Taxation

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

TAXATION1
1)
a)
The effective life pertaining asset that can be considered as a depreciating asset is to
be computed by the commissioner in the compliance of the Taxation Ruling TR 2018/41.
b)
Div. 13 belonging to ITAA 97 contains the detailed discussion in relation to the the
tax offsets that are available to a taxpayer2.
c)
The maximum tax rate that a taxpayer resident in Australia has the possibility to
subjected to in the income year 2018/19 is an amount of $54097 with a forty-five cents for
each dollar in any income exceeding $1800003.
d)
Under section 118.25 of the ITAA 97, the trading stock are an exempt from the
capital gain tax4.
e)
The CGT event B1 provided in section 104.15 of the ITAA 97, the taxation of the use
of the asset under the category of CGT asset beforehand the handover of the actual transfer of
ownership has been provided5.
1 TR 2018/4
2 The Income Tax Assessment Act 1997 (Cth), div. 13
3 www.ato.gov.au, "Individual Income Tax Rates", Ato.Gov.Au (Webpage, 2019)
<https://www.ato.gov.au/Rates/Individual-income-tax-rates/>
4 The Income Tax Assessment Act 1997 (Cth), s. 118.25
5 The Income Tax Assessment Act 1997 (Cth), s. 104.15

TAXATION2
f)
Section 4.10(3) of the ITAA 97 contains the formula for computing the payable
income tax pertaining to a taxpayer. This can be calculated by subtracting the tax offsets off
the product of assessable income and the rate of tax applicable6.
g)
The proceeding of Federal Commissioner of Taxation v Day 2008 ATC 20-0647 has
introduced an objective approach towards the permissiblity of expenses for availing
deductions by virtue of section 8.1 belonging to ITAA 978. Prior to this, there was an affinity
of the courts to render all the expenses that has a relationship with the domestic venture not to
be allowed for deduction, even if it has contributed towards the process of yielding income.
In that particular proceeding, the court has contended that in case the cost has an association
so proximate with the in income yielding process that its deductibility cannot be disallowed,
then its connection with the domestic purpose will be ignored. It can also be stated that, in
case, the expense has an active role to play in the course of yielding income, which is taxable,
it is required to be permitted as a deduction with respect to this section.
h)
Average tax rate and marginal tax rate are the two rates related to taxation that has the
difference in the application and in the computation. The average tax rate is to be applied
upon the total taxable income pertaining to a person, making payment of the tax. Again,
marginal tax rate is required to be imposed in the increment that the taxable income
belonging to a person suffers. Hence, it can be stated that the calculation of the same will be
based on this incremental income. In the event of average tax rate, the computation is to be
6 The Income Tax Assessment Act 1997 (Cth), s. 4.10(3)
7 Federal Commissioner of Taxation v Day 2008 ATC 20-064
8 The Income Tax Assessment Act 1997 (Cth), s. 8.1

TAXATION3
done taking the total income belonging to a person as a base. Again, the marginal tax rate will
be calculated by taking increment in the income of a person as a base.
i)
Consumption tax is to be implied as a tax, levied upon the consumption of the goods
and services that the consumers avail. In this kind of tax, the focus is upon the money spent
on the consumption of the goods and services and not the size of consumption related to
goods and services. This can be compensated directly or indirectly but in most of the cases
consumption taxes are indirectly payable. Examples of consumption taxes are sales tax,
excise duties, GST and other forms of taxes, which are levied upon the consumption of goods
and services in Australia. The main form of consumption tax is the goods and services
tax(GST) that imposes at 10% of tax upon the price of majority of the goods relating to
consumer that a person spends to avail.
2)
a)
Under section 8.1 of the ITAA 979, any expense, that has been incurred in the revenue
yielding process will be treated as a deduction for the purpose of tax assessment. In this case,
Brett availed a loan to appropriate the payments towards his employees for his business,
which leads to taxable income. Henceforth, it would be allowed for the purpose of deduction
under this section.
b)
The portion of the expense, which can be traced to the income yielding process would
be permitted as deduction by virtue of section 8.1 belonging to the ITAA 9710. If a part of the
income has been used for income development process and the rest portion for private use,
9 The Income Tax Assessment Act 1997 (Cth), s. 8.1
10 The Income Tax Assessment Act 1997 (Cth), s. 8.1