Taxation Law Assignment (Solved)

TAXATION LAW

TABLE OF CONTENTS
QUESTION 1...................................................................................................................................1
QUESTION 2...................................................................................................................................4
REFERENCES................................................................................................................................6
BIBLIOGRAPHY............................................................................................................................7

QUESTION 1
1. Tax liability and credit availability to Jason
 Construction of residential property for sale
 Jason is liable to pay GST on sale of such property
 Jason can claim credit for construction cost and purchase made for sale of property.
Amount of GST Payable: One eleventh of sales price of residential house.
If he is registered under Margin Scheme, he has to pay GST as one eleventh of margin of
sales. This is calculated as sales price deducted by amount paid for property or sum of money of
place valuation (Ford & Van, 2016). But in this case, GST credit cannot be availed by Jason that
paid on purchase made by him for construction of the residential home.
(b.) Tax liability and credit availability to Ivy:
Subdivision 40 B—Residential rent
40-35 Residential rent
1. Sale of a residential premise by way of lease, Hire purchase or license are liable for input
tax.
2. The extent of input tax is up to an extent for which it is used predominately for residential
settlement. Objecting decisions of ATO:
 An objection must be filed in written format (letter/form of ATO) within the prescribed
time limit.
 Friend can also file his compliant through fax or posts
 He can also authorise another person to file his complaint, who can be
1. Friend, Spouse or a tax agent
2. Personal Legal Representative
Inclusion in objection form: Add the information about why you think decision given by ATO is
incorrect.
 Providing a declaration that all info and documents supporting objection are true and
correct.
 Must be signed and dated.
To avoid any delay, one must include following in his/her objection:
1

 complete personal details must be declared , if it is filed form another Australian
taxpayer, full name, contact detail and tax file number of that person must be mentioned
in form (Bryant, 2017).
 Complete details like decision, year, or tax period must be provided with objection.
 Relevant facts, information and arguments must be attached with objection along with
this supporting document must be attached which must be true and fair to its facts.
3. Tax liability of annul annuity instalment
A part of the instalment is taxed as ordinary income, which is calculated as:
Section 27A of income tax assessment Act, 1936
This is a case of immediate annuity which is returned in equal tax free instalment over
payment period (Butler, 2016). Instalment received are subjected to tax and withholding amount
of annuity is determined by formula
 Annuity Payment- [Deductible Amount/Number of Instalments (For Monthly Or Weekly
Instalments)]
 Deductible Amount = [Purchase Price of Annuity- Residual Value] / Expected Life Of
Annuity
Case
Annuity Amount = $100000
Annual Instalment = $8000
Expected Life = 20 years
= 8000- [100000/20]
= 3000 will be taxed as ordinary income
4. Tax expenditure and its different treatment
Tax expenditure arises when there is a reduction in normal tax, liability from benchmark
tax treatment by use of tax exemption, deduction, offsets, concessional rate of tax for a particular
class of taxpayer or related with a specific activity (Lawrence and Bennett, 2017). Benchmark
means standard treatment which is related with all types of taxpayers/activities. Income Tax
Assessment Act, 1997
Section 4-10 working out how much income tax a person pays
2