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

will be equally distributed among three mentioned partners of TVJ. Partnership is not
mandatory taxable entity in Australia but it has lodge a tax return at the end of year. It must
not change its tax file number and Australian business number (Roe, 2017). Tax must include
distribution is made to every member who is partner and Tax & general law partnership by
ATO states that partners should pay the specified obligation in order to get smooth
functioning.
b.
Ciara as being a child partner and equally acceptable for profits & loss as being minor partner
she should not be liable for debt in order to smooth functioning of her studies. Being a
partner of these mentioned partnership organization she can be held liable for equivalent
amount as in the case she has been specified equal eligible for bearing loss (Sadiq, Black and
et.al., 2021). From this it can be interpreted that all four partners are expected to pay equal
amount of liabilities.
QUESTION 3
a)
1 compensation =50000
2.
Land cost = 43000
Land sold= 40000
There would be capital loss on selling of property which is 3000 (43000-4000).
3.
Painting cost 10000
Selling value 40000
There is basically capital gain of 30000 as it is not mentioned any further cost related with it
so deducting cost from sold value gain has been obtained for his particular CTG.
4.
Share cost value = 40000 on specified date
Share sold value = 20000
From taking the above mentioned figures into consideration it can be taken into account that
there is significant capital loss on these particular transaction. By deducting 20000 from
40000, the outcome derived is 20000 through which it can be understood that mentioned
party has faced loss of 20000 on its capital investment (Abeysekera, 2020).
5

Particulars
Amo
unt
Holiday house cost
200,0
00
Stamp duty 10000
Purchase cost 10000
Cost of running
house
Interest
60,00
0
Repairs 6,000
Legal cost
20,00
0
advertising costs 6,000
Sales commission
16,00
0
Total cost
328,0
00
sold value
900,0
00
Capital gain
572,0
00
Above table reflects there is capital gain of 572000 from this particular CGT event.
6. Carry forward capital loss of = 2000
b)
Computation of net capital gain
Particulars
Amoun
t
capital gain

from selling painting 30000
From selling holiday house in
Brisbane 572,000
Total gain 602000
Capital losses
From land 3000
From shares 20000
Carry forward amount $2,000
Total loss 25000
capital gain (Total gain- loss) 577000
Tax rate 30%
Tax amount 173100
Net capital gain 403900
QUESTION 4
Part A
Item Constitute ordinary
income?
Section or Case Reason
a. Yes Section 92 It is considered to be
an good income
source for an
individual therefore
it is included as
ordinary income.
b. NO Income tax
assessment act 1997
It is stated as income
from the other
sources therefore it
has not been
included in ordinary
category.

c. NO Income tax
assessment act 1997
Winning amounts
are not included in
the ordinary group of
income (Newhouse
and Janssen, 2020).
In cases of such
professional punter
work it can be
considered as
ordinary income
source
d. NO Tax assessment act
1997
In most of the cases
amount received for
the purpose of any
injury is not
comprised in any
taxable amount
e. Yes Tax assessment act
1997
It is included in
income from
ordinary sources as
this is part of
business transaction
Part B
Item Allowable
deductions under the
positive limbs?
Section or Case Reason
a. Yes ATO He would be allowed
to deduct the
expenses related with
such activities like
travelling
(Guglyuvatyy, 2020).

b Yes ATO This is allowed to be
included in allowable
deduction as it has
been incurred for the
organization purpose.
c NO CCTR Child care expenses
are not claimable as
tax deduction.
Eligible taxpayers
have to pay tax
regarding this
d. NO Tax assessment act
1997
It is not included in
the allowable
deduction as it is part
of loan which is
utilized for
commercial trading.
e. No Australian lending
law
This not allowed to
be tax deductable as
there are certain act
formed for providing
assistance to first
home buyers , etc

QUESTION ONE
Jo's tax liability for the year ended 30 June 2019
Receipts
Professional fees 350000
Sales of do it yourself wills 35000
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
Gambling wins 100000
Total 531000
Payments
Office rent 18000
Cost of do it yourself 15000
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 extending the bathroom in investment property 15000
Total 126090
Gross income 404910
Tax payable
163404.
2
Less: Past year tax loss 10000
Net tax payable
153404.
2
Notes:
Tax liability
Income tax payable 155306
Medicare levy payable 8098.2
Income after tax & Medicare levy -153404
marginal tax rate 45%

This means for an annual income of $394,910 Jo 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 17225
37c for every dollar between $90,001 - $180,000 33300
45c for every dollar over $180,000 101209
Income tax payable 155306
QUESTION TWO
Dave's tax liability for the year ended 30 June 2019
Salary income 90001
Winning raffle ticket 35500
Total income 125501
Less: capital gain loss from previous
year 25000
Capital loss in current year 70000
Total taxable income 30501
No tax on income between $1 -
$18,200 0
19c for every dollar between $18,201 -
$37,000 2337
Income tax payable 2337
Medicare levy payable @2% 610
Add: Capital gain tax (note) 13725.45
Total tax liability 16672.45
The 12-month ownership rule:
Two storey residence
Purchase price 170000
Selling price 850000
Capital gain 665000
Taxable capital gain
(665000*50%) 332500
Capital gain tax payable @45% 149625
Residential land
Selling price 500000
Purchase price 100000
Capital gain 400000
Taxable capital gain 200000
Capital gain tax payable 90000

Painting
Sold price 30000
Purchase price 450
Capital gain 29550
Taxable capital gain 14775
Capital gain tax payable 5466.75
Motor cruiser
Sales value 40000
Purchase price 110000
Capital loss 70000
ANZ shares
Sales value of shares 90000
Purchase price 45000
Capital gain amount 45000
Taxable capital gain amount 22500
Capital gain tax amount 8325
QUESTION THREE
a)
Computation of net income of Nadine
Family
Receipts
Rent from the investment properties
6000
0
Interest from a bank account 6000
Unfranked dividend 3000
Total
6900
0
Payments
Accounting expenses for tax return 4000
Repairs to investment properties 5000
Interest on loan
1400
0
Legal expenses 1000
Total
2400
0
Net Taxable income
4500
0
b)

Nadine can distribute the net income in the following ways in order to minimize the tax
liability (Tredoux and van der Linde, 2021).
.
John: $18200 -$6000 = $12200
Kim: $18200 - $2000 = $16200
Amy: $416 for avoiding child tax @68%
Brad: $0 ($45000-$12200-$16200-$416 -$16184)
QUESTION ONE
(i)
Net partnership income for the 2016-17
Assessable Income $
Receipts
Gross receipts from trading 860000
Capital gain 5000
Fully franked dividend from an Australian company 12520
Excess of closing trading stock over opening stock: s 70-35
ITAA97 10000
Payments
Purchases of trading stock 305000
Salaries paid to the partners 60000
Superannuation contributions for Elizabeth and Fred 50000
Superannuation paid for employees 64000
Interest paid to Elizabeth on her capital contribution 3000
Interest paid to Fred on his capital contribution 2000
Interest on a cash advance made to the partnership by
Elizabeth 2000
Salaries and holiday leave paid to employees 60000
Fringe benefits tax paid by the partnership 2300
Other general and specific deductions 123400
Net income of partnership 215820
(ii)
Determining the distribution amounts to each of the partners
Net income of partnership 198300
Less: Salary paid to Elizabeth and Fred 60000
Less: Superannuation amount 25000
Less: interest on capital 3000
Amount available for distribution 110300

(iii)
Elizabeth’s income tax liability
Assessable Income $
Share of partnership's net income ($110300*50%) s 92
ITAA36 55150
Partner's salary 30000
Superannuation amount 25000
Interest paid to Elizabeth on her capital contribution 3000
Interest on a cash advance made to the partnership by
Elizabeth 2000
Gambling winnings: non-ordinary income
Fully franked dividends received 7000
Gross salary paid as a part-time instructor 20000
Deductions
Purchased a calculator 250
Annual membership of a professional association 500
Taxable income 141400
Income tax liability 39950
Medicare Levy 2828
Total tax liability 42778
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 - $87,000 16250
37c for every dollar between $87,001 - $180,000 20128
Income tax payable 39950
QUESTION TWO
Calculating the capital gain as per Income tax act 1961
Computation of cost of asset of Holiday House:
Particulars Amount
Sale Value 600000
Less: Cost of asset: 220000*272/100 598400
Additional second floor. 100000* 167/100 167000
Other 20000
Long term capital loss 185400
Assuming David Beckham socks also a Capital Asset.
Particulars Amount

Sales value 22000
Less: Cost (12000*272/113) 28880
Long term capital loss 6880
The definition of Capital asset incorporates paintings, sculpture, arts .
So on selling that capital asset also capital gain tax has to be paid. But giving gift to the
daughter on the occasion of marriage does not attracts tax. As per income tax act 1961 any
gift given by any one on the occasion marriage does not attracts tax it is fully exempted
(Pinto and Evans, 2018).
Land and building is also considered as the capital assets.
Sales value = 800000
Cost of land = 100000
Cost of building = 200000
Long term capital gain = 500000
For depreciable asset even though if asset is used for any number of years, the gain or loss
will be short term in nature in accordance to sec 50 of income tax act 1961 (Edmonds, 2021).
Computation of Capital gain for motor vehicle:
Sale Value. 125000
Less: cost of asset. (15000)
Short term Capital Gain = 110000
Computation of Net Capital gain after set off
Particulars Amount
Long term capital loss (a) -185400
Capital loss for Stocks (b) -6880
Capital gain for building (c) 500000
P.Y losses 220000 + 15000 (given) -235000
NET LONG TERM CAPITAL GAIN 72720
Short term capital gain 110000
Net capital gain 182720

Business loss cannot be set off with the long-term capital gain. So, the assessee has to pay tax
on long term capital gain.
Calculation of the taxable income of Joe's for the year ending June 2017
Particulars Amount
Business loss -75000
Capital Gain 182720
Taxable Income 182720
It is being assumed that the rent received from the holiday house is in relation to the other
financial year, therefore, it is not taxable in the current financial year.
QUESTION THREE
Taxable payable of Tang Foods Pty Ltd
Particulars Amount Amount
Receipt
Sales
6,234,05
2
Dividend fully franked 12,000
Total
6,246,05
2
Payments
Purchase of stock 155,000
Fine for breaching Health and Safety
regulations 4,250
Rent 12000
cost of doing by another person 6,670
Interest on loan 10,417
Repairs 37,080
Bad debts 2,985
Advertising in the local paper 12,758

Purchase of new equipment for the
company 163,000
Cleaning costs 22,589
Office rent 18,000
Depreciation of plant and equipment 32,476
Fringe Benefits Tax 14,320
Salary paid to employee secretary 130,000
cash register depreciation 625
minivan for deliveries depreciation 9,750
depreciation on motor car 22,100
PAYG installment 120,000
Tax on capital gain 7,784
Total 781,804
Gross Income
5,464,24
9
Taxable payable 30%of profit 1639275
tax payable
3,824,97
4
From the above it can be understood that tax payable are mentioned as above all the
respective items are included in computation for getting actual value (Pert, Chen and
Carvosso, 2018).
QUESTION ONE
Priyanka Ryan's tax liability for the year ended 30 June 2018
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
Gambling wins
50000
0
Total
77100
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
Gross medical expenses 5000
Rate paid on above mentioned investment property 2000
Interest paid on loan 15000
Cost of painting the investment property after purchase 5000
Cost of extending the bathroom in investment property 15000
Total
12209
0
Gross income
64891
0
Tax payable
27821
9
Less: Past year tax loss 12000
Net tax payable
26621
9
Tax liability
Income tax payable 265241
Medicare levy payable 12978
Income after tax & Medicare levy -
266219
marginal tax rate 45%
This means for an annual income of $394,910 Jo 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 $90,001 - $180,000 34410
45c for every dollar over $180,000 211009
Income tax payable 265241

QUESTION TWO
Two-storey residence
Sales price 850000
Less: Commission 15000
Total sales price 835000
Less: Purchase price 70000
Long term capital gain 765000
vacant residential land
Sales value 500000
Purchase price 100000
Long term Capital gain 400000
A painting
Sales value 30000
Purchase price 20000
Long term Capital gain 10000
A luxury motor cruiser
Sales value 60000
Purchase price 110000
Long term Capital loss -50000
BHP shares
Sales value 90000
Purchase price 45000
Short term Capital gain 45000
Unabsorbed capital loss (65000+130000) 195000
Long term capital gain 1125000
Short term capital gain 45000
Total Capital gain 1170000
Less: unabsorbed capital loss 195000
Net capital gain 975000
Annual salary from part time job 89746
Add: Net capital gain 975000
Add: Won motor car 35500
Net taxable income 1100246
Income tax payable (Note) 468342
Medicare levy payable 22005

Income after tax & Medicare levy 609899
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 414110
Income Tax payable 468342
QUESTION THREE
a)
Computation of net income of Whelan Family
Trust
Receipts
Rent from the investment properties
8000
0
Interest from a bank account 6000
Total
8600
0
Payments
Accounting expenses for tax return 2000
Repairs to investment properties
1000
0
Interest on loan 4000
Legal expenses 1000
Total
1700
0
Net Taxable income
6900
0
b)
Distributions to the beneficiaries in order to minimize tax liabilities:
The core objective is to reduce the tax through taking benefit of the differential marginal tax
rates of the beneficiaries. There are various options but given below are the certain options
available in which all the beneficiaries except May do not have to pay income tax.
John: $18200-$12000 = $6200
Kim: $18200-$2000 = $16200
Amy: $416 (in order to avoid child tax at 68%)
Grandmother; $18200
May: the balancing amount $27984 ($69000 - $6200 - $16200 - $416 - $18200)

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