Griffith University BFA714: Australian Tax Law Assignment 1 Analysis

This document presents a comprehensive solution to an individual Australian Tax Law assignment (BFA714) from Griffith University, Semester 2, 2019. The assignment requires a detailed analysis of Kim Smith's income and deductions for the 2018/19 financial year. The solution meticulously categorizes various income sources, including salary, allowances, interest, and other income, determining their assessability based on relevant tax laws and rulings. It also analyzes work-related expenses such as travel, uniforms, and other work-related expenses, gifts or donations, and the cost of managing tax affairs to determine their deductibility. The document further calculates Kim's taxable income, basic income tax liability, Medicare levy, and Medicare levy surcharge, providing a complete overview of her tax obligations. The analysis includes relevant references to the Income Tax Assessment Act 1997 (ITAA 1997) and other tax rulings to support the conclusions.

BFA714 Australian Tax Law Assignment 1 (individual) Semester 2, 2019
Item 1 – Salary and Wages
Salary Assessabl
e or not?
Amount
assessabl
e
Reasons/Law
LWD $120,000 Yes $82,800 As per ordinary income, taxable are treated under “section 6-5, ITAA 1997” for the personal
rendering services or receipts from employment. Kim receives the salary with is payable
under the “Scott v CT (1936)” which is satisfied with her work.
PAYG tax
withheld – LWD
$6,000
Yes $6,000 The gross salary, which was deduction by the PAYG withholding, will be allowed by
deduction. Personal exertion income that while the allowances are received by Kim that will
be taxable under” section 6-5, ITAA 1997” within the ordinary concepts and since it allowed
by her employment.
Total assessable income $ 88,800
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Item 2 – Allowances, earnings, tips, director’s fees etc.
Allowances,
earnings, etc.
Assessabl
e or not?
Amount
assessable
Reasons/Law
Clothing
allowance
$1,500
Yes $1500 The allowances which are treated as taxable income would bring about increase in gross
income of the taxpayer on the basis of levied tax of the employee. An employee is allowed
for claiming expenses until the expenses occurred. For Kim clothing allowance will be
considered as taxable income and it would be considered as part of assessable income. For
the receipt of phone allowance Kim reports. Kim should have assessable income which
should include phone allowance and that should not include any deductions. Professional
development allowance of $3500 has been received by her. Professional development
allowance would be included as gross income since it is taxable income as per “section 6-5,
ITAA 1997”.
Phone allowance
$1,000
Yes $1000
Professional
development
allowance $3,500
Yes $3500
Whisky from client
$200
No $0 Ordinary income cannot include such receipt until and until both the prerequisites are
satisfied with. This needs to get assured whether it is receipt in the form of cash or whether it
is convertible in the form of cash or whether it can become a part of gain for the taxpayer.
Kim receiving a receipt of whisky from her client leads for a non-taxable advantage as it is
non-convertible into cash.
Frequent flyer
points value
$1,000
No $0 Under Airline Business Rewards program the frequent flyer refers to the employee who has
non-cash benefit as per subsection 136(1). A gain can be treated as income as per Payne v
FCT (1982) if it does not get converted into cash. The frequent flyer point by Kim is
considered as non-taxable benefit.
Total assessable income $ 6000
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Item 10 – Gross Interest
Interest Assessabl
e or not?
Amount
assessable
Reasons and evidence
NAB $5 Yes $5 Usually, banks consider the interest earned by a taxpayer from the bank as taxable. Under
section 6-5, ITAA the bank find the investment that is made by Kim as an ordinary income.
Westpac $318 Yes $318 Under section 6-5, ITAA 1997, the bank interest received from Westpac should be declared
in Kim from ordinary concepts.
Westpac $282 No 0 The sum of 282 will be check from kim’s gross interest and at a withholding rate of 47%
since she has not uncover her TFN number to bank.
Citibank $1,660 Yes $1660 Under “section 6-5, ITAA 1997” they have taxable as ordinary income.
Tota’l interest assessable $ 1983 Label L
TFN withheld $ 282 Label M
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Item 24 – Other income
Item Assessable
or not
Amount
assessable Reasons/law
Winnings
from casino
$500
No 0
As per income under ordinary concepts gains from Windfall cannot be treated as its under. As per” Section
6-5, ITTA 1997” winnings from casino is considered to be as gain from windfall for Kim and therefore it
cannot be taxable under this section.
Royalty
income
$5,010
No 5010
As per “McCauley v FCT (1944)” the court declared royalties to be a part of assessable income as per
ordinary concepts or can also be under “section 6-5, ITTA 1997” consideration as statutory concepts. As per
“section 6-5, ITAA 1997” royalties those are received by Kim for sale of written books is considered to be
taxable in terms of ordinary income.
Total assessable $5010
Item D2 – Work-related Travel Expenses
Expenses Deductible
or not?
Amount
deductible
Reasons/law (including references to relevant tax ruling/s)
Flights to Melbourne
for conference $540
Yes 540 For attending the conference which are connected to work cost is incurred and are
allowable for deductions. Under “Taxation Ruling of TR 98/9” expenses for self-
education are allowable for deduction where taxpayer gets engaged. As per “section 8-1,
ITAA 1997” cost that is incurred for flights, accommodation as well as meals are
permitted for deduction.
Accommodation at
hotel $700
Yes 700
Meals and sustenance
$140
Yes 140
Taxi travel to and from
the airports (to attend
conference) $260
Yes 260 According to the provision provided under “section 8-1, ITAA 1997” taxi travel in case of
attending a conference is allowed as deductible from the amount of income as it considers
as a derivation of taxable income.
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Taxi fares to attend
seminars $90
Yes 90 The taxi fare paid for attending the seminar is allowed for deduction from the income,
though it incurred by Kim while earning her employment income.
Taxi fares to get home
when there was no
public transport $310
No 0 As per the provision under “section 8-1, ITAA 1997” taxi fare to get back to home is not
allowed for deduction as it considered as private expenditure.
Public transport fares
to commute to work
$1,440
No 0 Followed the provision under “section 8-1, ITAA 1997” incurred fare for using public
transport in case of attending in the workplace considered as private expenditure for Kim
and which is not allowed for deduction under the tax liabilities
Work-related travel expenses
deductible
$ 1730
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Item D3 – Work-related uniform, occupation specific or protective clothing, laundry and dry cleaning expenses
Expenses Deductible
or not?
Amount
deductible
Reasons/law (including references to relevant tax ruling/s)
Sunglasses $300 No 0 Deduction in case of sunglass is only allowed when the assesse is exposed to sun for long
hours and in case of short time period no such deductions is generally allowed.
Correspondingly, followed the provision under “section 8-1, ITAA 1997” he expenses for
sunglass of $300 is not allowed for deduction as it is a normal articles of apparels
Work-related uniform etc.
expenses deductible
$ 0 Claim type: private expenses(non-deductible)
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Item D5 – Other Work-related Expenses
Expenses Deductible
or not?
Amount
deductible
Reasons/law (including references to relevant tax ruling/s)
CPA Australia
membership fee $990
Yes 990 As per ‘section 8-1, ITAA 1997’, the membership fee of kim is deductible under the
CPA Australia. Since these activities fall under ATO deduction like subscription to
professional association or business if it relates to its income producing activities.
Subscription to
Australian Financial
Review $550
Yes 550 As per ‘section 8-1, ITAA 1997’, any subscription which is related to her employment
and a part of assessable income like her subscription to Australian financial review is a
valid deduction.
Telephone expenses
$1,200
Yes 900 During kims course of employment the telephone expense occurred accounts for 75% of
total telephone expense and can be recovered. In the case of “Ronpibon Tin NL v FCT
(1949)” this conclusion has been achieved
Home office expense Yes 0 For all the total hours devoted to work by Kim, she will be allowed a deduction for home
office expenses, this is as per “Taxation Ruling of TR 93/30”.
Filing cabinet $250 Yes 250 If the cost of assets is below 250 the tax payer is allowed instant write off as deduction
for depreciating assets and Kim is eligible for it.
Laptop $2,400 Yes 2800 Only 75% of the cost of laptop can be claimed by Kim as she uses for her work purpose
while the rest 25% is related to her private expense.
Internet $1,080 Yes 810 75% of deduction will be provided to Kim for her internet expense as per the ‘section 8-
1, ITAA 1997’ as it is related to her work.
Accounting seminars
$3,000
Yes 3000 Self-education expense are allowed for deduction engaged by the tax payer as per
“Taxation Ruling of TR 98/9”. As per “section 8-1, ITAA 1997” attending accounting
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Expenses Deductible
or not?
Amount
deductible
Reasons/law (including references to relevant tax ruling/s)
seminar is a valid deduction.
Qantas Club $500 Yes 450 Only 90% of Qantas club expense can be recovered by Kim as it relates to her work
purpose.
Suitcase $300 no 0 As per “section 8-1, ITAA 1997” purchase of suitcase is a private expense and is not
deductible.
Conference
registration fee $1,750
yes 1750 As per “section 8-1, ITAA 1997” Kim can claim deduction in conference registration
fees as it is within the decided limits and it is allowed in the ATO.
Total deduction $ 10500
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Item D9 – Gifts or Donations
Gifts or
donations
Deductible
or not?
Amount
deductible
Reasons/law (including references to relevant tax ruling/s)
Aspire Support
Services $90
Yes 90 It is a deduction under division 30 which is claim by Kim, as the recipient is deductible gift
recipient.
Red Cross $1 Yes 1 Under division 30 permissible deduction.
RSL art union –
raffle tickets $360
Yes 360 Under division 30 permissible deduction
Cancer Council –
chocolates
$6
Yes 6 Under division 30 allowable deduction, because Kim is a voluntarily made.
Volunteer work
$5,000
Yes 5000 It is an allowable deduction under division 30 because it was volunteer work by Kim without
any material advantages.
Total deduction $ 5457
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Item D10 – Cost of Managing Tax Affairs
Managing tax
affairs
Deductible
or not?
Amount
deductible
Reasons/law
Invoice for cost of
preparing tax
return $480
yes 480 According to the provision under section 25-5 specific deduction can be claimed for managing
tax affairs. Here Kim can claim her specific deduction while preparing her tax return as it’s
occurred for managing the tax affairs.
Income tax
payable (2018)
$3,030
No 0 Followed the provision under section 8-1, ITAA 1997 no deduction will be allowed as it is a
tax liability that occurred in previous year.
General Interest
Charge $289
Yes 289 As per rules provided by Australian Taxation Office, general interest charged is
deductible. Here the interest charged can be consider as deductable taxable charges
by Kim.
Total deduction $480
10

Item M1 – Medicare Levy Reduction or Exemption
Reasons/law
2% of Kim’s income will be liable for Medicare levy
Item M2 – Medicare Levy Surcharge (MLS)
Reasons/law (including calculations to ascertain is Kim is liable and if so, the amount of liability)
As Kim’s assessable income threshold limit is above $ 90,000 for singles, she will be liable for Medicare levy surcharge at 1% on her
income that is taxable.
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Calculation of tax payable for 2018/19
Assessable income
Item 1 – Salary and Wages $ 82800
Item 2 – Allowances, etc. $ 6000
Item 10—Interest $ 1983
Item 24 – Other income $ 0
$ 95793
Less Allowable deductions
Item D2 – Work Related Travel Expenses $ 1730
Item D3 - Work-related uniform, etc $0
Item D5 – Other Work Related Expenses $ 10500
Item D9 – Gifts or Donations $ 5457
Item D10 – Cost of Managing Tax Affairs $ 480
$ 18167
Taxable income $ 77626
Basic Income Tax Liability (etc.) $ 16775
Add: Medicare levy $ 1553
Add: Medicare levy surcharge $ 958
Total tax payable $ 19285
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