Taxation Law

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

TAXATION LAW1
Q. 1.
a)
The life of the assets that can be depreciated is covered under the Taxation Ruling TR
2018/41. This ruling provides for the method that the commissioner needs to follow while
computing the depreciation of such assets for the tax purposes.
b)
The tax offsets that are available to a person has been provided under division 13 of the
Act2.
c)
54,097 with an additional of 45% for 180, 001 or above is the top rate of tax that is
available to a resident taxpayer in the year 2108/19.
d)
permanent resident of a person paying the tax is exempt from tax under section 118.10 of
the Act3.
e)
The CGT event B1, as provided under section 104.15 of the Act4, subjects the right of a
person relating to the enjoyment and utilisation of a CGT asset to tax even before the actual
passing over of the title of ownership.
1 The Taxation Ruling TR 2018/4
2 The Income Tax Assessment Act 1997 (Cth), div 13
3 The Income Tax Assessment Act 1997 (Cth), s 118.10
4 The Income Tax Assessment Act 1997 (Cth), s 104.15

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f)
The computation of the income tax of a person has been provided under section 4.10(3) of
the Act5. This section requires the product of income multiplied by the rate of tax by the tax
offsets.
g)
It has been held in the case of FC of T v Day 2008 ATC 20-0646 that the losses or costs
that a person making the payment of tax makes in the generation of income, which is taxable
will be allowed as a deduction by virtue of section 8.1 of the Act7. In this regard, it needs to
be contended that the deduction is only allowed to the person, if the cost has been playing a
role in the generation of his taxable income. In the background of this decision, the expenses
that has been incurred by the taxpayer for the with a domestic essence was being construed as
an expense not allowed as a deduction. However, with this case, the assessment of the same
as a contribution to the generation of profit is required to be considered.
h)
To draw the differences existing among average tax rate and marginal tax rate, the
implementation of the same is required to be considered. Average tax rate is computed with
respect to the entire income of the taxpayer, which is taxable. But marginal tax rate is needed
to be assessed with respect to the increments that occurs in the taxable income of the person
paying the tax. In this context, it can be said that for the determination of average tax rate the
taxable income in its entirety needs to be taken. However, for the purpose of the marginal tax
rate, only that part of the income will be considered, that has been occurred as an increment
to the already existing taxable income. Hence, it can be stated that marginal rate of tax is
concerned towards the increment or any escalation that has occurred in the total income of a
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

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person, which is taxable. But the average tax rate is required to be concerned with the whole
amount of taxable income that a person has earned in an income year. The target of the
average rate of tax is the total taxable income of a taxpayer. But the target of the marginal
rate of tax is the increment for the escalation in the income that has occurred in the total
taxable income of a person.
i)
Consumption tax implies a tax, which is levied upon the goods or services, that a consumer has
consumed. It is to be noticed that the consumption tax is levied upon the consumption and not on the
goods or services. This kind of tax includes excise duties, sales tax and other duties and taxes that a
consumer availing services or goods is required to pay. This kind of taxes are levied over the price of
the goods or services availed. It can be paid directly or it can also be paid indirectly.
Q. 2.
a)
The losses or costs that person making the payment of tax makes in the generation of
income, which is taxable will be allowed as a deduction by virtue of section 8.1 of the Act8.
In this regard, it needs to be contended that the deduction is only allowed to the person, if the
cost has been playing a role in the generation of his taxable income. In the present situation,
the interest that he has incurred as an expense for the loan that he has taken for making
payment to the employees with respect to wages needed to be treated as a cost that has been
incurred for the purpose of business, which will earn him taxable income. The loan was
secured with respect to his personal home will not be considered in this case as the loan has
been availed for the purpose of generating income, the cost will be allowed as deduction
under the section.
8 The Income Tax Assessment Act 1997 (Cth), s 8.1