Taxation Law

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

TAXATION LAW1
Question 1
a)
The Taxation Ruling TR 2018/41 covers the technique to be used for the computation of
effective life pertaining to the assets that are subjected to depreciation by the Commissioner.
b)
The Div. 13 of the Income Tax Assessment Act 1997 (Cth)2 details the available tax
offsets.
c)
The top tax rate applicable to a resident taxpayer in the 2018/19 tax year is 54,097 plus
45% for 180, 001 or above.
d)
Under section 118.10 of the Income Tax Assessment Act 1997 (Cth)3, permanent resident
of a person is exempt from capital gain tax.
e)
The right of a person for the purpose of usage and enjoyment of a CGT asset before the
actual passing of the title is taxed under B1 s104.15 of the Income Tax Assessment Act 1997
(Cth)4.
1 Taxation Ruling TR 2018/4
2 The Income Tax Assessment Act 1997 (Cth), Div. 3
3 The Income Tax Assessment Act 1997 (Cth), s. 118.10
4 The Income Tax Assessment Act 1997 (Cth), s. 104.15

TAXATION LAW2
f)
Under section 4.10(3) of the Income Tax Assessment Act 1997 (Cth)5, the income tax of a
taxpayer is to be calculated by deducting the tax offsets from the product of the taxable
income and tax rate.
g)
In the case of FC of T v Day 2008 ATC 20-0646, the High Court has contended that any
expenditure that has been made by the taxpayer in the process of generating income, which is
taxable would be allowed as a deduction under section 8.1 of the Income Tax Assessment Act
1997 (Cth)7. Prior to this judgement, the expense, which are of personal nature were
construed to be not permitted for the purpose of deduction under the Act. However, after this
decision, the court has contended that irrespective of the nature of the expense that has been
incurred by the taxpayer, if it has contributed to the generation of the taxable income of that
person would be allowed as a deduction.
h)
The difference between average rate of tax and marginal rate of tax lies in the target of
impact. The average rate of tax is to be calculated over the entire taxable income of a person.
On the other hand, marginal rate of tax is to be calculated upon the increments in the income
of the taxpayer. The average rate of tax is to be determined over the taxable income of the
persons, which includes all the incomes that the taxpayer earns and is to be assessed as
taxable. However, the marginal rate of tax in concerned with the increment or increase in the
income of a person.
5 The Income Tax Assessment Act 1997 (Cth), s. 104.15
6 FC of T v Day 2008 ATC 20-064
7 The Income Tax Assessment Act 1997 (Cth), s. 8.1

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i)
Consumption tax depicts a tax that is to be levied or paid for the purpose of any
consumption of goods or service. These taxes includes sales tax, excise duties and any other
taxes that a consumer pays for availing a consumer goods or services. This kind of tax can be
paid either directly or indirectly.
Question 2
a)
Any expenditure or loss that has been incurred by a tax payer in the process of generating
income, which is taxable would be construed to be and allowed as a deduction under section
8.1 of the Income Tax Assessment Act 1997 (Cth)8. In this context, it can be said that the
taxpayer is allowed only that amount of the expense as deductions as would have contributed
to process of generation of his taxable income. In this case, Brett incurred interest expense on
a loan he took out to pay employee wages. The loan was secured against his personal home.
This can be construed to be an expense, which has been incurred in the process of generating
his taxable income. Hence, irrespective of the security he has used in the availing of the loan
the interest accrued to be paid by him would be allowed as a deduction.
b)
It can be stated that the deductions under section 8.1 of the Income Tax Assessment Act
1997 (Cth)9 is available to a person, if the expenditure against which he has been claiming the
deduction has been incurred by him under the process of generating profit. If any expenditure
has been incurred partly for the generation of profit and partly for the purpose of personal
use, the taxpayer can claim only that part of the expenditure as deduction, which has been
incurred in the process of generating profit. In this case, Julie incurred $500 in mobile phone
8 The Income Tax Assessment Act 1997 (Cth), s. 8.1
9 The Income Tax Assessment Act 1997 (Cth), s. 8.1