Report on Australian Business Taxation: Case Analysis and Discussion

This report provides a comprehensive analysis of Australian business taxation, focusing on several case studies involving residents and their tax obligations. The report examines scenarios related to capital gains, assessable income, and tax deductions, with specific attention to relevant legislation and taxation policies. The cases include a healthcare practitioner's income and expenses, a client with a rental property and a damaged retaining wall, a share trader's capital gains and losses, and a client who sold their residential property. The report applies relevant sections of the Income Tax Assessment Act and other rulings to determine taxable income, deductions, and surcharges, and concludes with an overview of the tax implications for each client, referencing key legal precedents. References to relevant books and journals are also provided.

AUSTRALIAN BUSINESS
TAXATION ASSIGNMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
QUESTION 2...................................................................................................................................2
QUESTION 3...................................................................................................................................4
PART A..................................................................................................................................4
PART B..................................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Tax implications and rules are highly significant which in turn assists Australian
government in generating fair income. Taxation shall be charged over assessable income
generated by an individual during the concerned financial year.. Rented property or capital gains
by all the factors. In this report, there are 5 cases of Australian residents, who has generated
capital gains and charged taxable income. Discussion can be on the basis of various legislations
and taxation policies facilitate by Australian government in dealing with several cases.
QUESTION 1
DR. JONES
Issue:
 Dr. Jones is a healthcare practitioner was approached by MCA to join healthcare centre at
Brisbane.
 $25000 has been paid to Dr. Jones in agreement and work hours to be required for 40
hours for 5 days of week (Monday-Friday)
 Bank account opened by him on his daughter's name and become signatory to it,
frequently deposit or draw the amount from it.
 Initial deposit made by him in account for $30000, at the end of year bank credited
interest of $350.
Rules/ laws:
 Section 8(1)1 deductions
 section 6 (5-25)2 assessable and exempted income
 TR 98/1 Determination of income, receipts v. earning
 Arthur Murray (N.S.W.) Pty. Limited V. FCT
Application: Dr. Jones serving the entity in Brisbane at the post of healthcare
practitioner. He has signed the agreement with MCA in consideration of the amount is paid by
them yo him for $25000 and the will liable to work 8 hours a day which will for 5 days in the
week. He has to work for 40 hours from Monday to till Friday. He has opened a bank account on
the name of his daughter who is minor aged around 16. he made the initial deposit in the bank
1 Income tax assessment Act 1997
2 Income tax assessment Act 1997
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account for $30000 which will be in the use of his daughter's education expenses (Long,
Campbell and Kelshaw, 2016). He frequently do deposits and draw money from the account. At
the end of the year the bank has credited $350 amount as interest over the savings account. The
assessable can be calculated as per the section 6 (5- 25) after deduction of the taxable slab
percentage and Medicare levy over the taxable amount. He earns 25000 as the earning and spend
30000 as the expenditures the taxation can be levied on the both income and expense made by
him. The deduction can be allowed in the section 8(1) where he is not liable to made any taxation
over the interest credited to his account. The ruling will be followed by this case is TR98/1
which describes determination of income and receipts vs. earning. This case is same as the case
of Arthur Murray (N.S.W.) Pty. Limited V. FCT.
Conclusion: As per the above discussion it is to be concluded that Dr. Jones has to make
payment for the income of &25000 and the expenditure for $30000, and the exemption can be
given to him on credited amount which was facilitate by bank to his account for $350. the
taxation can be charged over the income as per the taxation slab awarded by the federal
legislation and the Australian taxation office (Fry, 2017). He is the residence in Australia than he
will liable to make the additions in taxable budget for 2% along with Medicare levy of 2% than
the total amount can be paid by him context with assessable or taxable income. The Medicare
levy can be awarded to him because he is a resident in Australia and the government facilitated
this scheme as to give the health and safety cover to citizens. If Dr. Jones has been benefited with
the insurance from any of the hospital and medical unit than he will not been liable to add any
surcharge over the taxable income gains by him.
QUESTION 2
CLIENT# 2
Issue:
 Client# 2 is an Australian resident has an rental property on beach front at northern South
Wales.
 In the year 2012 the boundary of the rental property was constructed at the cost of
$65000 it was found damaged in 2016
 reconstructing the wall costs $100,000 in May- June 2017
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 Insurance company will pay the all repairing and reconstructing cost of the wall for
$100,000.
 The property was rented the client claimed $8000 of deduction.
Rules/ laws:
 Section 8(1)3 deductions
 section 6 (5-25)4 assessable and exempted income
 Excellar Pty Ltd v FC of T, Administrative Appeals Tribunal of Australia
 Division 435
Application: Client#2 is a citizen of Australia and provided his beach front property on
rent. One of the wall of property got damaged due to coastal erosion which was seaside
boundary. The wall was constructed in 2012 at the cost of $65000. the team of council engineers
concluded that the wall was total damaged and unsafe it should be build again which will cost to
client#2 around $100,000 and will take duration of May and June of 2017. The insurance
company pays whole amount of cost occurred in reconstructing the wall (Bentley, 2016). Client
has claimed deduction over the original retaining wall for $8000. as per division 43 under section
43 (1 & 2) there are various subsections which facilitates deduction over the construction
(Assessable income, 2017). Here client#2 can claim deductions over construction of original wall
which was built in 2012 but the rule says that the deduction can be allowed as if the construction
occurred in same financial year. In some circumstances or condition he can claim the deductions.
This case has similarity with the case of Excellar Pty Ltd v FC of T, Administrative Appeals
Tribunal of Australia. The assessable income of Client#2 can be calculated as per sections 6 (5-
25) and the further deduction can be benefited with knowing the allowances in section 8(1) from
ITAA 97.
Conclusion: As per the above discussion it can be said that client#2 can claim the
deductions over the 2012 construction of originals wall in some conditions as it will be allowable
under section 43(1& 2) as in capital expenditure made by him (Meehan, 2016). The insurance
company covered all the costs over reconstruction of wall which was got damaged due to coastal
3 Income tax assessment Act 1997
4 Income tax assessment Act 1997
5 Income tax assessment act 1997
3

erosion. The damage can be occur due to natural disasters so it can be fully claimed in the
insurance cover.
QUESTION 3
PART A
CLIENT# 3
Issue:
 Client#3 is an Australian resident working as an share trader.
 He purchased 10000 share for $15 each in 1995 and sold it for $25 each in 2017
 He had a capital loss in 2016 for $75000
Rules/ laws:
 Section 3946
 Schedule 1, Section 12-207 application of division and regulations to non-share dividends
 Alexandria Landfill Pty Limited V Supreme Court of New South Wales,
 TR 2010/14
Application:
PARTICULARS AMOUNT($) Taxable income
Capital gain
sale of shares = 10,000* 25=
250,000
250000
Less: capital loss -75000
Total revenue 175000 175000
Assessable income
175000+ 19822* 37%= 84572
(175000-84572=90428)
90428
Total assessable income 90428
Add: Medicare levy 3500
6 AUSTRALIAN TAXATION OFFICE
7 TAXATION ADMINISTRATION ACT 1953,
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(175000*2%= 3500)
Add: temporary budget repair
levy
(175000*2%= 3500)
3500
Taxable income 97428
As per the above calculations client#3 has to pay taxation over the assessable income he
gains for 90428. the calculation can be made as to deducting the capital losses he had in previous
year to the current year's gains by selling of shares as per section 394 at ATO. He has to make
surcharge over his income from Medicare levy and temporary budget repairs as he is resident in
Australia it is the amount that have to be charged over the income or revenue generate by the
individual as to give them health and care cover by government of Australia (Clements, 2016).
The case relates with case of Alexandria Landfill Pty Limited V Supreme Court of New South
Wales and it follows the taxation ruling under TR 2010/14.
Conclusion: As per the discussion over assessable income generate by Client#3 on the
selling of shares which are generated as capital gain to him. He also has suffered from the capital
loss of $75000 in previous year (Solomon, 2017). Measurement of his assessable income can
come to the end result of the total taxation must be paid by him is around 97428 including all the
surcharges.
PART B
CLIENT# 4
Issue:
 Client#4 has owned a property as his main residential property for $35000 in 2003
 in 2005 he moved to Sydney and rented his property.
 In 2012 he returns to Brisbane and again started living in the same property.
 He sold his property for $920000 in 2017 which has cost of $420000.
Rules/ laws:
 Ryan & Anor. v. Commissioner of Land Tax (N.S.W.), Supreme Court of New South
Wales
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 Section 9C and 9D8
 section 6(1-25)9
Application: Client#4 is a citizen of Australia the taxation can be charged over the
income he has generated from the purchase and sales of residential property.
PARTICULARS AMOUNT TAXABLE AMOUNT
Capital gain as per sales
(920,000 – 420,000=500000)
500000
Assessment income
(500,000*45%=225000)
225000+54547=279547
(500000-279547 = 220453)
220453
Total assessable income 220453
Add: Medicare levy
(500000*2%=10000 )
10000
Add: temporary budget repair
(500000*2%= 10000)
10000
Taxable income 244053
As client#4 has sold his residential property for 920000 which has the cost of 420000 he
made gains on the sales which is of 500000 over this property. It comes under the taxable slab of
45% with the addition of $54547. it brings the assessable income around 220453 which will be
surcharged by Medicare levy and Temporary budgeted repair for 2% each (Snape and De Souza,
2016). It comes under section 9C and 9D of land tax management act 1956 and the section 6(1-
25) as the calculation of assessable income. The case is same as case of Ryan & Anor. v.
Commissioner of Land Tax (N.S.W.), Supreme Court of New South Wales.
8 Land Tax management act 1956
9 Income tax assessment act 1997
6

Conclusion: As per the discussion it is to be said that Client#4 can be liable to make
payment over the taxation of his residential property (Tran-Nam, Evans and Lignier, 2014). The
property was sold at a capital gain or profit to him for $500,000. thus, it comes under taxable
slab for 45% of federal legislation of Australia.
CONCLUSION
As per the above cases it has been concluded that all the clients has to be charged with
taxable income they have through various sources. It can be by selling of shares, employment in
any organisation, selling of residential property. The taxation can be done as per the rules and
regulations imposed by federal legislation of Australia. There can be various deductions or
exemptions which are facilitates by ATO to help individuals in claiming essential expenses to be
exempted.
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REFERENCES
Book and Journal
Bentley, D., 2016. Taxpayer rights in Australia twenty years after the introduction of the
Taxpayers' Charter. eJournal of Tax Research. 14(2). p.291.
Clements, J., 2016. The stamp duty consequences of farm-in arrangements in Western Australia.
Tax Specialist. 19(5). p.200.
Fry, M., 2017. Australian taxation of offshore hubs: an examination of the law on the ability of
Australia to tax economic activity in offshore hubs and the position of the Australian
Taxation Office.The APPEA Journal. 57(1). pp.49-63.
Long, B., Campbell, J. and Kelshaw, C., 2016. The justice lens on taxation policy in Australia.
St Mark's Review. (235). p.94.
McCluskey, W. J. and Franzsen, R. C., 2017. Land value taxation: An applied analysis.
Routledge.
Meehan, C., 2016. 12 Inclusion and inclusive practice in Australia. Inclusive Education:
Perspectives on Pedagogy, Policy and Practice. p.140.
Snape, J. and De Souza, J., 2016. Environmental taxation law: policy, contexts and practice.
Routledge.
Solomon, R., 2017. Bounded political contestation: the domestic translation of international
health and housing rights in Australia. Australian Journal of Political Science. pp.1-16.
Tran-Nam, B., Evans, C. and Lignier, P., 2014. Personal taxpayer compliance costs: Recent
evidence from Australia. Austl. Tax F. 29. p.137.
Online
Assessable income. 2017. [Online]. Available through
:<www.iknow.cch.com.au/topic/tlp1041/overview/assessable-income>. [Accessed on 14th
September 2017].
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