Taxation laws : Sample Assignment

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to I:............................................................................................................................2
Answer to II:..........................................................................................................................2
Answer to III:.........................................................................................................................2
Answer to IV:.........................................................................................................................2
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................3
Answer to question 5:.................................................................................................................4
Answer to I:............................................................................................................................4
Answer to II:..........................................................................................................................4
Answer to III:.........................................................................................................................4
Answer to IV:.........................................................................................................................4
Answer to question 6:.................................................................................................................4
Answer to question 7:.................................................................................................................5
Answer to question 8:.................................................................................................................5
Answer to I:............................................................................................................................5
Answer to II:..........................................................................................................................5
Answer to question 9:.................................................................................................................6
Answer to question 10:...............................................................................................................6

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Answer to question 1:
According to section 8-1 of the ITAA 1997 a deductions is allowed to taxpayers
relating to outgoings up to the extent that it is incurred in generating or producing the taxable
income. However, a deductions not allowed in circumstances when the expenditure are
capital, private of domestic in nature (Barkoczy 2014). As held in held in “Federal
Commissioner of Taxation v Herald and Weekly Times” expenditure of capital in nature
were not allowed for deductions. Likewise for Paper Co the expenditure incurred in
defending the criminal charges is a held as deductible expense. The legal expenses incurred
by Paper Co. were in the course of gaining taxable income and are deductible under section
8-1 of the ITAA 1997.
Answer to question 2:
Answer to I:
According to section 108-70 the cost incurred in repairing the damaged drainpipe
caused due to storm to the rental property can be incurred in the cost base as its amounts to
capital improvements.
Answer to II:
Under section 110-25 (2) the expenditure that is occurred on payment to auctioneer on
the sale of property is incurred into the cost base of the property (Woellner 2013).
Answer to III:
With reference to Section 110-55 the land tax paid on the property that was acquired
in 2011 and sold for a loss shall not be incurred in the reduced cost base of the property.
Answer to IV:

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According to section 104-10 the gifting of apartment for no considerations will not be
incurred in the cost base of the property.
Answer to question 3:
Calculations of Capital Gains Tax
in the Books of Claude
Particulars Amount ($)
Sale Price 600000
Add: Cost of Selling
Legal Cost 12000
Total Sale Price 588000
Purchase Price 300000
Add: Cost of Purchase
Legal Costs 10000
Total Acquisition Costs 310000
Capital Gains 278000
Taxable Capital Gains 139000
Capital Tax Payable 41842
Answer to question 4:
Decline in Value = Asset Costs x Days Held x 100%
365 Asset Effective Life
8000 365 100% 1333.33
365 6
The decline in value of Projector is 1333.33
Percentage of Business Use = 90%
= 1333.33 x 90% = $1,200
Matthew deduction is reduced to $1,200 which is 90% of the projector decline in
value for the year ended 2017.

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Answer to question 5:
Answer to I:
The cost incurred by accountant for golf membership for taking his client to play golf
is a recreational business expenditure. Therefore, with reference to section 32-10 of the ITAA
1997 a deductions is allowable for cost of recreation.
Answer to II:
The expenditure of the taxpayer in respect of the travelling between the home and the
place of work was out of the normal daily journey. The expenditure were in special
circumstances of this case and the expenditure that was incurred was for producing the
taxable income (Coleman and Sadiq 2013). The expenditure was not private or domestic in
nature. The expenditure incurred by taxpayer in “FCT v. Collings (1976)” were held as
allowable deductions under section 51 of the ITAA 1936.
Answer to III:
According to section 8-1 of the ITAA 1997 a long service leave will be entitled to
deductions (James 2014). This is because the expenditure that is occurred is in course of
deriving the taxable income.
Answer to IV:
Under section 25-25 of the ITAA 1997 a borrowing expenditure incurred by the
taxpayer in relation to the business loan to the purchase the new factory are allowed for
deductions (Kenny 2013).
Answer to question 6:
Particulars Amount ($)
Sale price $597,000

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Less: Cost of Advertisement $3000
Purchase price $450,000
Capital gain/loss $147,000
CGT Old Regime
Indexed capital gain/loss $147,000
Tax payable under old regime (marginal tax rate x indexation factor x
capital gain) $58,675
CGT New Regime
Tax payable under new regime (marginal tax rate x half capital gain) $23,028
Answer to question 7:
With reference to section 8-1 of the ITAA 1997 a deductions is allowed to a business
that are incurred in relation to advertisement and sponsorship costs. This is because these
expenditure are incurred in daily running of the business (Krever 2013). The amount paid by
the taxpayer in lump sum to the Victorian Government is held as allowable deductions under
section 8-1 of the ITAA 1997. This is because the amount is incurred in gaining or producing
the taxable income and will be held allowable as deductions.
Answer to question 8:
Answer to I:
According to division 115 of ITAA 1997 a CGT discount is allowed to individuals,
trusts and complying superannuation entities (James 2014). Therefore, in case of Century Pty
Ltd Division 115 discount is not available relating to the compensation payment received
from insurance pay-out.
Answer to II:
In case of Marcia a capital gain event G1 occurred after receiving a sum of $120,000
for not working as the tax consultant within the radius of 300 kilometre for a period of three
years. As a result the sum received by Marcia will qualify as the discount capital gain under

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the subsection 115-25 (1) of the ITAA 1997 since the conditions of division 115 is met by
her.
Answer to question 9:
According to “taxation ruling of 93/30” expenditure related with the home that are
private or domestic in nature are not allowed as deductions for assessment purpose. However,
an exception to this rule is that where a portion of home is used for producing income and
possess the character of place of business then the expenditure incurred in that respect is
allowed for deductions. The court of law in “Swinford v FCT” allowed a taxpayer to
deductions relating to portion of the room that was used as business premises (Coleman and
Sadiq 2013). Joey will be able to claim portion of deductions relating to $1000 internet costs,
$4000 interest payment and $450 on accountant fees.
Answer to question 10:
Computation of Capital Gains Tax
Particulars Amount ($)
The 12-month ownership rule Yes
Sold price $700,000
Purchase price $500,000
Capital gain $200,000
Taxable capital gain $100,000
Current taxable income $0
Capital gain tax payable $26,632
Less: Capital Loss from Sale of Shares $ 25,000
Net Capital gains $ 1,635
Reference List:

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Barkoczy, S. 2014. Foundations of taxation law.
Coleman, C. and Sadiq, K. 2013. Principles of taxation law.
James, M. 2014. Taxation of small businesses.
Kenny, P. 2013. Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. 2013. Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters.
Woellner, R. 2013. Australian taxation law select 2013. North Ryde, N.S.W.: CCH Australia.