Taxation

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

TAXATION1
Question 1
a)
The assessment of depreciating asset has been covered by the Taxation Ruling TR
2018/41 and prescribes the technique with which the Commissioner is required to compute
the same.
b)
The available offsets relating to taxation has been covered by Div. 13 of the Income
Tax Assessment Act 1997 (Cth)2.
c)
The maximum rate of tax that is applied to a taxpayer is 54,097 and a 45% above the
taxable income that needs to be charged over any income above 180,000.
d)
A permanent resident is an exemption from CGT under the Income Tax Assessment
Act 1997 (Cth), section 118.103.
e)
Under B1 s104.15 of the Income Tax Assessment Act 1997 (Cth)4, the right
pertaining to a tax payer in relation to a use and the enjoyment of a property before the
passing over of the title of ownership is to be taxed.
f)
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

TAXATION2
Income Tax payable by a taxpayer is required to be calculated by multiplying the tax
rate with the total income and then deducting the tax offsets from the same. This formula has
been provided under section 4.10(3) of the Income Tax Assessment Act 1997 (Cth)5.
g)
The High Court contended in the case of FC of T v Day 2008 ATC 20-0646, that any
expense that a taxpayer incurs in the due process of the generation of taxable income, needs
to be permitted as a deduction under section 8.1 of Income Tax Assessment Act 1997 (Cth)7.
Before the judgement, there has been a contention among the courts that all expenses that can
be connected to a domestic purpose cannot be treated as a deduction under section 8.1.
However, after this decision it has been contended by the court that even if it has a domestic
purpose, the slightest connection of it with the income generation process will render it to be
allowed as a deduction under section 8.1. However, this deduction is only available to that
extent or part of the expenditure that has contributed in the process of income generation.
h)
Marginal tax rate is a rate of tax that needs to be applied in the increment that occurs
upon the total income of a person. On the other hand, average rate of tax is the rate of tax that
is required to be applied over the entire income of a person. The difference lies in the
calculation and the destination of these tax rates. In case of marginal rate of tax, the
calculation needs to be carried out upon the instrument that has been caused to the total
income of a person. However, average rate of tax is to be calculated over the total income of
a person that is taxable. This can be construed as the fact that average rate of tax is to be
imposed upon the total taxable income of a person and the marginal rate of tax is to be
imposed only with upon the increment that the taxable income of a person suffers.
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

TAXATION3
i)
Consumption tax implies any tax that has been levied upon the consumption relating
to any services or goods that has been availed by a person. It generally is to be imposed upon
the consumer of goods or services. These taxes includes sales tax, excise duties and other
forms of taxes that a consumer is required to pay for obtaining goods and services of
consumer nature. This tax can be paid by a consumer either directly or indirectly. The tax is
levied upon the consumption and not the particular goods or services.
Question 2
a)
Losses and expenses that has been incurred in the process of income generation
process pertaining to the taxpayer will be allowed as a deduction from the total income
taxable of a person under section 8.1 belonging to the Act8. In this regard, taxpayer will be
permitted to avail deduction of expenses that has a contribution actively in the process of his
income generation. In this case, the loan availed by Brett was for the payment to be made to
his employees and these employees has been working for his business, which generates his
income that will be subject to tax. Hence, this needs to be treated as a deduction under this
section, irrespective of the use of his personal home as a security for availing this loan. This
loan and any interest incurred due to the same will be treated as deduction this under section.
b)
Any deduction under section 8.1 of the Act9 will be applicable to a person, if he can
show that he has been claiming this deduction with respect to an expenditure that he has
incurred while generating income from his process of income generation. In case the
8 The Income Tax Assessment Act 1997 (Cth), s. 8.1
9 The Income Tax Assessment Act 1997 (Cth), s. 8.1