Taxation

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

TAXATION1
Question 1
a)
The TR 2018/41 deals with the system to be used for the purpose of computing of the
assets which the subjected to depreciation for the tax purpose.
b)
The Div. 13 of the ITAA 972 enumerates the details regarding the tax offsets that can
be claimed by a taxpayer.
c)
The highest rate of tax that can be applied to a person in the year of income 2018/19 is
an amount 54, 097 with an additional 45cents each dollar above an income exceeding 180,
000.
d)
Motor cycles, cars and other vehicles of similar nature are treated as an exemption
form capital gain tax under section 118.5 of the ITAA 973.
e)
The CGT event B1as provided under the ITAA 974, section 104.15, contains
provisions relating to the taxation of the enjoyment and usage of CGT assets prior to the
transfer of title of the same.
f)
1 TR 2018/4
2 The Income Tax Assessment Act 1997 (Cth), Div. 13
3 The Income Tax Assessment Act 1997 (Cth), s 118.5
4 The Income Tax Assessment Act 1997 (Cth), s. 104.15

TAXATION2
Section 4.10(3) of the ITAA 97 prescribes the method for the calculation of the
income tax that needs to be paid by a taxpayer. This can be calculated by multiplying the tax
rate with the total taxable income of a person and the same is then required to be deducted by
the tax offsets available.
g)
The case of FC of T v Day 2008 ATC 20-064, has affected the deductibility of the
losses and expenditure under section 8.1 of the ITAA 97. The High Court, in this case, has
rejected the contention that the slightest essence of domestic nature would render the
expenditure to be not allowed as a deduction under this section. The court has adopted a more
objective approach and has contended that in case the expenditure can be traced as to have a
contribution in the process of earning taxable income, it will be allowed as a deduction
irrespective of its proximity with the personal or domestic purpose.
h)
The difference between average tax rate and marginal tax rate lies in the computation
and the target that it affects. The average tax rates are generally imposed upon the income of
a person in its totality but the marginal tax rates are to be imposed upon the income, which
are incremental. The average tax rate is required to be calculated by dividing the amount of
tax payable by the total taxable income of a person. However, the marginal tax rate is to be
calculated over the incremental income.
i)
Consumption Tax implies that kind of tax that has been levied upon the expense that
has been incurred by a person in the furtherance of availing goods or services for the purpose
of taxation. The base for the levy of such a tax is the expense that has been undergone for the
purpose of availing the goods and services. This kind of tax is generally paid indirectly. It

TAXATION3
includes sales tax, GST and other taxes levied upon the expenses undergone availing of
consumer goods and services. The Goods and Services Tax is the consumption tax prevalent
in Australia, which imposes a ten percent upon the most of the services and goods that has
been sold for the purpose of consumption.
Question 2
a)
Any losses or expenses that a person who is subjected to tax incur while earning their
taxable income, is required to be allowed for the purpose of deduction under section 8.1 of
the ITAA 975. However, for the purpose of claiming this deduction, the taxpayer needs to
establish that the expense or loss has been playing an important part in the generation of
income, which will be subject to taxation. In the present situation, the interest has been
incurred for a loan that has been taken by the taxpayer for paying the employees who works
for his business. This needs to be treated as a cost, which has been included for the purpose of
the business, which earn him his income for tax purposes. Although the loan has been
secured upon his personal home. This will be construed as an income or expenditure that has
been incurred in the process of generating income. Hence, this cost will be permitted as a
deduction for the purpose of this section.
b)
The expense or loss that a taxpayer incurs in the furtherance of the venture of earning
income will be allowed as a deduction under section 8.1 of the ITAA 976. Under this section,
a person will be allowed this expense as a deduction only if he can establish that the expense
has accrued for the purpose of the process of his earning taxable income. If a part of the
expense can be construed to be for the purpose of income generation and the other part for
5 The Income Tax Assessment Act 1997 (Cth), s 8.1
6 The Income Tax Assessment Act 1997 (Cth), s 8.1