A Taxation Law for the Bachelor Level Authors

PAYMENT LAW BACHELOR LEVEL TAXATION LAW BACHELOR LEVEL 10 10 TAXATION LAW BACHELOR LEVEL Taxation Law Bachelor Level Authors Note: Contents Bank statement extract: 2 Issue: 2 Rules: 2 Application: 3 Conclusion: 5 Income statement: 5 Issue: 5 Rules: 5 Application: 5 Conclusion: 6 Dividend statement: 6 Issue: 6 Rules: 6 Application: 6 Conclusion: 6 Contract of sale of real estate: 7 Issue: 7 Rules: 7 Application: 7 Conclusion:

Running head: TAXATION LAW BACHELOR LEVEL
Taxation Law Bachelor Level
Name of the Student:
Name of the University:
Authors Note:

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Contents
Bank statement extract:....................................................................................................................2
Issue:............................................................................................................................................2
Rules:...........................................................................................................................................2
Application:.................................................................................................................................3
Conclusion:..................................................................................................................................5
Income statement:............................................................................................................................5
Issue:............................................................................................................................................5
Rules:...........................................................................................................................................5
Application:.................................................................................................................................5
Conclusion:..................................................................................................................................6
Dividend statement:.........................................................................................................................6
Issue:............................................................................................................................................6
Rules:...........................................................................................................................................6
Application:.................................................................................................................................6
Conclusion:..................................................................................................................................6
Contract of sale of real estate:.........................................................................................................7
Issue:............................................................................................................................................7
Rules:...........................................................................................................................................7
Application:.................................................................................................................................7

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Conclusion:..................................................................................................................................7
Extract of exclusive distributor termination agreement:.................................................................8
Issue:............................................................................................................................................8
Rules:...........................................................................................................................................8
Application:.................................................................................................................................8
Conclusion:..................................................................................................................................9
Fixed asset register:.........................................................................................................................9
Issue:............................................................................................................................................9
Rules:...........................................................................................................................................9
Application:...............................................................................................................................10
Conclusion:................................................................................................................................10
References:....................................................................................................................................11

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Letter of advice:
It is important to note that the liability of an individual in respect of income tax or any other kind
of tax primarily depends on the residential status of the individual. This is because a non-resident
individual is only liable to pay income tax on the amount of income which has either been earned
or received or both in Australia. A resident Australian on the other hand is liable to pay income
tax on all of his or her income including income which has not earned or received in Australia.
Thus, firstly it is important to determine whether the Carol McKendrick is a resident Australian
or not as per the Income Tax Assessment Act 1997 to deal with her tax issues in the country.
Australian Taxation Office (ATO) has mentioned that residency tests have to be conducted to
determine the tax residential status of individuals for income tax purpose in the country. Since
Carol’s domicile is in Australia hence, she is an Australian resident for4 income tax purposes
even though she might stays out of the country for 183 days or more for work purpose
(D'Ascenzo, 2017).
Bank statement extract:
Issue:
The issue here is to determine whether if any of the transactions of bank statement of carol is
subjected to income tax liability or not in Australia.
Rules:
As already discuss that Carol is an Australian resident for income tax purpose as her domicile is
in the country and thus, she passes one of tests under the residency tests, i.e. domicile test for tax
residency purpose (Freebairn, 2015).

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As per the Income Tax Assessment Act, 1997 (ITAA 1997) any income which is not specifically
exempt under the act is subjected to income tax in the country if it arises to a resident Australian.
However, certain incomes have been specifically exempted from the provision of income tax
thus, accordingly, the transactions showed in bank statement extract are examined below to
check whether these are liable to income tax or not for Carol.
Application:
I. Payment of $14,128 to Norman Harvey Limited is must be for acquisition of some
asset (assumed) hence, it shall not be allowed as deduction from gross taxable income
of Carol to determine her income tax liability for the year.
II. The payment in respect of Widgets shall be deducted from receipts in respect of
Widgets to calculate the net taxable income from widgets. Thus, $2,345 shall be
deducted from gross receipts from Widgets (Fry, 2017).
III. Salary of $5,023 is a taxable income of Carol and shall be included in computing her
taxable income for the income year.
IV. Receipt in respect of early deposit for sale of property is to be considered at the time
of calculation of capital gain of the client if the property is not the main residence of
the client as sale of main residence is exempt from capital gain and income tax
provisions subjected to certain terms and conditions.
V. Debit card payment transaction of $10,000 if revenue in nature is to be deducted from
gross taxable income of Carol.
VI. Payment to Skin Care Australia of $629 is allowed as deduction as it is directly
related to the role of flight attendant (Hyun Seok Yoon, 2017).

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VII. Payment of salary to Jacqueline Tran is allowed as deduction in computation of
taxable income of Carol hence, $1,008 is to be deducted from gross taxable income of
Carol to calculate her net taxable income.
VIII. Payment of $5,950 to Abel & Abel Solicitors is to be deducted as it is legal expenses
necessary to be incurred for generation of taxable income.
IX. Payment of $450 to Maze Restaurant is allowed as deduction for computation of
income tax liability as it is incurred for the dinner of client for business purpose.
X. Advertisement of $2,550 is an eligible expenditure and allowed as deduction.
XI. Aviation course fee is allowed as deduction as it is directly related to the professional
acumen of the client.
XII. Speeding fine of $220 is not allowed as deduction as it is a fine due to contravention
of a law.
XIII. Interest charge is allowed as deduction hence, $430 is allowed as deduction.
XIV. PAYG installment is again allowed as deduction as per the income tax provisions in
the country.
XV. Receipt of damages from Widgets Inc. is to compensate for the loss of revenue hence,
is to be considered for computation of taxable income of the client. Hence, $49,950 is
to be considered for determination of taxable income of Carol.
XVI. Dividend is a taxable income in Australia in the hands of the recipient however, fully
franked dividend is exempt from income tax liability hence $700 is not to be included
in computing taxable income of Carol.
XVII. Payment of office rent is allowed as deduction as it is incurred to generate revenue
which is subjected to tax. However, only $750 is allowed as deduction, i.e. rent for

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the period till June, 2019 is allowed as the July payment is a prepaid expenses which
is subjected to deduction in next income year (Jones, 2017).
XVIII. Redundancy payment of Jacqueline is allowed as deduction as per ITAA 1997 hence,
$7,500 allowed as deduction.
Conclusion:
Hence, it is clear from the above that the receipts which are revenue in nature have to be
considered for calculation of taxable income of Carol and the expenditures necessary to generate
these revenue shall also be allowed to determine the taxable income of her. The receipts from
employment is fully taxable as she is an employee of an Australian company.
Income statement:
Issue:
The issue here is to assess the taxable income of Carol from the income statement provided by
her.
Rules:
As already mentioned that as per the charging section of ITAA 1997 a resident of Australia is
subjected to income tax liability for any income accruing to him or her. Since, Carol is an
Australian resident for income tax purpose hence, except exempt income all other income
accruing to her is subjected to income tax liability. Accordingly, let us assess whether the income
mentioned in income statement is taxable income or not (Kim Jihyun, 2018).

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Application:
The gross payments received by Carol, i.e. $82,252 is the amount to be included in computing
the taxable income of her as the amount of tax withheld is not an expense it is tax liability. The
laundry and uniform allowance are exempt from tax liability as both are essential to the job of
flight attendant.
Conclusion:
Taking into consideration the above it is clear that the gross amount of $82,252 received by
Carol is to be included in computing the taxable income of her for the income year ending on
June 30, 2019.
Dividend statement:
Issue:
The issue is to determine the implications of receiving franked dividend and resulting franking
credits.
Rules:
As per ATO the shareholder who receive franked dividend are not liable to include the portion of
dividend which is franked to compute his or her income tax liability (Martin, Gregor and Rice,
2018).
Application:
Thus, franked dividend of $700 received by Carol is not to be included in computing the taxable
income of Carol for the income year ending on June 30, 2019.

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Conclusion:
The franking credit of $300 in respect of franked dividend can be utilized by Carol to reduce her
income tax liability in the future.
Contract of sale of real estate:
Issue:
The issue here is to determine the tax implications for the contract of sale of real estate produced
by the client.
Rules:
As per the provisions of ITAA 1997 a tax payer is liable include the commission he received as
an agent for sale of real estate and accordingly, liable to pay income tax on income exceeding the
threshold limit for income tax. In this case the contract of sale of real estate shows that the
contract of sale is yet to be completed as the purchaser has only paid deposit amount of $72,000
out of the sale price of $720,000. Thus, since the sale is not completed hence, the deposit is not
an income in the hands of the recipient. However, if there is any commission paid by Carol to the
agent even from this incomplete sale the same will be considered and deducted from the gross
revenue of business of the client to compute her taxable income for the income year
(Thampapillai, 2018).
Application:
As per the notes to bank extract it is clear that the net commission of real estate sale contract is
$18,000 and the same is yet to be paid to the agent. Thus, neither the amount of deposit of
$72,000 nor the amount of commission of $18,000 shall be considered for the income tax
purpose of Carol.

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Conclusion:
Thus, as per the provisions of ITAA 1997 the incomplete sale does not generate revenue for the
business and the amount received as deposit is rather a liability till the time the sale is completed.
Hence, the amount of $72,000 received as deposit money for the contract of real estate sale is not
to be considered for the calculation of taxable income from real estate business of Carol
(Thampapillai, 2017).
Extract of exclusive distributor termination agreement:
Issue:
The issue here is to determine whether the compensation paid to Carol for exclusive distribution
termination agreement to restrain her from conducting similar business operations is liable to
income tax and hence, needed to be included or not in the income tax return of Carol for the
income year ending on June 30, 2019.
Rules:
As per the guidelines provided in the ATO website any compensation made to make good the
loss of revenue to an individual is liable to be taxed under the ITAA 1997. Thus, such
compensation received by an individual is to be included in the taxable income of the recipient to
calculate his or her tax liability for a particular income year. An agreement to restrain an
individual from entering into similar business or services provided by an organization and
compensating the individual for such restrain is considered taxable income of the recipient.
Hence, such compensation is to be included to compute the taxable income of the recipient
(Urban and Bezeredi, 2017).

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Application:
In this case Carol has entered into an exclusive distribution termination agreement with Widgets
Inc. to not conduct similar businesses within specific jurisdiction entitled her to a compensation
of $49,950 from the company. Thus, the amount of compensation was made to compensate for
the loss of income of carol which she accepted by deciding not to enter into similar business in
the specific jurisdiction mentioned in the agreement. Thus, the amount of $49,950 is revenue in
nature and subjected to income tax provisions applicable in the country. Hence, the entire
compensation received by Carol is liable to tax and accordingly, shall be included in computing
the taxable income of Carol for the income year 2019.
Conclusion:
Taking into consideration the discussion above it is safe to state that the amount of compensation
of $49,950 received by Carol from Widgets Inc. for restraining from entering into similar
business is to be included in calculation of taxable income of her (Urban, 2016).
Fixed asset register:
Issue:
The implications of fixed asset register on the income tax liability of Carol is the main issue to be
discussed here.
Rules:
ATO as mentioned that normal wear and tear against fixed assets which are used for revenue
generation activities in a business is allowed as deduction from gross revenue of the business to
calculate the taxable income from business. This amount charged against fixed assets for normal
wear and tear is termed as depreciation. Thus, fixed asset register is helpful in assessing the

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amount of depreciation that can be charged against the revenue to determine the taxable profit
for calculation of taxable income of a tax payer.
Application:
The fixed asset register of Carol in addition to showing the book value also shows the percentage
of private and business use. Accordingly, the amount of depreciation shall be proportionately
deducted from gross revenue to calculate the amount of taxable income from business.
Conclusion:
The computer and printer both have been used 80% for business purpose hence, using the
depreciation rates applicable for these assets, amount of depreciation shall be calculated then the
80% of such amount shall be allowed deduction to compute the taxable income from business of
Carol. Furniture has been fully used for business purpose hence, the entire amount of
depreciation shall be charged against the revenue from business to determine the taxable income
from business (Raina, 2016).
At the end the file note provided by Carol shows the important notes about Carol and her
business such as that she carries out a sole proprietorship business along with other such
important matters. The information provided in file note shall be used to calculate the amount of
taxable income of Carol and her resultant income tax liability for the income year ending on June
30, 2019.

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References:
D'Ascenzo, M. (2017). Modernizing the Australian Taxation Office (ATO). SSRN Electronic
Journal, 02(02), pp.02-21.
Freebairn, J. (2015). Who Pays the Australian Corporate Income Tax?. Australian Economic
Review, 48(4), pp.357-368.
Fry, M. (2017). Australian taxation of offshore hubs: an examination of the law on the ability of
Australia to tax economic activity in offshore hubs and the position of the Australian Taxation
Office. The APPEA Journal, 57(1), p.49.
Hyun Seok Yoon (2017). Review of 2010 Income Tax Act Law Cases. Seoul Tax Law Review,
17(1), pp.499-539.
Jones, W. (2017). TAXATION CHANGES FOR PETROLEUM COMPANIES ARISING
UNDER THE TAX LAW IMPROVEMENT PROJECT RE-WRITE OF THE PETROLEUM
PROVISIONS OF THE INCOME TAX ASSESSMENT ACT. The APPEA Journal, 41(6),
p.134.
Kim Jihyun (2018). Review of 2012 Corporate Tax Act Law and Income Tax Law Cases. Seoul
Tax Law Review, 22(3), pp.423-466.
Martin, N., Gregor, S. and Rice, J. (2018). User centred information design practices and
processes at the Australian Taxation Office. Information Design Journal, 19(3), pp.53-67.
Thampapillai, D. (2017). The Income Tax Assessment Act 1936 S23AG and Double Tax
Avoidance Agreements. SSRN Electronic Journal, 03(03), pp.18-33.

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Thampapillai, D. (2018). The Income Tax Assessment Act 1936 S23AG and Double Tax
Avoidance Agreements. SSRN Electronic Journal, 2(2), pp.114-221.
Urban, I. and Bezeredi, S. (2017). The impact of changes in the Personal Income Tax Act on the
average tax rate. Press Releases, 02(71), pp.17-23.
Raina, J (2016). Concept of Domicile in the Income Tax Act. TAX and LAW, 9(3), pp.79-139.
Urban, I (2016). Review of Cases in 2014 ‘Income Tax Act’ and ‘Inheritance and Gift Tax
Act’. Australia Tax Law Review, 22(2), pp.421-471.