Taxation: Income, Deductions, and Taxable Income Analysis

This taxation assignment analyzes various financial transactions to determine their tax implications. It covers earnings, further benefits, investment earnings, marriage celebrant fees, bingo winnings, settlement proceeds, superannuation payments, sale of residence, sale of personal items, work expenses, and car expenses. The analysis applies relevant sections of the Income Tax Assessment Act 1997 (ITAA 97) and other legal precedents to classify income as ordinary income, statutory income, or capital gains. It calculates taxable income, medicare levy, and tax payable, including PAYG and franking credits. The assignment assesses the impact of each transaction, distinguishing between assessable income, non-deductible expenses, and capital gains, providing a comprehensive overview of tax liabilities.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Author Note

1TAXATION
1. Earnings from Koles:
Issue
The tax implications of the given transactions.
Reason
ITAA 97, s 6.5: all receipts received that can be treated as an income through the
ordinary concepts is required to be treated as ordinary income.
PAYG is required to be deducted from net tax.
ITAA 97, s 15.2: allowance to employee is to be treated as statutory income.
Impact on income
$80000 – to be treated as ordinary income as per ITAA 97, s 6.5.
$24000 – needs to be deducted from net tax.
$10000 – statutory income as per ITAA 97, s 15.2.
$(5000 + 5000) = $ 10000 - statutory income as per ITAA 97, s 15.2.
$1000 – it cannot be treated as a gift. statutory income as per ITAA 97, s 15.2.
$1000 – not to be included in assessable income as it has not been received in the
furtherance of employment.
2. Further Benefits from Koles
Issue
The tax implications of the given transactions.

2TAXATION
Reason
Eisner v Macomber (1920) 252 US 189: lump sum receipt is required to be treated as a
capital gain as it does not comply with the flow concept.
ITAA 97, s 15.2: allowance to employee is to be treated as statutory income.
Impact in income
$10000 – lump sum capital receipt.
$3000 - statutory income as per ITAA 97, s 15.2.
$1500 – Flyer points not assessable income.
3. Investment Earnings
Issue
The tax implications of the given transactions.
Reason
ITAA 97, s 6.5: all receipts received that can be treated as an income through the
ordinary concepts is required to be treated as ordinary income.
ITAA 97, s 44: dividends are to be treated as statutory income.
Franking credit needs to be deducted from net tax.
Impact
$500 - to be treated as ordinary income as per ITAA 97, s 6.5.
$14000 – as statutory as per ITAA 97, s 44.

3TAXATION
Franking credit – 1400*70/30 = $3267
4. Marriage Celebrant Fees
Issue
The tax implications of the given transactions.
Reason
ITAA 36, s 6.1: income that has been accrued from the application of personal exertion is
required to be treated as ordinary income.
Impact
$600 – needs to be treated as ordinary income as per ITAA 36, s 6.1.
5. Bingo Winnings and TAB Account
Issue
The tax implications of the given transactions.
Reason
ITAA 97, s 6.5: all receipts received that can be treated as an income through the
ordinary concepts is required to be treated as ordinary income.
Federal Coke Co Pty Ltd v FC of T 77 ATC 4255: income from windfall games are not to
be treated as assessable income, if it has not been carried out in business-like manner.
Taxation Ruling 97/11: income received form business is required to be treated as
ordinary income to be included under ITAA 97, s 6.5.

4TAXATION
Impact
$1000 – not assessable
$50000 - to be treated as ordinary income as per ITAA 97, s 6.5.
$25000 - to be treated as ordinary income as per ITAA 97, s 6.5.
6. Settlement Proceeds
Issue
The tax implications of the given transactions.
Reason
FC of T v Sydney Refractive Surgery Centre Pty Ltd 2008 ATC ¶20-081: lump sum
received against a personal injury as a compensation is required to be treated capital income as
compensation replaces the income replaces the capital nature of the asset.
ITAA 97, s 8.1: the expenses that has been incurred as for personal purposes is to be
treated as non-deductible income as it comes under the negative limb of this section.
Impact
$10000: needs to be treated as a capital receipt.
$8000: non-deductible private expenditure.
7. Superannuation Payment
Issue
The tax implications of the given transactions.

5TAXATION
Reason
Under the benefits phase of superannuation, the receipts that has been received as lump
sum is to be treated as capital receipt and to be subjected to taxation as statutory income.
Impact
$50000 – needs to be treated as statutory income.
8. Sale of Residence
Issue
The tax implications of the given transactions.
Reasons
ITAA 97, 104.10: a CGT event is required to be classified as an A1 event when it
involves disposal of a property by way of sale. The gain accrued from the same would be
included as a statutory income.
ITAA 97, s 118.20: any proceeds that has been accruing from a property used as a
residential property is required to be treated as an exempt from being subjected to taxation.
However, for the claiming of such exemption, the property should have been used as a resident
and should not have been rented out.
In case the property has been used as a rental property for a part of the time it has been
held, the rent thus incurred is required to be treated as an assessable income.
Impact
Cost Base = $(500000 – 25000) = $ 475000
Cost Proceed = $(1000000 – 25000) = $ 975000

6TAXATION
CGT gain = $ 500000
CGT gain after discount (div 115) = $(50% * 500000) = $250000
$ 250000 – needs to be treated as capital gain.
Amount received as rent needs to be treated assessable income. However, the exemption
of capital gain will not be included as it has been rented out by the taxpayer.
9. Sale of Personal Things
Issue
The tax implications of the given transactions.
Reason
ITAA 97, subdiv 108C: any capital gain that has been accrued from the sale of an item
held for personal use if the acquisition cost is above $10000.
Impact
$11000 – needs to be treated as a capital gain.
10. Work Expenses
Issue
The tax implications of the given transactions.
Reason
ITAA 97, s 8.1: any outgoing that has been accrued in the furtherance of the process of
earning income is to be treated as a deduction from the assessable income. In case it has been

7TAXATION
proved that the expense has been accrued from a personal purpose it would not be allowed as a
deduction.
Impact
$4000 – non-deductible as incurred from personal purpose.
$3000 - non-deductible as incurred from personal purpose.
$1000 - non-deductible as incurred from personal purpose.
$5000 - non-deductible as incurred from personal purpose.
11. Car Expenses
Issue
The tax implications of the given transactions.
Reason
FBTAA, s 7: car FBT accrues when a car is provided to an employee by an employer.
Impact
[0.2 * car BV * (no. of days in the taxation year when the car has been provided / no. of
days in the year)] – employee’s contribution
= C x (100 % - BP)]
= 10000 * 50%
= 5000.
Particulars Amount Amount

8TAXATION
Salary 80000
entertatinment Allowance 10000
Unused leave 5000
Annual leave 5000
Iphone 1000
Gift 0 Disregarded -
1000
Lumpsum 10000
Yearly 3000
Flyer Points 0 Disregarded -
1500
Bank Interest 500
Dividends 14000
Marriage fees 600
Bingo wining 0 Disregarded- 1000
Bingo wining 50000
Trifecta 30000
superannuation 50000
Deductions
Groomimg 0 4000 Non-deductible
Hairstyl
e
0 3000 Non-deductible
Make
up
0 1000 Non-deductible
suit 0 5000 Non-deductible
Total Taxable Income 259100
Capital Gain
Lumpsum recepit 10000
Sale of house 250000
Personal assets 11000
Total Taxable Income 530100
Medicare Levy 10602
Surchagre 6626.25
Tax payable 211641.
6
Tax 228869.
8
PAYG 24000
Franking credits 3267
NET TAX PAYABLE 201602.
8

9TAXATION

10TAXATION
Reference
The Income Tax Assessment Act 1997 (Cth)
The Income Tax Assessment Act 1936 (Cth)