Taxation Law Assignment - Individual Tax Returns Analysis

This taxation assignment, prepared by a student, delves into the intricacies of individual tax returns. It meticulously analyzes various aspects, including work-related income and deductions, Australian-sourced dividend income, rental property deductions, and capital gains. The assignment involves preparing work papers, calculating taxable income, and determining tax payable. It includes a detailed comparison between manual calculations and tax software outputs, highlighting discrepancies due to differences in taxable income and tax offsets. Furthermore, the assignment provides a letter of advice to a client regarding non-deductible expenses such as stamp duty and capital expenditure. It also explores recent changes in federal budget proposals affecting tax deductions and provides an overview of necessary documentation for tax liability determination. The assignment concludes with a journal entry example related to accrued wages and its non-deductibility under relevant taxation rulings.

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

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Table of Contents
Answer to question A:................................................................................................................2
Answer to B:..............................................................................................................................3
Answer C:...................................................................................................................................3
Answer to D:..............................................................................................................................4
Answer to E:...............................................................................................................................5
Answer to F:...............................................................................................................................5
Answer to G:..............................................................................................................................6
Reference List:...........................................................................................................................7

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Answer to question A:
Work Papers
Particulars Amount ($) Amount ($)
Work Related Income and Deductions
Employment Income
Gross Salary 44000
Tool Allowance 2360
Superannuation gross payment
Lump Sum - Taxable Component 27000
Australian Sourced Dividend Income
Fully Franked (Net) 2800
Franking Credits 1200 4000
Partially Franked Dividends From BHP
60% Partially Franked Dividend 2100
Franking Credits 540 2640
Income from Wielding activities 29000
Gross Rental Income from Investment Property 8000
Redundancy payment Nil
Capital Gains 0
Assessable Income 117000
Car Deductions
Nissan Nirvara 6670
Depreciation 4920
Holder Commodore 330
Total Car Deductions 11920
Rental Property Deductions
Council Rates 1760
Land lord insurance 960
Car Lease expenses 0
Agent management fees 1056
Capital Allowance Depreciation 2660
Interest on loan 6450
Total Car deductions 12886
Work Related Deductions
Three Tools 1159
Union Fees 680
Overalls and safety boots 400
Income Protection Insurance 1600
Donation 170

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Red Nose Purchase 6
Bus Return Ticket to settle property 120
Total work related deductions 4135
Wielding business related deductions
Cost of materials 1050
Safety gloves and glasses 300
Mobile Calls 864
Sun screen cream 77
Public liability insurance 1500
Total Allowable Business deduction 3791
Total Deductions 32732
Total taxable Income 84268
Tax on taxable Income 18934
Add: Medicare levy Surcharge @2% 1685.36
Less: Franking Credits 1740
Less: PayG on Salary 6300
Less: PAYG on Superannuation 3500
Total tax Payable 9079.36
Answer to B:
Refer to PDF
Answer C:
The difference between the difference in the answer in the spreadsheet and the answer
in the Handi tax file is primarily because of the differences in the taxable income and the tax
free part. The tax payable on the taxable income stands 36,852. Furthermore, a tax offsets has
been provided with lump sum offset standing $1,890. Additional differences have been
noticed with the Medicare levy surcharge as the rate of Medicare surcharge stood 1.00%. The
differences may amount from the adjusted sum that is not included into the return. The
differences in the tax amount is due to the other amounts that are withheld voluntarily.
Additionally, the tax withheld from the salary and wage income contributed to the difference
between the tax that was computed manually.

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Answer to D:
Letter of Advise
To Mr James Brown
Date: 27/10/2018
From: Tax Consultant
Dear James
We would like draw your kind attention towards our letter of advice that would aim to
reflect your tax obligation towards ATO requirements. While assessing your transactions
relating to payments it is found that you incurred an expense towards stamp duty for your
rental property. According to the ATO an individual taxpayer is not allowed to claim
deduction for the stamp duty that is on their rental property (Morgan et al., 2013). Similarly,
your expense on stamp duty is a non-deductible expense because ATO count it as the
acquisition cost that would form the part of your cost base.
As per the “taxation ruling of 97/23” an individual taxpayer under “section 25-10 of
the ITAA 1997” is not allowed to claim deduction for the repairs that are of substantial nature
(Jover-Ledesma, 2014). You reported expenses for the purchase of materials relating to the
repairs and painting your investment property. The expenses can be treated as capital
expenditure which is non-deductible however it will be added to the cost base of your
property.
We anticipate that the advice provided to you would help in meeting the tax
obligations of ATO and further reporting criteria involved in filing the tax return.
Thank You

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Answer to E:
In the recent changes proposed by the federal budget of 2018 the taxpayers are now
allowed to claim deduction for the cost of managing tax affairs in managing their own tax
return. The taxpayer is now allowed claim deduction for the cost of preparing and lodging the
tax return and activity statements (Ato.gov, 2018). The taxpayer under the federal budget of
2018 are allowed to obtain a valuation for the deductible gift or donation of the property and
deducting the conservative covenant (Woellner, 2013). The federal government in the budget
announced that a temporary budget repair levy of 2% has finished and not any more
applicable for the 2017-18.
The government in it is budget stated that if the taxpayer receives any unfunded or
untaxed component in their income stream then the 10% tax offset would not be applied to
the untaxed source benefit that are above the $100,000 cap (Ato.gov, 2018). The government
in its budget stated that the taxpayer would not be able to claim any deduction relating to the
cost of travel that they occur in respect of the residential rental property (Sadiq et al., 2014).
The current proposal may prohibit James in the future to claim any rental travel deduction
that would be incurred for the residential rental property. Furthermore, James can manage its
cost of tax affairs as the expenses incurred for the same is deductible.
Answer to F:
The tables provide the summary of the information sources however to determine the tax
liability there are certain documents that needs to be checked. This includes the following;
a. The abstract of the bank statements
b. Proof relating to the investments and the salary certificate that is issued by the
employer
c. Proof of investment in the property (Krever, 2013).

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d. Written tax file number including the personal details or any form of refund that is
paid directly into the financial bank account.
e. The total amount of supplement income or loss.
Answer to G:
Journal Entry
Date Particulars Amount ($) Amount ($)
30-06-2018 Wages Expenses A/c 600
To Wages Payable A/C 600
(To accrued staff wages)
According to the “taxation ruling of TR 97/7” for a taxpayer to qualify for the
deduction under “section 8-1 of ITAA 1997” the loss or outgoing should be incurred (Kenny,
2013). The court of law in “W Nevill & Company Ltd v FC of T (1937)” a loss or outgoings
might be incurred within the meaning of the “section 8-1” even though no money has been
actually paid (Sadiq & Coleman, 2013). Therefore, as per “section 8-1” the accrued wages
for James here is non-deductible.

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Reference List:
Cost of managing tax affairs. (2018). Retrieved from
https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/
other-deductions/cost-of-managing-tax-affairs/
Grange, J., Jover-Ledesma, G., & Maydew, G. 2014 principles of business taxation.
Jover-Ledesma, G. (2014). Principles of business taxation 2015. [Place of publication not
identified]: Cch Incorporated.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. (2013). Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters.
Legal Database. (2018). Retrieved from https://www.ato.gov.au/law/view/document?
Docid=TXR/TR977/NAT/ATO/00001
Morgan, A., Mortimer, C., & Pinto, D. (2013). A practical introduction to Australian
taxation law. North Ryde [N.S.W.]: CCH Australia.
Sadiq, K., & Coleman, C. (2013). Principles of taxation law 2013. Sydney, N.S.W.: Lawbook
Co./Thomson Reuters.
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., & Ting,
A. Principles of taxation law 2014.
Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.