Taxation Law: Analysis and Advice on Brad Smith's Tax Return 2017/18

This assignment presents a taxation law analysis in the form of a letter of advice to Brad Smith regarding his 2017/18 tax return. It details the calculation of assessable income, including gross salary, travel allowance, rental income, and capital gains from share sales and the sale of Russian dolls. The assignment identifies allowable deductions, such as interest on a loan and repairs to an investment property, while disallowing expenses on an air conditioning unit and legal fees for a neighbor dispute. The document meticulously calculates the total taxable income, tax payable, and tax withheld, providing a clear breakdown of the tax liability based on relevant sections of the ITAA 1997 and FBTAA 1986. The letter concludes with a summary of the tax position and references supporting legal frameworks.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Letter of Advice
To: Brad Smith
From: Tax Accountant
Subject: Tax Return 2017/18
Dear Brad
I would like to draw your kind attention towards the taxable information provided by
you has been acknowledged and based on this information we are providing you with
appropriate tax information from the transactions reported by you. As evident from your note
it is noted that you have reported gross salary of $99,920 and out of which $26,734 has been
withheld. According to the “section 6-5 of the ITAA 1997” your gross salary would be
considered to be assessable and would be included in your taxable return (Barkoczy 2016).
Additionally, it is found that you have undertook loan of $100,000 at the annual interest rate
of 2%. Therefore, the interest charged on the loan taken for purchasing the investment
property can be claimed by you for as the assessable income under “section 8-1 of the ITAA
1997”. You have reported that you incurred expenses on petrol and the expenses incurred by
you have been incurred for work purpose and the same can be claimed as deductions under
“FBTAA 1986” (Tan et al. 2016).
According to the “Taxation ruling of TR 97/23” an individual can claim deductions
for the expenses incurred on repairs. The ruling effectively provides the circumstances under
which the expenditure incurred by the taxpayer for repairs would be considered as the
allowable deductions under “section 25-10 of the ITAA 1997” (Snape and De Souza 2016).
As evident from the information provided it was found that you incurred expenses for repairs
on the investment property. In context of the “section 25-10” the expense of $30,000

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reported by you satisfies the term “repairs” since it is related to the work done by you on the
premises. The work has been done you is in conjunction with the objective of remedying or
making the defects goods and preventing the property from being deteriorated. On the other
hand, it was noted that you bought air condition system which is not related to any repairs
and hence the expenses incurred on air conditions would not be allowed as allowable
deductions under “section 25-10 of the ITAA 1997” (Saad 2014).
In the later part it has been noted that you sold shares of Telstra that was bought by
you and in respect of the Australian taxation office gains made from the sale of shares give
rise to CGT events (Miller and Oats 2016). Similarly, it was noticed that you incurred a loss
from the sale of shares that held in Orica and the same can be set off against the gains made
from the sale of Telstra shares. As evident from the information the loss on sale of shares
from Circa can be offset from the gains made on sale of Telstra Shares.
The information provided by you also contained transaction on the sale of Russian
Babushka dolls. The doll was purchased by you for $1,000 and the same was sold for $4900.
As a result of this you made a capital gains and the same would be included in your
assessable income which would subjected to 50% CGT discount for the amount reported by
you.
According to “section 8-1 of the ITAA 1997” it provides that any form of loss or outgoings
reported by the taxpayer would be considered as allowable deductions given that legal
expenses has been incurred in generating the assessable income of the taxpayer (Bevacqua
2015). A deduction would not be available if the expenses incurred are of capital, private or
of domestic nature. The legal expenses that is incurred by you on neighbours for illegal fence
would not be considered for allowable deductions since these expenses carries the nature of
private or domestic expenses.

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A tabular representation of the total amount of tax payable by you from the reported
information is stated below:
In the books of Brad Smith
Computation of Assessable Income
For the assessment year ended 2017-18
Assessable Income Amount ($) Amount ($)
Gross Salary 99920
Travel Allowance 3000
Australian Sourced Rental Income 21000
Net Capital Gains on Disposal of Shares
Proceeds from sale of Telstra Shares 10000
Less: Cost Base 5000
5000
Proceeds from Orica Shares 6000
Less: Cost Base 10000
-4000 1000
Sale of Russian Dolls (@4900*3) 14700
Less: Cost Base 1000 13700
50% CGT Discount 7350
Total Assessable Income 145970
Allowable Deductions
Repairs on Investment Property 30000
Interest on Loan 2000
Total Allowable Deductions 32000
Total Taxable Income 113970
Tax on Taxable Income 29800.9
Add: Medical Levy 2279.4
Less: Tax Withheld 26734
Total Tax Payable 5346.3
As evident from the above stated table it is understood that your total assessable
income stood $1,45,970 for the assessment year 2017-18. You will be entitled to total amount
of deductions of $32,000 which includes deductions on interest on loan and repairs carried
out on the investment property. The tax on taxable income stands $29800.90 and the total

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amount of tax that is withheld from your gross salary has been deducted to reduce your tax
liability. Consequently, the total amount of tax payable by you is $5,346.30.
I hope that above stated advice is relevant to you as all the information provided by has been
duly complied with appropriate sections to support your tax status.
Thank You
_____________

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Reference List:
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Bevacqua, J., 2015. ATO accountability and taxpayer fairness: An assessment of the proposal
to split the Australian taxation office. UNSWLJ, 38, p.995.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Snape, J. and De Souza, J., 2016. Environmental taxation law: policy, contexts and practice.
Routledge.
Tan, L.M., Braithwaite, V. and Reinhart, M., 2016. Why do small business taxpayers stay
with their practitioners? Trust, competence and aggressive advice. International Small
Business Journal, 34(3), pp.329-344.