Revenue Law Assignment: Income, Deductions, and Tax Calculation

This revenue law assignment analyzes the assessable income and allowable deductions of a partnership, calculating the partnership's net income for the year ended June 30, 2019. It includes the computation of GST payable and input tax credit for the partners, Sam and Bessie. The assignment then details the calculation of Sam and Bessie’s share of the net income, considering partner salaries, interest, and drawings. Finally, it computes Sam's taxable income, including income from the partnership, interest, dividends, and capital gains, along with the calculation of total tax payable, incorporating deductions, franking credits, and pay-as-you-go (PAYG) installments. The assignment references relevant sections of the Income Tax Assessment Act 1997 and case law to support the calculations and explanations.

Running head: REVENUE LAW
Revenue Law
Name of the Student
Name of the University
Authors Note
Course ID

1REVENUE LAW
Table of Contents
Answer to (A):............................................................................................................................2
Answer to (B):............................................................................................................................3
Answer to (C):............................................................................................................................4
References:.................................................................................................................................5

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Answer to (A):
Assessable Income and Allowable Deductions
Computation of Partnership Net Income
For the year Ended 30 June 2019
Particulars Amount ($) Amount ($)
Assessable Income
Invoice Service fees 187000
Gain on Sale of Land 48000
Total Assessable income 235000
Allowable Deductions
Rent of salon 57200
Salary for casual employee 12000
Depreciation 3300
Electricity, internet and telephone expenses 3520
Total Allowable Deductions 76020
Partnership Net Income (Section 90) 158980
As explained in the section 90, the assessable income of the partnership is computed
by subtracting the income from the allowable deductions. The point of derivation is regarded
important in ascertaining when the income will be considered for taxation. As noticed in
“FCT v Carden” the taxpayer should use the method which is considered correct in their
specific situation as it helps in offering correct reflex of taxpayer’s situation (Woellner et al.
2016). In the present situation, the partnership only received $187,000 in cash. So under “sec
6-5(4) ITA Act 97” of cash basis the sum of $187,000 has been included for assessment
purpose.
Partnership does not make capital gains. Instead it is individual partners that make the
capital gains based on the interest in the partnership asset on the basis of the own right under
“section 108-5(2)(c)” (Barkoczy, 2016). The partners also reported the sale of land which
they purchased for $250,000 but later sold it for $298,000. With respect to “sec 106-5(2)”

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every partner has their own cost base for asset. The capital gains that is made by selling the
land is included into the partnership income for accounting purpose.
Accordingly a partnership cannot enter into the employment agreement with the
partner. Referring to “Ellis v Joseph Ellis Co” the partner’s salaries will not be considered
for deduction under “sec 90 ITAA 1997” (Taylor et al., 2017). Furthermore, the interest paid
to Sam and drawings made by each partners is not allowed for deduction.
GST Payable:
Computation of GST Payable or Input Tax Credit
In the books of Sam and Bessie
For the year ended 30th June 2019
Particulars Price (Ex GST) GST Payable
Receipts (Inclusive GST)
Invoice Service fees 170000 17000
Expenses (Excluding GST)
Electricity, internet and telephone expenses 3520 320
Total GST Payable 16680
Answer to (B):
Computation of Sam and Bessie’s share of net income of the partnership
For the Year Ended 30 June 2019
Particulars Amount ($) Amount ($)
Section 90 Net Income 158980
Less: Partners salaries (Sam) 45000
Interest paid to Sam 3000
Drawings 16000
Residual after subtracting 94980
Distribution - Bessie - 50% Share of Net income 47490
Add: Drawings 10,000
Total Income (Sec 92 (2)(a)) 57,490
Distribution - Sam - 50% Share 47490
Add: Salary 45000

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Interest on Capital 3000
Drawings 6000
Total Income (Sec 92 (2)(a)) 101490
As explained in “section 92(1)” the profits must be distributed among the partners
(Morgan & Castelyn, 2018). As evident the profits made partnership has been divided among
each of the respective partners in accordance with their equal share in partnership.
Answer to (C):
Computation of Taxable Income
In the books of Sam
For the Year Ended 30 June 2019
Particulars Amount ($) Amount ($)
Assessable Income
Income from Partnership 101490
Interest from bank account 230
Australian Sourced Dividend Income
Fully Franked (net) 1400
Gross up for franking credits (700 x 30/70) 600 2000
Capital gain on disposal of property
Sam share of capital gain (50%) 24000
50% CGT Discount 12000
Less: Capital loss on sale of Shares 6000
Net Capital Gains 6000
Total Assessable Income 109720
Allowable Deductions Nil
Total taxable income 109720
Tax on taxable income 28093.4
Add: Medicare levy 2194.4
Less: PayG Instalment 5300
Less: Franking credit 600
Total Tax Payable 24387.8

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References:
Barkoczy, S. (2016). Foundations of taxation law 2016. OUP Catalogue.
Morgan, A., & Castelyn, D. (2018). Taxation Education in Secondary Schools. J.
Australasian Tax Tchrs. Ass'n, 13, 307.
Taylor, J., Walpole, M., Burton, M., Ciro, T., & Murray, I. (2017). Understanding Taxation
Law 2018. LexisNexis Butterworths.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation
Law 2016. OUP Catalogue.