Tax Law Assignment: Analyzing Company and Individual Tax Obligations

This assignment provides a detailed analysis of Australian taxation law, covering various aspects of company and individual tax liabilities. It includes calculations for taxable income, tax payable, and Medicare levy for companies and individuals, considering different income sources like professional fees, salaries, dividends, and rental income. The assignment also explores capital gains tax (CGT) calculations, including capital losses and gains from property and share transactions, as well as fringe benefits tax (FBT). It addresses partnership income, the tax implications for child partners, and trust net income distributions. Furthermore, the assignment includes working notes and calculations to illustrate the application of relevant tax laws and regulations, making it a comprehensive resource for understanding Australian taxation principles. The assignment covers a wide range of tax scenarios, from calculating individual tax liabilities to analyzing complex business transactions, providing a practical understanding of the Australian tax system.

Australian Taxation Law

TABLE OF CONTENTS
QUESTION ONE.......................................................................................................................4
QUESTION TWO......................................................................................................................4
QUESTION THREE..................................................................................................................5
QUESTION ONE.......................................................................................................................6
QUESTION TWO......................................................................................................................7
QUESTION THREE..................................................................................................................8
SECTION A.............................................................................................................................10
QUESTION 1...........................................................................................................................10
QUIESTION 2.........................................................................................................................10
Part A..................................................................................................................................10
Part B...................................................................................................................................12
QUESTION 3...........................................................................................................................13
a)..........................................................................................................................................13
b)..........................................................................................................................................14
QUESTION 4...........................................................................................................................15
Part A..................................................................................................................................15
Part B...................................................................................................................................16
QUESTION ONE.....................................................................................................................18
QUESTION TWO....................................................................................................................19
QUESTION THREE................................................................................................................20
QUESTION ONE.....................................................................................................................21
QUESTION TWO....................................................................................................................22
QUESTION THREE................................................................................................................24
QUESTION ONE.....................................................................................................................25
QUESTION TWO....................................................................................................................26
QUESTION THREE................................................................................................................27

REFERENCES.........................................................................................................................29

QUESTION ONE
Particulars Amount Amount
Net profits of the company 3419700
Add: Dividend received
(240000*80%) (ITAA 1997
215(B))
48000
Cash dividend received and
tax paid
Nil
Wages (Overpayment of
expense for wages)
30000
3497700
Depreciation and other
expenses (ITCC 1997
(705(45))
Low-cost pool assets
(80000+17080)
9708
New motor vehicle
(17750/6)
2958.33
I-pad 330
Delivery van (74232/5) 14846.4
Actual cost for accident
claim
25000
New steel window frame 840
Painting of the premises 10000
Stock (230000-33567) 196433
Goodwill expense 100000
PAYG installments paid 955000
Purchase of building Nil 1315115.73
Taxable income of the
company
2182584.27
The tax liability for the company will be 27.5% as the turnover of the company is less $10
million (Edmonds, 2019). So, the tax to be payable by the company for the period of 2016-17
is $2182584.27 27.5% = $600210.67.
QUESTION TWO
Sam 's tax liability for the year ended 30 June 2017
Receipts
Professional fees
20000
0
Sales of do it yourself wills 25000
Income from part time military services (exempted income) 0
Dividend received from an Australian resident company fully
franked 7000

Net salary received from part time job 24000
Interest on bank deposits 5000
Rental income from an investment property 10000
Profit on sale of office equipment 2000
Gambling wins
50000
0
Total
77300
0
Payments
Office rent 14000
Cost of do it yourself 10000
salary paid to employee secretary 50000
Purchase of new calculator 290
Cost of meals and entertainment for clients 1400
Train fares for travel to and from work 1200
Rates on family home 2200
Tax agent's fees for preparing returns 1000
Rate paid on above mentioned investment property 2000
Interest paid on loan 15000
Cost of painting the investment property after purchase 5000
Cost of replacing roof tiles on the investment property 1000
Cost of extending the bathroom in investment property 15000
Maintaining Sam’s father Myron 5000
Total
12309
0
Gross income
64991
0
Taxable payable 30% of profit
19497
3
Less: Carried forward losses 12000
Net tax payable
18297
3
QUESTION THREE
Sue’s tax payable for the income year ending 30 June 2017
Annual salary from part time job 60000
Add: Net capital gain (Note 1) 15500
Net taxable income 75500
Income tax payable (Note 2) 16084
Medicare levy payable 1510
Income after tax & Medicare levy 57906
Note 1:

Capital gain 170500
Capital loss 35000
Total Capital gain 135500
Less: unabsorbed capital loss 120000
Net capital gain 15500
Note 2:
This means for an annual income of $75500 Sue pay:
No tax on income between $1 - $18,200 0
19c for every dollar between $18,201 - $37,000 3572
32.5c for every dollar between $37,001 - $90,000 12512
Income Tax payable 16084
QUESTION ONE
Fees received 13011492
Operating expenses
Advertising 1100000
Accounting depreciation 755000
Fringe benefits tax 45000
Provision for unreported claims 150000
Provision for bad debts 143000
Repairs 430000
Wages and Salaries 7400000
Purchase of trading stock 920000
Superannuation for employees 893000
Total operating expenses 11836000
Cost of buying the goodwill of a business 400000
Net profit 775492
Particulars Amount Amount
Net profits of the company 775492
Add: Dividend received
(100000*100%) (ITAA 1997 215(B)) 100000
Cash dividend received and tax paid Nil
Wages (Overpayment of expense for
wages) 20000
895492
Depreciation and other expenses
(ITCC 1997 (705(45))

Low-cost pool assets 600
New spray vehicle (626750/5) 125350
Computer system 9975
Twenty new truck (1573288/6) 262215
New BMW Seven Series 30625
Painting of the premises 40000
Stock (1630000-933567) 696433
Goodwill expense 100000
PAYG installments paid 445000
Purchase of building Nil 1710198
Taxable income of the company -814706
QUESTION TWO
Annual salary from part time job 89746
Add: rent received (15000+48000) 63000
Add: Net capital gain 772000
Add: Fully franked dividend 4500
Add: travel allowance 2365
Add: Won motor car 35500
Less: PAYG instalment 22000
Net taxable income 945111
Income tax payable (Note) 398532
Medicare levy payable
18902.2
2
Income after tax & Medicare levy
527676.
8
Note:
This means for an annual income of $75500 Sue pay:
No tax on income between $1 - $18,200 0
19c for every dollar between $18,201 - $37,000 3572
32.5c for every dollar between $37,001 - $90,000 16250
37c for every dollar between $87,001 - $180,000 34410
45c for every dollar over $180,000 344300
Income Tax payable 398532
Holiday house
Sales price 550000
Less: Advertising and estate agent’s fees 8000
Total sales price 542000
Less: Purchase price 350000
Other cost incurred during purchase

Stamp duty and legal fees 20000
Adding a second bathroom 35000
Capital gain 137000
Less: deduction on interest 15000
Total capital gain 122000
Vacant residential land
Sales value 500000
Purchase price 100000
Capital gain 400000
Harley Davidson motor cycle
Sales value 220000
Purchase price 130000
Capital gain 90000
A painting
Sales value 30000
Purchase price 20000
Capital gain 10000
Main place of residence
Sales value 600000
Purchase price 300000
Capital gain 300000
BHP shares
Sales value 90000
Purchase price 45000
Capital gain 45000
Unabsorbed capital loss (65000+130000) 195000
QUESTION THREE
Trust net income for the year ended 30 June 2018
Particulars Amount Amount
Gross income 524000
Add: Other income
Interest 1800
Exempt income 40000
Capital gain 40000
Dividend from BHP fully franked 16540
Total gross income 622340

Less: deductions or expenses
Rent 40000
Salaries to employees 127000
PAYG Withholding paid to ATO 18000
Salary to Jim Lee including PAYGW $23,000 72000
Salary to Mary Lee including PAYGW $15,000 35000
Salary to Mary Lee including PAYGW $15,000 1000
Superannuation contributions for employees 15674
Superannuation contributions for Jim and Mary 100000
Depreciation New computer system 4750
Depreciation New motor vehicle for Jim and Mary 10812.5
Motor vehicle expense 3500
Accounting conference 3000
Net interest 1800
Robbed 26000
Total expense
458536.
5
Net income before deduction of loss
163803.
5
Loss from the last year 120000
Net income 43803.5
Jim Lee's personal income year ended 30 June 2018
Particulars Amount
Jim Lee and Marry Lee's split equal distribution of
income total as $43803.5
21901.7
5
Add: Salary paid by trust 90000
Add: Revenue 6000
Total income
117901.
8
Less: Expenses and payments
Interest paid 8000
Medical expenses for Marry and Jim 7000
Professional membership fees 1500
Total expenses 16500
Income before loss
101401.
8
Trading loss 36000
Capital loss 12000
Net income for Jim Lee
53401.7
5
Income tax payable 8902
Medicare levy payable
1068.03
5
Note:

No tax on income between $1 - $18,200 0
19c for every dollar between $18,201 - $37,000 3572
32.5c for every dollar between $37,001 -
$90,000 5330
Income tax payable 8902
SECTION A
QUESTION 1
Active Enterprises Pty Ltd (AEPL)
Total cost of fringe benefits
Loan 30000
Retail price 4000
Lunch cost 290
Cost for hiring boat 10000
champagne cost 10500
Aggregate Fringe benefits 54790
FBT rate @ 47% and GST
rate @10%
54790*[47%+10%]/[(1-
47)*(1+10%)*47%]
Total Fringe taxable amount 3046.43
FBT 1431.82
660 amount has been excluded because it is primarily utilized for the purpose of work. If it
has been utilized for personal use it would have been included. From the above illustrated
table it can be understood that it has adopted higher gross up formula for determining
aggregate fringe benefit.
QUIESTION 2
Part A
a.
ITAA 1997 off Australia comprises various sections that provides detail regarding calculation
of income tax. Each section gives information regarding particular distinct situation that has

significant clarification for making an individual and organization understandable about
computation of income tax (Fry, 2017). Under the act section 98 would be applicable for
calculating gross up salary’s tax. In order to get the taxable amount 93000 of Bruce, an
Australian resident the below mentioned steps can be taken into consideration. The net
taxable 22545 would be the amount of taxable income.
Working note:
Total income 93000
90000
Average tax rate 23.90%
income tax 21510
Medicare 0
net pay on 90000 68490
Margin rate 34.50%
Additional amount 3000
Tax 1035
Total net pay 69525
Total tax 22545
b.
Yes he has to pay tax after having PAYG to Australian Taxation Office (ATO) of amount
1549. If mentioned person employer has send $20,996 to ATO still Bruce need to pay tax in
order to fulfill its tax liabilities. Bruce would not be eligible for having spouse offset tax of
$1,452 as Australia’s government allow spouse to earn this benefit if his/her earning is up to
40000 per year (Lang, 2021). The mentioned condition of Bruce does not fulfill this
requirement so it can be understood that earning it would not be possible for him.
c.
Diana I would be liable to pay 55059 if she has PAYG withholding tax taken out of her pay
of $25,876. She needs to pay the mentioned amount of tax as being liable to pay sum of

specified liability from the table. She would not be eligible to receive tax offset as her annual
salary is more than 40000.
Working note:
Total income 109000
90000
Average tax rate 23.90%
income tax 21510
Medicare 0
income tax
Net pay of 90000 68490
Margin rate 34.50%
Additional amount 19000
Tax 6555
Total tax 28065
Net income 80935
From the above mentioned calculation it can be understood that margin rate is
applied on amount above than 90000.
Part B
a.
Partnership income = $520,000
Expenses = $240,000
Salary of a partner = $40000
Income – expenses = taxable amount
Taxable amount = 240000
Tax= taxable figure* tax rate (45%)
Tax = 108000
Net income = Total income- tax
Net income = 132000
From the above computation it can be identified that Tito, Vic and Joey (TVJ) for 2014-15
will be liable for 108000 in order to earn 132000 net income. This specified earning after tax