Taxation and Law Assessment 2: Income, Deductions, Tax and Offsets

This document provides a detailed solution to a Taxation and Law assignment, focusing on the calculation of income tax, deductions, offsets, and levies. It covers various aspects of employment-related income, including assessable and non-assessable items, and deductible expenses such as superannuation contributions and motor vehicle costs. The solution also addresses dividend and investment income, including franking credits and capital gains, as well as rental property income and expenses. Relevant legislation and income tax rulings are cited throughout to support the calculations and explanations. The final section reconciles income, deductions, and offsets to determine the net tax payable, considering factors like Medicare Levy and HECS repayments. Desklib offers a wealth of similar solved assignments and study resources for students.

Taxation and law -
Assessment 2

Table of Contents
Employment related income........................................................................................................3
Dividend and Investment.............................................................................................................7
Rental Property............................................................................................................................7
Tax payable, offsets and levies....................................................................................................8

Employment related income
Income
Item Assessable/Not
Assessable
Calculatio
n
Assessable
amount/Tax
credit
Legislation/Case
Law/Income Tax
Rulings
Gross Payment Assessable 110000 110000 Under section 10-5, of
income tax assessment
act, 1997
Tax Withheld other
Assessable
26500 26500 Under section 6-20, of
income tax assessment
act, 1997
Telephone payment (not related to phone calls
made to Mindfulness Pty Ltd.
other
Assessable
income
1600-
1600*70/10
0
480 Under section 6-23, of
income tax assessment
act, 1997
Short Course through class Bento expenses of
Bronte paid by its company on behalf of
employee
other Assessable income 750 Under section 6-23, of
income tax assessment
act, 1997
Income reveived in the event of serious illness Non assessable
income
3000*25% 750 Under section 36-10, of
income tax assessment
act, 1977
Total Assessable amount 138480
Deductions
Item Deductable/
Non
deductable
Calculatio
n
Amount
claimed
Legislation/Case
Law/Income Tax
Rulings
Additional supperannuation contribution (non-
concessional)
Deductable 2000 Under section
10(13) of income
tax assessment act
1997
Motor vechile running cost deduction based on actual cost: (70% related to work) Section 40-880 of
the Income tax
assessment act,
1977

Fuel Deductable 1690*70/10
0
1183 Section 40-880 of
the Income tax
assessment act,
1977
Servicing: Deductable 1200*70/10
0
840.00 Section 40-880 of
the Income tax
assessment act,
1977
Registration Deductable 960*70/100 672.00 Section 40-880 of
the Income tax
assessment act,
1977
Insurance Deductable 1500*70/10
0
1050.00 Section 40-880 of
the Income tax
assessment act,
1977
Parking fees Deductable 330*70/100 231.00 Section 40-880 of
the Income tax
assessment act,
1977

Donation to red cross Deductable 350 Section 40-880 of
the Income tax
assessment act,
1977
Donation to Go Fund Me to cover expenses for
parents of a lost child
Deductable 200 Section 40-880 of
the Income tax
assessment act,
1977
Premium on life insurance policy of policy* Deductable 3000*75% 2250 Section 40-880 of
the Income tax
assessment act,
1977
Deduction for replacement of income in the
event of a serious illness
Deductable 3000*25% 750 Section 40-880 of
the Income tax
assessment act,
1977
Deduction on capital cost (vechile purchase and
she claim running cost deduction using actual
cost method)
Deductable 38000 Section 40-880 of
the Income tax
assessment act,
1977

Deduction on membership to small business
association of Austrlia
Deductable 97 Section 40-880 of
the Income tax
assessment act,
1977
Total Deductions #######
Note* Because of lack of information clarity, it is assumed that the payment of life insurance policy of 2250 i.e., 70% of 3000
is made by Bronte within the year 2021.
 Note* Because of lack of information clarity, it is assumed that the payment of life
insurance policy of 2250 i.e., 70% of 3000 is made by Bronte within the year 2021.
 As per Section 6-20, of income tax assessment act 1977, the gross salary received by an
individual from its employer is taxable income.
 As per section 6-23, of income tax assessment act 1977, the expenses of employees paid
by the employer directly to the government is considered as taxable income. The
expenses paid by employer on behalf of employee but it is related to personal work of
employee that is considered as taxable income.
 As per section 36-10, the income is taxable for Bronte because it is paid by the employer
on behalf of the employee but Bronte can claim deduction against it.
 As per section 10(13) of ITAA, 1977 the non-concessional contribution of additional
superannuation of employees is tax deductible.
 Section 40 -880 of ITAA, 1977 states the list of deductions Bronte can claim over the
expenses made by employees during the year. For example, donations made to red Cross
are allowed for tax deduction as per this section.

Dividend and Investment
Investment Income (excluding Capital gains)
Item Assessable/Not
Assessable
Amount
Assessable
Tax Credit Legislation/Case
Law/Income Tax
Rulings
Fully franked dividend received from
own business (Mindfulness Pty Ltd)
Assessable 15000/70*10
0 = 21428.57
6428.57 division 2020 of
ITAA 1997
Dividend received from NAB Assessable
dividend
650 Section 45B of ITAA
Dividend received from CBA Assessable
dividend
850 Section 45B of ITAA
Dividend received from WOW Assessable
dividend
300 Section 45B of ITAA
Total 23228.6 6428.57
Investment Deductions
Item Deductible/
Non
Deductible
Deductible
Amount
Legislation/Case
Law/Income Tax
Rulings
Franking credit available on fully
franked dividend
deductible 6428.57 Division 207
Total 16800
Capital Gain
Item Assessable/Not
assessable
Calculation Legislation/Case
Law/Income Tax
Rulings
Gain through reinvestment of dividend
in NAB
Assessable 650 Subdivision 130-A of ITAA 1997
Gain through reinvestment of dividend
in CBA
Assessable 850 Subdivision 130-A of ITAA 1997
Gain/Loss 1500
Proceeds from the sale of share Assessable 1900*2.57 =
4883
Section 104.10 of ITAA 1997
Less: cost incurred for acquiring -4807
Less: brokerage fees paid -110
Gain/Loss -34
Taxable Capital Gain/Carry Forward Loss 1466
Rental Property
Item Amoun
t
Amt
assessable/deductibl
e
Calculation Legislation/Case Law/Income Tax
Rulings

Rental
income
4070 Amt assessable 370 * 11 weeks (from 8th April to 30th June 2021)
Total Income 4070
Rental expenses deduction:
Council rate 1200 Deductible Under Section 8-1 of the ITAA 1997
Interest on
loan
1000 Deductible Under Section 8-1 of the ITAA 1997 and
Taxation Ruling 2004/4
Depreciation
on property
166 Deductible (100000+350+3000+529)
18.75% for 31 years
Under Section 8-1 of the ITAA 1997 and
Taxation Ruling 2004/4
Council water
rates
230 Deductible Under Section 8-1 of the ITAA 1997 and
Taxation Ruling 2004/4
Body
corporate fees
545 Deductible Under Section 8-1 of the ITAA 1997 and
Taxation Ruling 2004/4
Insurance 1500 Deductible Under Section 8-1 of the ITAA 1997 and
Taxation Ruling 2004/4
Establishmen
t fees
595 Deductible Under Section 8-1 of the ITAA 1997 and
Taxation Ruling 2004/4
31
Total Expenses 5236
Rental Profit/Loss -1166
 On the basis of calculation, it is identified that Brontee has incurr rental loss in the year 2020/2021 which they can
not claim or neither carry for in the next year because the the rental income is received from its relative.
 In the section 8-1 of the ITAA 1997, there is a list of expenses associated with the maintenance of house property
that can be claimed against the rental income received through renting out this property.
Tax payable, offsets and levies
TAX PAYABLE/RECONCILIATION
Total employment
related income
138480 From the employment related income sheet
Total employment
deductions
47623.00 From the employment related income sheet
Investment income
(excluding CGT)
23228.57 From the dividends and investments sheet
Investment
deductions
6428.57 From the dividends and investments sheet
Capital gain 1466 From the dividends and investments sheet
Rental Property
profit/loss
0 From the rental property sheet
Taxable Income 217226.14 (hint: the taxable income amount needs to agree to the taxable income on your actual tax
return as well)
Basic Tax 68419.15 (hint: you do not need to manually calculate the tax and offsets. You can use the
amounts calculated by handitax and enter these amounts into the correct cells)
Medicare Levy
@2% on
4344.5228

Medicare Levy
Surcharge
2715.3267
5
HECS repayment 300
Rebates 0
Tax Withheld 26500
Tax Offsets
(Franking credits)
6428.57
NET TAX
PAYABLE
$260,077 (Hint: This amount should agree to your actual tax return)
Spouse Income
Enter type of
income
Enter amount of income
Annual salary
income
750000
Dividend received
from own
company
15000
Total Income $765,000
Basic tax liability
0-18200 0.00 0
18201 - 45000 19% 5092
45001-120000 32.50% 24375
120001-180000 37% 22200
180001-217227 45% 16752.15
68419.15