Australian Tax Law Solution

Particulars	Amount
Sales consideration	$ 705000
Less:	Cost of acquistion(market vaue)	$475000
as stamp duty value will be considered
Capital Gain	$ 230000

Total income

48462

Australian Income	29762
(510+21000+6252+2000)
Foreign Income	19250
(2700+3900+12650)
Gross total income	49012
Less:	Deduction:	250
Less:	Deduction:	300

Working Notes: -

• Income which are exempt will not be included for computing total income.
• Exempt income are those income Which are not included in determination of income under relevant head /concerned head.
• Any gift received by partner from partnership is taxable.
• Any benefit arising due to business or profession taxable.
• But here as partner superannuation and gifts from partnership, so it is taxable under the head
• Partnership loss can be set off against any head but cannot be set off against salary head.

For the year: 2014/15

= 93400 -80000 =13400 Business Income.

= Partnership Loss can be set off against business income , but cannot be set off against salary income = 13400 -21800 = ( 8400)

= 8400 cannot be set off against exempt incpme.

= Taxable income for 2014/15 is 4000 only .

= exempt income cannot be included in total income.

= Carry forward of loss = (8400)

= Loss can be carry forward for next 8 assessment years.

For the year: 2015/16

= 126000- 129000 = As business income is NIL in CURENT YEAR.

= carry forward loss can be set off against partnership profit in current year.

= 14900- 8400 = 6500

= Total taxable income in this year = 6500 +11000 = 17500.

For the year: 2016/17

= 133400 -119200 = 14200

= Loss of Partnership of 5600 set off against 14200

= 14200- 5600 = 8600

= Total income for 2016/17 = 8600 + 8000 = 16600.

= There is no carry forward loss in this year.

QUESTION 12.13.300

Working note 1: calculation of rental income:

• Agent commission is deductible for getting the tenant.
• Council rate are allowed on payment basis i.e means if paid it will allowed. And if O/s then not allowed. Assume paid = allowed.
• Insurance charges is not allowed as 30% standard deduction is already allowed.
• Mortgage repayment of his rental property = $ 20000- 12100 = 7900
• Principal mortgage repayment of 12100 is not allowed as deduction.
• While interest on Mortgage repayment of 7900 is allowed as deduction.

Income from rental property:

Calculation of interest Amount:

= Interest in term deposit liable for tax, if Interest exceeds basic exemption limit of interest.

= Bank is liable to deduct Tax.

= Interest on saving is liable for tax, but deduction allowed.

= bank charges related to to term deposit are deductible.

= Interest charges on line of credit not deductible .

Calculation of income from other sources (interest income)

Calculation of dividend income:

= Calculation of Maximum franking credit:-

= Amount of frankable distribution * ( 1 /Applicable gross up rate)

= Applicable gross up rate : 100% - 30% /30% = 70% /30%

= 233.33%

= 900 * (1/233.33%)

= 386.1

= Australian resident taxpayer can claim tax offset for franking attached to distribution

= 2100 – 386.1 = 1713.9

Calculation of capital gain:

As all asstes rae held for more than 1 years they are liable for capital gain:

= Capital gain are chargeable at the rate of 10%

For quality shares =

For oil painting – Oil painting is not considered as capital asset , as the jewellery , Drawing, painting, Sculpture, Archaeological collection or any other WORK of art not considered as capital assets. As they are not capital asset no, capital gain will be charged.

For Crummy shares:

Net capital gain = 6600 -1500 = 5100

Taxable income = 4890 + 17510 +1713.9 +5100 = 29213.9

QUESTION 16.9.21

Working notes 1:

• Employers can generally claim income tax deduction for the cost of providing benefits and for the FBT they pay.
• FBT paid – Deduction allowed.
• Entertainment of Employees (cost) – 5380 dedcustion allowed.
• Entertainment of client – Not allowed.

Working notes 2:

Decline in value- taxpayers claiming this deduction may adopt safe harbours for the commissioner rates of effective life, oe self assess the life of the asset, deduction allowed.

Working notes 3:

Annual leave – if actually paid by the Employer ( but not on accruing liabilities)

Working notes 4:

Rent paid or market value whichever is lower

= 137000 or 65000 whichever is lower = 65000

Working notes 5:

= Emloyees superannuation contribution not allowed

= Employer ( personal) Superannuation for ricky allowed for deduction.

= Superannuation guarantee charges paid not allowed.

= other overheads paid allowed as deduction.

= payroll tax paid = Allowed as deduction As it is indirect tax.

= PAYG will not allowed as deduction as it is direct tax .

QUESTION 1.1.5

Working notes:

As deduction will be allowed for independent Minor children only.

And deduction will be only for Maximum 2 children.

So Here Total income = 23000 +29000 = 52000$

QUESTION 9.5.29

Deduction will be allowed on pension income if it is generated in the country in which it is earned, as here pension income is foreign income , it will be taxable in hands of Leonard,

And for Unfranked dividend Tax will be chargeable:

Leonard taxable income = 15000 + 48000 = 63000

Tax payable = 63000 * Effective rate of tax.

QUESTION 10.5.3

Lumpsum superannuation:

Least of following allowed as deduction:

Superannuation received = 310000

Wages last withdrawn * 15/26 = 85000 * 15/26 = 49038

= 310000 – 49038 = 26092

Taxable income = 260962

Nate tax payable = 28170 * 260962/310000 = 23713.86

= 23713.86 – 22110 = 1603.86

QUESTION 18.10.15

= 7800 / 5 = 1560 depreciation value of equipment block.

= Depreciation of other block = 1700

Total depreciation value = 1700 + 1560 = 3260.