BFA714: Griffith University Australian Tax Law Assignment 1, 2019

This document presents a comprehensive solution to an individual Australian Tax Law assignment (BFA714) for the 2019 financial year. It meticulously analyzes Kim Smith's financial data, determining assessable income from salary, wages, allowances, interest, and royalty income. The solution addresses various deductions, including work-related travel expenses, uniform expenses, other work-related expenses, gifts, and the cost of managing tax affairs. Each item is assessed with detailed reasons and references to relevant tax rulings. The assignment also calculates the Medicare Levy Surcharge (MLS) and the final tax liability. The analysis includes a breakdown of each item's tax implications, ensuring a thorough understanding of Australian tax law principles. The solution is designed to provide clarity on complex tax concepts and practical application of tax regulations, making it a valuable resource for students studying Australian taxation.

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 120,000 This refers to the employment income, i.e. the money received for work done for an entity,
LWD in this case. Total receipts would be taxable
PAYG tax
withheld – LWD
Yes 37,200 Amount withheld as PAYG tax, is the amount employer has deducted from the gross salary
of Kim, her gross salary is including the PAYG tax amount which is not paid to her. Thus, it
shall be taxable.
Allowances No 0 Allowances shall not be taxable, if the amounts received have been spent for the purpose for
which these were received.
Total assessable income $ 157,200
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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
No 1,500 The amount of allowances not spent by the taxpayer on the purpose for which it was
received shall be taxable in the hands of tax payer and no deduction shall be allowed for the
same.
Phone allowance
$1,000
Yes 100
Professional
development
allowance $3,500
Yes 0
Whisky from client
$200
No 0 The gifts to the extent of $10,000 in a year from one person is not taxable. Hence, whisky
from a client of value, $ 200 is not taxable in the hands of Kim.
Frequent flyer
points value
$1,000
No 0 As per Australian Tax Office, tax ruling TR1999/6, the frequent flyers points earned by an
individual are not taxable.
Total assessable income $ 1,600
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Item 10 – Gross Interest
Interest Assessabl
e or not?
Amount
assessable
Reasons and evidence
NAB $5 Yes 5 Amount of interest earned on a transaction account would be taxed similar to savings bank
interest, i.e. it shall be added to the taxable income of the individual
Westpac $318 Yes 318 Savings bank interest is taxable in the hands of individual, i.e. it shall be added to the
taxable income of the individual
Westpac $282 Yes 282 The amount withheld by the bank is also in the nature of Savings bank interest which was
withheld as tax, but it doesn’t affect the taxability of the said amount and it shall be taxable
in the hands of the individual.
Citibank $1,660 0 The amount of interest on term deposit is taxed in the year of receipt, since, in this case,
Kim has opted for roll over of term deposit including the interest amount, it will not be
taxable in the year 2018/19
Total interest assessable $ 605 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 Since, Kim is not a professional casino player and her winnings are attributable to her luck rather than her
knowledge or skill in the subject. The income so earned is not taxable in the hands of Kim.
Royalty
income
$5,010
Yes $ 5,010 The amounts of royalties earned by a person is taxable @ 30%, as per the tax laws of Australia.
Total assessable $5,010
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 These expenses are allowed to be deducted as per Australian Tax Office, as these
pertains to the expenses incurred in relation to attending an accounting conference,
which will be useful foe keeping her up-to-date with recent accounting developments.
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
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Taxi fares to attend
seminars $90
No 0 Though, the expense was incurred on travel to CPD seminar, which is directly linked to
the job, but it was provided as a reimbursement in the form of allowance which was not
taxable in the hands of tax payer.
Taxi fares to get home
when there was no
public transport $310
Yes 310 Since, the expense directly pertain to Kim’s employment, these could be deducted from
the taxable salary.
Public transport fares
to commute to work
$1,440
Yes 1,440 Since, the expense directly pertain to Kim’s employment, these could be deducted from
the taxable salary.
Work-related travel expenses
deductible
$ 3,390
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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 The case law referred to by Kim’s friend, is Case U124 87 ATC 741; AAT Case 87
(1987) 18 ATR 3624, wherein the taxpayer was allowed to claim the deduction for eye
glasses, as the work of the taxpayer involved working at a Visual Display Unit (VDU) for
eight hours in a day under fluorescent lighting. The tribunal accepted the glasses to be
protective clothing, as the tax payer was not required to wear them outside work and are
required only while working.
Whereas, in this case, Kim is using sunglasses only for going back from and coming to
office and during the lunch breaks and hence, no deduction is allowed for such sun
glasses.
Work-related uniform etc.
expenses deductible
$ 0 Claim type:
6

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 of the Act, where the membership of a professional association is
relevant to produce assessable income by the member, it is deductible.
Subscription to
Australian Financial
Review $550
Yes 42 As per TR 2000/7, the deductibility of payments for membership and subscription was
changed, to allow a $ 42 deduction for memberships of trade, professional or business
organisation.
Telephone expenses
$1,200
No 0 As per Kim’s assessment 75% usage is official, i.e. $ 900, whereas Kim has got $ 1,000
as telephone allowance, thus no deduction would be allowed to Kim for the same.
Home office expense No 0 Since Kim doesn’t have
Filing cabinet $250 Yes 250 Kim purchased the cabinet for the purpose of home office dedicatedly and hence can
be allowed deduction upfront.
Laptop $2,400 Yes 300 Total depreciation on the laptop, assuming diminishing balance method is 50%, i.e. $
400, of which 75% is for official use and hence, deduction can be claimed for 75%, i.e. $
300
Internet $1,080 Yes 810 Kim has incurred total internet charges of $ 1,080, of which 75% are for official
purposes, hence, deduction shall be allowed for 75% of the expenses
Accounting seminars
$3,000
No 0 Since, Kim is paid a professional allowance for meeting these expenses, which is not
taxed, no deduction can be allowed for such expenses.
Qantas Club $500 No 0 Although, 90% travel is related to work, a club membership which is taken for
entertainment by the employee, cannot be treated as an employment related expense.
Suitcase $300 No 0 Since the amount spent on the suitcase was reimbursed to her by the employer, no
deduction shall be allowed for the same to Kim in her personal tax return.
Conference Yes 1,350 The amount of registration fees spent, in excess of amount reimbursed by the
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Expenses Deductible
or not?
Amount
deductible
Reasons/law (including references to relevant tax ruling/s)
registration fee $1,750 employer, shall be allowed as a deduction to Kim.
Total deduction $ 3,742
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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
No 0 The amount of donation paid to Deductible gift recipients (DGR) is deductible and Aspire
support services is not a DGR and hence the amount of donation to Aspire support services is
not deductible.
Red Cross $1 No 0 As per the law, deduction is allowed for donation made to a DGR for an amount of $2 or more
and hence, $1 donated to red cross shall not be allowed as a deduction
RSL art union –
raffle tickets $360
No 0 Buying Raffle ticket to win a price home, doesn’t qualify for charity and hence no deduction is
allowed for the same.
Cancer Council –
chocolates
$6
No 0 Deduction is not allowed for donations given as personal benefits, such as Chocolates or pens.
Hence, in this case, deduction is not allowed
Volunteer work
$5,000
No 0 One of the conditions for the gifts to be allowed as a deduction is that it must be money or
property, which includes financial assets such as shares. In this case, Kim did volunteering
work, which cannot be allowed as a deduction.
Total deduction $ 0
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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 The cost of preparing tax return is deductible and it is deemed to have been incurred in the
year of payment, since it has been paid in the current year, it can be claimed as deduction.
Income tax
payable (2018)
$3,030
No 0 Income tax payable is not allowed as a deduction as it is computed on the taxable income
and no deduction is allowed for income tax.
General Interest
Charge $289
Yes 289 General interest charged by the ATO is allowed as a deduction from the taxable income.
Total deduction $ 769
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Item M1 – Medicare Levy Reduction or Exemption
Reasons/law
Medical levy reduction is provided to tax payers with income below certain threshold. The maximum salary upto which such exemption
is available is $ 27,997.
Since, Kim’s salary is way beyond the maximum limit for levy reduction, no reduction shall be available to Kim.
Item M2 – Medicare Levy Surcharge (MLS)
Reasons/law (including calculations to ascertain is Kim is liable and if so, the amount of liability)
Kim is liable for the surcharge, as she doesn’t have a private patient hospital cover and earns above the threshold for levy of Medicare
Levy Surcharge.
MLS is applicable on individuals earning more than $ 90,000, the total taxable income for Kim is $ 156,514. Since, the income of Kim is
more than $ 140,001 she falls in Tier 3 and hence, MLS of 1.5% shall be applicable on her income.
The amount of MLS shall be 1.5% of $ 156,514, i.e. $ 2,348.
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Calculation of tax payable for 2018/19
Assessable income
Item 1 – Salary and Wages $ 157,200
Item 2 – Allowances, etc. $ 1,600
Item 10—Interest $ 605
Item 24 – Other income $ 5,010
$ 164,815
Less Allowable deductions
Item D2 – Work Related Travel Expenses $ 3,390
Item D3 - Work-related uniform, etc $ 0
Item D5 – Other Work Related Expenses $ 3,742
Item D9 – Gifts or Donations $ 0
Item D10 – Cost of Managing Tax Affairs $ 769
$ 7,791
Taxable income $ 156,514
Basic Income Tax Liability (etc.)
The tax liability shall be $ 20,797 plus 37% of (156,514-90,000), i.e. $ 45,407
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