Australian Tax Deduction Calculation

This solved assignment focuses on calculating Australian tax deductions. It presents a scenario of an individual claiming deductions for self-education expenses, car travel, work clothes, professional tools, income protection insurance, and home loan interest. The assignment delves into the relevant ATO guidelines and provides a step-by-step calculation of each deduction, showcasing how to determine eligible expenses and apply appropriate methods like logbooks and percentage calculations.

TAXATION MAJOR ASSIGNMENT
CASE STUDY OF STEFAN FOR YEAR ENDED 30 JUNE 2017
Stefan, a Resident of Australia for taxation purposes, works as a Chef and is a single
parent of an 8 year old boy. He owns a 1.6 litre Corolla car, which he uses for travelling
to his work place and to TAFE where he is pursuing an advanced course to become a
fully qualified chef. He has recently purchased a house and also has an Income
Protection Insurance. Based on the information provided by Stefan, I have prepared his
Statement of Income for the year ended 30 June 2017 and calculated his tax liability to
facilitate him in filing his tax return.
CALCULATION OF TAX LIABILITY OF STEFAN
FOR THE YEAR ENDED 30 JUNE 2017
S.
No. Date PARTICULARS INCOME EXPENSES
Statute as
per ITAA,
1997
NOTES
(All Amounts are in AUS$)
01. 30 June 17 Gross Wages 49,000.00 s 6-5 A
02. 24 Aug 16 Telstra Dividend 540.20 s 6-5 B
03. 30 Jun 17 Family Tax Benefit 5,500.00 s 6-5 C
04. 14 Feb 17 Net Capital Gain from
Sale of Telstra shares 1,450.00 D
05. 30 Jun 17 Self-Education Expenses 2,775.00 s 6-5 E
06. 30 Jun 17 Car Expenses 2,610.00 s 8-1 F
07. 30 Jun 17 Work Cloths & Shoes 280.00 s 8-1 G
08. 30 Jun 17 Professional Tools 200.00 s 8-1 H
09. 30 Jun 17 Income Protection Ins. 320.00 s 8-1 I
10. 30 Jun 17 Interest on Home Loan 7,400.00 s 8-1 J
11. 30 Jun 17 Tax Agent Fee-2016 180.00 s 8-1
12. 30 Jun 17 Superannuation Deposit 1,500.00 s 8-1
TOTALS 56,490.20 15,265.00
Gross Taxable Income 41,225.20
LESS:
Family Tax Benefit 5,500.00
Telstra Dividend 540.20
NET Taxable Income 35,185.00
Gross Tax Payable 3,227.15
PAYG Payment 8,450.00
Tax Withheld on Telstra
Dividend payment 162.00
NET REFUND 5,384.85

Dear Mr. Stefan,
You will found below my Notes which explain the calculations appended with this
letter. These notes are an extension of the explanations given for the various incomes
and expenses, as per the information provided by yourself to me. In the appended
calculations table, you will also find reference to the Tax Statute of the Income Tax
Assessment Act of 1997, which becomes applicable to the amount shown in the same
row, as per Barkoczy, (2015).
A. Gross Wages
These are the Gross Wages which are received by you from your employer.
B. Dividend
This is the Fully Franked Dividend amount received by you from Telstra.
C. Family Tax Benefit
As per Barkoczy, (2013), the ATO regulations make you eligible for Family Tax Benefit
(FTB) Part B which gives extra financial assistance to single parents, since:
 You have a dependent child, who is below 20 years of age and who does not
receive a pension or a payment or a benefit, including Youth Allowance.
 You provide care for this child for at least 35% of your time.
 You meet the income test stipulated by the ATO.
D. Capital Gain from Sale of Telstra Shares
You originally purchased 2000 shares of Telstra @ $3.60 per share in September 1995.
You were allotted 200 Bonus Shares in March 2008, which shall also be calculated @
$3.60 each share. Another 240 shares were purchased by you in January 2009 @ $8.00
per share, as per CCH, (2015). Your total acquisition cost calculates to –
September 1995 2,000 shares @$3.60 each $7,200.00
March 2008 200 Bonus Shares @$3.60 each $720.00
January 2009 240 shares @$8.00 each $1,920.00
Total Acquisition Cost $9,840.00
14 February 2017 Sale Proceeds of 2440 shares $12,740.00
Gross Capital Gain $2,900.00
LESS: 50% Discount under Discount Method $1,450.00
NET Capital Gain $1,450.00

E. Self-Education Expenses in 2017
You are eligible for this deduction on account of these self-education expenses, as you
meet one of the following conditions:
 You can show the ATO that the course would lead to an increased income from
your current work related activities.
 You can also show that circumstances exist which also established a direct
connection between this course and your current work related activities.
 You can claim the expenses, such as those incurred on textbooks, stationery,
student services and course fees.
 Expenses which you incur on account of your travel between your workplace and
place of education.
F. Car Expenses
As a taxpayer, says CCH, (2015), the ATO gives the choice of any one of the following
4 methods of claiming your car expenses:
1. Cents per kilometer
This is applicable if you travel above 5000 business or work-related kilometer.
Although the ATO does not require a written evidence, it does mandate that you
calculated the business kilometer by a reasonable estimate.
2. 12% of Original Value
This method is also applicable if work-related travel is more than 5000 kms. The
taxpayer can claim a deduction which shall be equal to 12% of the value of the
car.
3. One-third of Actual Expenses
This method also can be used if work-related travel exceeds 5000 kms. The
fuel/oil costs are then calculated from the recorded odometer readings.
4. Log book
You have stated that you have been maintaining a log-book for at least 12 weeks
hence this can be used to substantiate the usage of the car. From these entries,
ATO can make an assessment of the use of the car for work-related percentage
and this can then be applied against the expenses incurred. Since you have given
an estimate that only 20% of the recorded expense of $13,050 is for work related
travel, you will be eligible for deduction of $2,610 on this account, asserts,
Barkoczy, (2015).

G. Work Clothes and Shoes
You have full claim for this expense.
H. Professional Tools
As you are eligible of a Tool Allowance of $450.00 from your employer, you will be
able to claim only $200.00 against this head ($650.00 - $450.00).
I. Income Protection Insurance
The ATO state that you can claim the cost of premium paid by you to insure the loss of
your income, provided your policy provides benefits of an income. Hence, your income
protection insurance premium is tax-deductible in case your policy is a standalone
policy.
J. Interest on Home Loan
Since the amount paid is for the loan which has been taken by you for a self-occupied
property, you can claim deduction of the interest part which you pay to the lending
institution.
Yours sincerely,
(STUDENT)
LIST OF REFERENCES
Barkoczy, S. 2013. Foundations of Taxation Law 2012, 5th ed. CCH Australia Limited,
North Ryde, NSW.
Barkoczy, S. 2015. Australian Tax Case book, 12th ed. CCH Australia Limited, North
Ryde, NSW.
CCH. 2015. Australian Master Tax Guide 2015. CCH Australia Limited, Sydney, NSW.