Taxation Law: Tax Treatment of Income and Expenditures for Technology Computer Pty Ltd

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

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TAXATION LAW
Contents
Introduction:....................................................................................................................................2
Part a:...............................................................................................................................................2
Part b:...............................................................................................................................................6
References:....................................................................................................................................12

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TAXATION LAW
Introduction:
In Australia, it is the Income Tax Assessment Act 1997 (ITAA 1997) which is referred to
by the tax payers, both individuals as well as corporate entities, in determining the taxable
income and resultant tax liabilities for any income year. The standard income year in the country
is from 1st of July of a year to 30th June of next year. Taking into consideration the provisions of
ITAA 1997 and the instructions provided by the Australian Taxation Office (ATO), a detailed
report outlining the tax treatments for each item is reported below.
Part a:
Technology Computer Pty Ltd, here in after to be referred to as Technology in this
document, has incurred number of expenditures and earned income from different sources during
the income year ending on June 30, 2018. The tax treatments of these items as per ITAA 1997
are enumerated below.
1. Trading stock yet to be received by Technology is not part of closing stock hence, it has been
excluded from accounting profit (White and Townsend, 2018).
2. Service revenue of $50,000 is not to be included in computing taxable income from business as
the services in relation to the revenue is not yet completed.
3. Depreciation of $300,000 is added back to deduct entire depreciation as per ITAA 1997, i.e.
$375,000 to compute taxable income from business (James, 2016).
4. The entire sale proceed received from sale of a machine is not a revenue receipt to the business.
In such case only the gain or loss from sale of such machine is to be considered for calculating
assessable income of business. Hence, the entire sale proceed receipt from sale of the machine
has to be excluded form accounting profit and only the resultant gain or loss shall be adjusted
with the profit to determine the taxable income from business. The following calculation will help

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in understanding the appropriate tax treatment for the item (Chardon, Freudenberg and
Brimble, 2016).
Details $ $
Depreciation on Machine
Depreciation as per prime cost method:
Rate of depreciation is (100/4)% 0
.25
Depreciation per year (100000 x 25%) 25,000.
00
Accumulated depreciation till the machine was sold (25000 x
2)
50,000.
00
Machine's value as per books of account as on the June 30, 2018
Machine cost 100,000.
00
Less: Accumulated depreciation 50,000.
00
Machine's value as per books of account as on the June 30,
2018
50,000.
00
Less: Proceed received from sale of the machine 30,000.