Taxation Law

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

TAXATION LAW1
Q. 1.
a)
The computation of depreciating asset is covered by the Taxation Ruling TR 2018/41.
b)
The tax offsets are contained in Div. 13 of the Income Tax Assessment Act 1997 (Cth)2.
c)
The tax rate in the year 2018/19 tax year is 54,097 and a 45% upon any income above the
180,001 slab.
d)
Property used for residential purposes are required to be treated as a exempt from the CGT
under section 118.10 of the Income Tax Assessment Act 1997 (Cth)3.
e)
The CGT event B1 has been contained in section 104.15 of the Act4 that provides for the
right pertaining to a taxpayer in relation to the enjoyment and use of an asset, which can be
categorised as a CGT asset, before the real transfer of the title in relation to ownership.
f)
Under section 4.10(3) of the Income Tax Assessment Act 1997 (Cth)5 the income tax
assessment formula has been provided. This can be stated as:
Income Tax = (Total taxable income * tax rate) – tax offsets
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
5 The Income Tax Assessment Act 1997 (Cth), s. 104.15

TAXATION LAW2
g)
The case of FC of T v Day 2008 ATC 20-0646 has analysed the status of the deductions
available under section 8.1 of the Act7, relating to an expenditure and losses. The high court
has refused to accept the contention that any expenditure having a touch of domestic nature
will be refused to be treated as a deduction. In this case, it has been held by the high court
that if the expense has a relationship with the generation of taxable income of a taxpayer the
same needs to be permitted as a deduction while computing the total taxable income.
h)
The two terms average tax rate and marginal tax rate has to be differentiated with respect to
the process of computation involved and the target it strives to impact. In case of average tax
rate, the same has to be calculated over the total taxable income that a taxpayer needs to be
assessed with for the purpose of payment of income tax. On the other hand, marginal tax rate
has to be construed to be computed over the increment that has been caused to the total
income of a person. Hence, it can be stated that average tax rate has been imposed upon the
total taxable income of a person. On the other hand, marginal tax rate needs to be imposed
upon the incremental income of a person. Average tax rate is required to be arrived at by
dividing the total income from the income tax payable. On the other hand, the base upon
which the marginal tax rate is needed to be computed is the incremental income.
i)
Consumption tax can be imposed on the consumption of the consumer goods and services.
This tax is imposed on the spending that a person undergoes for availing consumer goods or
services and not the quantity of the goods or services. This form of tax can be paid either by
way of indirect method or directly.
6 FC of T v Day 2008 ATC 20-064
7 The Income Tax Assessment Act 1997 (Cth), s. 8.1

TAXATION LAW3
Q. 2.
a)
In the present situation, Brett has been made a liability to pay an interest for a loan he has
availed for the purpose of making payments to his employees. The assessment of the same
needs to be analysed under as a deduction 8.1 of the Act8. As the loan has been availed for the
purpose of the payments made to the employees it needs to be construed to be a expense that
has been incurred for the process of yielding income. Hence, the same will be construed as an
expense, which needs to be allowed as a deduction.
b)
Deduction under section 8.1 of the Act9 is only allowable, if the same has been incurred
for the purpose of income yielding process. In the present case, Julie has encode an expense
of $500 with respect to mobile phone usage. She has contended that 60% of the charge
pertains to business calls and the rest for personal use. Hence, deduction will be available
only for that portion of the charge that has been used for business purpose. Hence, Julie will
be allowed as deduction of $300.
c)
In the present situation, Sally has an expense of $1200 in the process of hiring babysitter
for the purpose of looking after the children. She needed to hire this babysitter for going to
work. Although it has a slightest relation with the income building activity but the relation is
remote and it constitutes a more domestic nature than that of a business nature. Hence, this
amount will not be allowed as a deduction under section 8.1 of the Act10.
8 The Income Tax Assessment Act 1997 (Cth), s. 8.1
9 The Income Tax Assessment Act 1997 (Cth), s. 8.1
10 The Income Tax Assessment Act 1997 (Cth), s. 8.1