ACC00132 Taxation Law: Case Study on Tax Return and Letter of Advice

This assignment provides a detailed solution to a taxation law case study involving the preparation of work papers, calculation of taxable income and income tax payable, and the creation of a letter of advice. The solution covers various aspects of income tax, including work-related income and deductions, capital gains tax (CGT) implications from share sales, rental property income and deductions, and other allowable deductions. It addresses the tax treatment of salary, superannuation contributions, vehicle expenses, rental income, and the non-deductibility of certain clothing expenses. The document also includes calculations for tax payable, applicable offsets, and levies, ultimately determining the estimated tax refund. This resource is ideal for students seeking to understand the practical application of taxation law principles. Desklib offers a wealth of similar solved assignments and study materials to support student learning.

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

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Table of Contents
Letter of Advice.........................................................................................................................2
Work papers:..............................................................................................................................4
Work Related Income and Deductions:.................................................................................4
Capital gains:..........................................................................................................................5
Rental Property:.....................................................................................................................5
Other deductions:...................................................................................................................6
Tax Payable, Offsets and Levies:...........................................................................................6
References:.................................................................................................................................8

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Letter of Advice
To Samudra
From Tax Consultant
Date: 14-09-2018
Dear Samudra
We wish to seek your attention towards our tax related advice based on the
transactions that has been furnished by you during the accounting year. We would like to
inform you that the amount of gross salary that is reported by you will be subjected to
assessment as ordinary income under “section 6-5 of the ITAA 1997”. A recommendation
can be made in this regard to enhance your financial position by creating balance for your
income and expenses. As per the information furnished by you we noticed that you reported
the superannuation contribution of $15,000. The superannuation contribution will reflect in
your taxable income. You also made personal superannuation contribution of $4,100
therefore, the amount will be held as permissible deductions.
We found that you incurred a vehicle running expense out which 82% of the expenses
were incurred for business purpose. We recommend you that, you can claim an allowable
deduction for the vehicle expense under “section 8-1, ITAA 1997” from your tax liability.
We noticed that you earned rental income for the month of May and June. The
expenses were mainly incurred on council rates, lease, insurance etc for your rental property.
These expenses were incurred in derivation of your rental income therefore you can claim
allowable deduction under “section 8-1, ITAA 1997”. While you incurred expenses on
interest on loan for the month of April, May and June. You will only be allowed to claim

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deductions for the month of May and June while the month of April will be excluded as your
property was not rented out for that month.
You further reported expenses on the purchase of suit. The purchase of suit by you is
not a mandatory clothing therefore you cannot claim deductions under the general provision
of “section 8-1, ITAA 1997”.
We anticipate that the advice provided has helped you in serving your objective and
hope to serve you again in future.
Thank You

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Work papers:
Work Related Income and Deductions:
The present set of work papers comprise of gross salary, allowances, reimbursement
and contributions made for superannuation (Woellner et al. 2016). The receipt of salary is
held as taxable under the ordinary the ordinary concepts of “section 6-5 of the ITAA 1997”
(Robin 2017). While the dividends that is received constitute the statutory income which will
be held for assessment under “section 44 (1), ITAA 1997”.
Work Papers
Particulars Amount ($)
Work Related Income and Deductions
Employment Income
Gross Payments 120000
Less: Tax Withheld 32032
Travel Allowance 2011
Less: Superannuation Contributions 15000
Australian Sourced Dividend Income
Dividends on 29 September 1150
Dividends on 28 March 500
Total Dividends Fully Franked (Net) 1155
Franking Credits
Gross up for Franking Credits 495
Total Employment Income 74979
Work Related Deductions
Registration & Insurance 1371
Fuel & Oil 5117
Services 902
Tyres (Repairs) 869
Tolls for road and tunnels 595
Lease Payments 7331
Mobile Phone 823
Monthly Mobile Plan 576
Total Work Related Deductions 17584

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Capital gains:
According to “section 104-10, ITAA 1997” a CGT event A1 occurs when a
transaction of sale of CGT asset is entered into by the taxpayer (Blakelock and King 2017).
Shares held in the Commonwealth Bank was sold which eventually gave rise to CGT event
A1. Furthermore, the taxpayer sold the shares that of Qantas that was inherited by his
grandmother. The capital gains made from sale of assets will be incorporated for taxation
purpose.
Capital Gains from Investment Amount ($)
Gross Sales Proceeds from sale of Shares 57128
Add: Brokerage Fees 115
Total Sales Proceeds 57243
Cost Base for 500 Shares @6.70 3350
Cost Base for 250 Shares @ 38.54 9635
Total Cost Base 12985
Net Capital Gains 44258
Sale of Shares Inherited from Grandmother
Gross Sales Proceeds from Qantas Shares 10440
Add: Brokerage Fees 20
Net Proceeds from Sale of Shares 10460
Less: Cost Base 6040
Net Capital Gains 4420
Total Capital Gains 48678
50% CGT Discount 24339
Rental Property:
The expenses incurred on the rental property are assumed for deductions for the
month of May and June since it was during that the time the property was sublet for deriving
rental income (Braithwaite 2017). A deduction for interest on loan is taken for deductions for
the month of May and June while for April the interest on loan has been ignored since the
property was not available for rent.
Income From Rental Property Amount ($)
Gross Rental Income (May and June) 3330

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Allowable Rental Deductions
Council Rates 458
Water Rates 185
Insurance 1340
Interest on bank Borrowings (May and June) 333
Travel Expenses 840
Total rental Allowable Deductions 3156
Net Rental Income 174
Other deductions:
The taxpayer reports expenses for the purchase of clothes. The commissioner of
taxation in “Mansfield v FC of T (1996)” held that deductions for clothes that are bought by
taxpayer for the purpose of enhancing the appearance will be disallowed for deductions
(Miller and Oats 2016). Therefore, the purchase of suits will be held as non-allowable
deductions since it is not a compulsory clothing.
Other Deductions Amount ($)
Accommodation Cost 1425
Meals 1250
Taxis 180
Gross Other Deductions 2855
Personal Superannuation Contribution 4100
Donations
Cancer Council 800
RSL Art Union 50
Subscription to Magazine 245
Insurance Policy 2600
Total Other Expenses 9555
Tax Payable, Offsets and Levies:
Tax Payable, Offsets and Levies Amount ($)
Tax Payable on Taxable Income 87,239
Less: Offsets
Insurance Premium offsets 2,600
Lump Sum 3,247
Reportable Superannuation Contribution 15000

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Medicare levy 8233.84
Less: Credits
Tax Withheld 32,032
Estimated Tax Refund 21965.11

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References:
Blakelock, S. and King, P., 2017. Taxation law: The advance of ATO data
matching. Proctor, The, 37(6), p.18.
Braithwaite, V., 2017. Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Robin, H., 2017. Australian taxation law 2017. Oxford University Press.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.