Taxation Law

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

TAXATION LAW1
QUESTION 1
a)
The process that is required to be implied by the Commissioner for the purpose of
calculating the effective life of the depreciating assets has been provided for in the Taxation
Ruling TR 2018/41.
b)
Under div. 13 of the Income Tax Assessment Act 1997(Cth)2, the details relating to
the tax offsets has been provided.
c)
The highest tax rate that has been applied to a resident in the income year 2018/19 is
the amount of 54,097 along with a 45% above the income taxable for any income which
equals or exceeds 180,001.
d)
The capital gain that has been accrued from shares is an example of exempt under
section 118.13 of the Income Tax Assessment Act 1997(Cth)3.
e)
CGT event B1 under section 104.15 relating to the Act4, as under this section the
passing over of the enjoyment and usage of capital asset, prior to the actual transfer of title
related to ownership will be construed as a CGT event B1.
f)
1 Taxation Ruling TR 2018/4
2 The Income Tax Assessment Act 1997(Cth), Div 13
3 The Income Tax Assessment Act 1997 (Cth), s. 118.13
4 The Income Tax Assessment Act 1997 (Cth), s. 104.15

TAXATION LAW2
The Income Tax Assessment Act 1997(Cth) in section 4.10(3)5 provides for the
computation process of arriving at the income tax payable by a person. This needs to be
calculated by deducting the tax offsets from the product of taxable income and tax rate.
g)
In general, although expenses and losses that has been incurred by a taxpayer in the
process of earning a taxable income is permitted as a deduction under section 8.1 of the Act.
Prior to the case of FC of T v Day 2008 ATC 20-0646, there has been a contention that any
loss or expense that has an essence of domestic purpose would be construed to be not allowed
as deduction under this section. however, in this case, the High Court has contended that if it
can be construed that irrespective of its domestic nature, it has a considerable amount of
contribution in the generation of income such an expense or loss needs to be treated as
deduction under section 8.1 of the Act7. If the expenditure is not solely contributing to a
domestic purpose only and has considerable amount of part to play in the income generation
process, the same needs to be allowed as deduction under the section.
h)
Average rate of tax is a rate of tax, that is to be applied and calculated over the total
income of a taxpayer. On the other hand, marginal rate of tax implies a tax rate that is to be
computed and levied upon the increment for the margin of increase in the total income of a
person. In this context it can be stated that the difference between the two lies in the target
that they affect. The average rate of tax is applied to the whole income of a person which
taxable. On the other hand, marginal rate of tax is to be applied upon the increment or the
increase that has been occurred to the total income of a person. Again, it can be stated that for
the computation of the average rate of tax, the whole income of a person is required to be
5 The Income Tax Assessment Act 1997 (Cth), s. 4.10(3)
6 FC of T v Day 2008 ATC 20-064
7 The Income Tax Assessment Act 1997 (Cth), s. 8.1

TAXATION LAW3
considered. Whereas in case of the calculation of marginal rate of tax, only the increment in
the income needs to be considered.
i)
Consumption tax is a tax that needs to be imposed upon the use or consumption that
has been made relating to goods or services. This tax can be paid either directly or indirectly.
This kind of tax include sales tax, other forms of taxes that pertains to goods and services
consumption and excise duties. This tax is imposed on the consumption of the goods and not
upon the goods or services availed.
QUESTION 2
a)
In this case, a loan has been availed by Brett, which has been secured against the
personal house he has. Any interest that will be payable by him, against the loan, needs to be
assessed in relation to the purpose for which the loan has been availed. As he has availed the
loan for the purpose of paying out his employees and these employees work in the business
that has been running for the process of earning income to Brett, this income will be subject
to tax. Under section 8.1 of the Act8, if a cost or expense has been incurred in the process of
making income that is taxable, it needs to be allowed or permitted as a deduction. In this case,
as the interest incurred by Brett is directly related to the income earning process, the same
will be permitted as a deduction.
b)
In the instant situation, the cost incurred by Julie amounting to $500 has been incurred
for the purpose of mobile phone chargers. This mobile phone has been used by Julie for the
60% of the time for making business calls and the rest for personal use. Under section 8.1 of
8 The Income Tax Assessment Act 1997 (Cth), s. 8.1