in order to put him in the position to gain or
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produce the actual assessable income instead for the purpose of gaining or producing assessable
income Lunney. In additin to this, it will be considered as a private expense and also none of the
rules of the exception to the basic rule appear to be applied here.
c) Travel expenses for travel from a client’s premises to his home
Such type of travel expenses will constiture as the travel between the other workplace and the
home and is taken to be experienced in respect to gaining or producing the assessable income
(AI). The tax payer is in the position to gain or produce the assessable income and as such they
would meet with the needs of section 8-1 of ITAA97.
d) Expenses on a new suit to impress his clients
This expense will not be deducted in accordance with the section 8-1 as it is not being incurred in
respect to gaining or producing AI but on the flip side, it is being put by the tax payer to gain or
prodce the asseessable income. Along with this, it would constitute a private or domestic
expense and will fall within the negative limbs of s 8-1 of ITAA97.
e) Expenses on membership of the local sports club where he entertains clients
The expense of $700 incurred by Ronald on a local sports club in which he entertains clients will
not be deducted as per section 26-45 ITAA 1997 which denies the deductions pertaining to the
recreational club expenses. But it is also deductible under section 8-1 of ITAA 1997 due to the s
8-1(2)(d).
f) Meal expenses on entertaining clients
Prima facie, the business meals mainly incorporates an ntertainment expense for which
deduction cannot be claimed irrespective of the fact whetehr the business transcation or
discussion have actually taken place with reference to Div 32 ITAA97 section 31-10(2). However,
in case if the food is provided at an in-house dinning facility or considered it as a fringe benefit,
then in that case, it would be deductible with referenec to section 8-1, section 32-30 and section
32-30, Items 1.1-1.3. Coopers case- football player.
Question 4 (7 marks)
How are the general law and tax law definitions of a ‘partnership’ different ? explain what the
difference is important?
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ANSWER:
The definition of the partnership as per general law is relations which exist among people
carrying some common professional objective which is generally profit. On the other hand, from
the income tax purpose the partnership is defined under s 995- 1 (1) of income tax assessment
act of 1997. Under this the partnership is defined as an association of person other than a
company carrying the business as partner. In addition to this, they are also in receipt of ordinary
and statutory income jointly or the limited partnership. Both these definitions of the partnership
are different from one another. This is particularly because of the reason that both these contain
different elements.
The major variation among both that is general & taxation law relating to partnership is that the
general law is the traditional partnership which is shaped in case two or more parties assent to
start the business as partners. On the other hand, income tax law further extend the definiaton
of general law by adding the “in receipt of income jointly”. This purpose of tax law exist only with
the purpose of tax. Whereas on the other side the general law does not recognize the tax law
partnership.
In addition to this, the general law of partnership does not recognize sthe tenancy within
common or joint or part ownership of property. Only the receipt relating to joint revenue from
the investments if carried by company is external from the definition of the partnership beneath
the general alw.
In against of this, there are number of legal consequences in the general law of partnership.
While in against of this, in the partnership as per the tax law is not governed as per the written
agreement. Along with this other member under the tax law is not coming under the similar
obligation relating to fiduciary.
On the other hand, under general law of partnership is created when 2 or more business starting
and carrying the company as partners. In against of this, a tax law partnership come into
existence from the time a perosn jointly commende on activity from which the partners will
jointly receive.
Question 5 (11 marks)
Bebel Sports is a large sports retailer. It purchases ‘tennis racquets’ for $110 for each from A2Z
Sports Goods, a large manufacturer of tennis products. Bebel Sports plans to sell the tennis
racquets at a 200% mark-up to its customers. In January last year, it purchased 100 racquests.
However, in April, it discovered that 10 of these racquets had design faults and it returned them
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to the manufacturer and obtained a full refund. Explain the GST consequences of this
arrangement for both parties.
ANSWER:
In the present case, wherein the company identified that 10 racquets which were of faulty design
and they were send back to the manufacturer and they will get he refund in full amount . Hence,
as per the consequences as per GST when the consumer returns the goods to the company it is
not considered as cancellation of the original sales. Hence, in this case the company is not
eligible to take any of the action and will not be in position to claim the money back. On the
other hand the original sale of the good is not being cancelled. In addition to this, there will not
be any change within the GST obligation for the original sales of the product. Hence, in the
present case there will not be any adjustment required to be conducted by any of the party.
Hence, in the present case, both Beble Sports and A2Z Sports goods will not have to make any of
the adjustment relating to GST paid and received. The major reason pertaining to the fact that in
the present case the goods are not being sold to the consumers and thus, this not involve any of
the GST receivable.
Question 6 (7 marks)
Who must lodge tax returns? What is an assessment ? Why are assessments important?
ANSWER:
The lodge tax is being defined as the getting back the taxes which are being paid. Even though
the person has earned the tax- free threshold which is new and tax was paid on the income
during the year then they are eligible to lodge a tax return. Under the Australian taxation if the
person has earned more than $18200 within their past financial year then they are required to
lodge a tax return. In against of this in case the perons earns more than the tax free threshold
the they certainly require to lodge the tax retrun and the tax on income is calculated over the
money the person has made all and above free tax threshold limit.
The amount which is subject to the taxation under the particular statue requires the analysis of
the situation of the taxpayers and all the legal provision which applicable to them. The notive of
assessment highlgihts the amount of tax which the person owe on the taxable income. In
addition to this the credit taken for tax already paid within the income year is also highlighted.
Further the assessment of tax which needs to be paid or refund is also highlighted within the
assessment.
Hence, the assessment are important to be analysed because it provides a informaiton of any
excess of private health reduction or the refund applicable. In addition to this, the notive of
assessment is important in order to check the fact that everything is correct. In addition to this,
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the tax assessment is very important to identify the job of determining the value of something
like property, and is used to property tax. Hence, the word tax assessment is being used in
different manner but in general it refers to as the tax liability which is owed by the taxpayer.
END OF SUPPLEMENTARY ASSESSMENT
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HI6028 Online Supp T1 2021