TLAW303 Non-Resident With a Taxable
for the year ended 30 June 2018:
(a) An Australian individual who is a resident with a taxable income of $15,000.
(b) ) An Australian individual who is a non-resident with a taxable income of $15,000.
(c) ) An Australian company with a taxable income of $15,000.
(d) ) An Australian individual who is a resident with a taxable income of $155,000.
(e) ) An Australian individual who is a non-resident with a taxable income of $155,000.
(f) An Australian company with a taxable income of $155,000.
(g) ) An Australian individual who is a resident with a taxable income of $255,000.
(h) ) An Australian individual who is a non-resident with a taxable income of $255,000.
(i) An Australian company with a taxable income of $255,000.
(j) An Australian company qualified as a “small business entity” with a taxable income of $100.
Question 2
Calculate the Medicare levy and Medicare levy surcharge payable for the year ended 30 June 2018 for the following taxpayers:
(a) An Australian resident, aged 25 years, with a taxable income of $18,000.
(b) An Australian resident, eligible for a Seniors tax offset, with a taxable income of $32,000.
(c) An Australian resident, aged 45 years, with a taxable income of $45,000.
(d) A taxpayer who is not a resident for tax purposes, with a taxable income of $45,000.
(e) ) An Australian company with a taxable income of $2,500,000.
(f) An Australian resident, aged 45 years, with a taxable income of $110,000, holding private health insurance.
(g) An Australian resident, aged 45 years, with a taxable income of $110,000, and no private health insurance.
(h) An Australian resident with a taxable income of $150,000, holding private health insurance for 90 days of the income year.
(i) Victor and his wife are Australian residents. Victor has a taxable income of $110,000 and his wife Jackie a taxable income of $75,000. They have no children and no private health insurance.
(j) An Australian couple have four children and no private hospital health insurance. What would be the family’s minimum Medicare levy surcharge threshold
Question 3
You client, Rob, has the following income and deductions for the financial year ended 30 June 2018: salary, $32,000; bank interest received, $150; and allowable deductions for special work clothing, $450. Rob’s employer has deducted $2600 as PAYG tax from his salary during the year. Calculate Rob’s income tax payable or refundable.
Question 4
During the current income year Rafael, a resident taxpayer, has a gross salary of $68,000 (PAYG tax withheld $15,100), a fully franked dividend of $2,000, an unfranked dividend of $1,000, and a 60% franked dividend of $900.There are no deductions. Calculate Rafael’s taxable income and tax payable.
Answer:
The receipt of salary by Frida would be considered as assessable income and would be considered for assessment under section 6-5 of the ITAA 1997.
Answer to B:
The annual leave having the value of $6,000 would be considered as income since it is in accordance with the ordinary concepts of section 6-5 of the ITAA 1997 and would be assessable as ordinary income.
Answer to C:
The court of law in Moore v Griffiths (1972) stated that a mere windfall hardly has the characteristics of income (Barkoczy, 2014). Winnings of $3500 by Frida from the share of Powerball syndicate is the mere windfall gain and cannot be considered as assessable income.
Answer to D:
The mere prize winning are not assessable however it attracts tax liability if there prevails a sufficient association with the taxpayer’s income producing activities (Brokelind, 2014). As held in FCT v Kelly money received for being the best player was considered for assessment. Similar amount received for being the best employee by Frida would be considered for taxation purpose.
Answer to E:
In Cooke & Sherden v FCT the amount of free overseas holi
day provided as the part of sales incentives cannot be considered as income (Coleman & Sadiq, 2013). Similarly for Frida the free overseas holiday was the reward for attaining the sales incentives and cannot be considered as assessable income.
Answer to F:
Any form of gains which is the mere gift does not possess the character of income. Similarly, the wedding gift received by Frida from her colleagues would not be considered as assessable income.
Answer to G:
Under section 23 L of the ITAA 1936 an employer providing fringe benefit to the employee would be considered as the non-assessable income (Grange et al., 2014). Similarly the reimbursement of self-education cost to Frida would not be considered as assessable income under section 23 L of the ITAA 1936.
Answer to H:
The court of law in Dixon v FCT stated that periodic receipts is considered as assessable income under section 6-5 of the ITAA 1997 (James, 2014). The rental income received for leasing the apartment would be included for assessment purpose.
Answer to I:
Under section 6-5 of the ITAA 1997 the reimbursement cost received from the tenant would be included into the assessable income for Samantha since it constituted an income.
Answer to J:
The court of law in London Australia Investment Co v FCT (1997) stated that the receipt of insurance payment would be included in to the taxable income of the taxpayer (Jover-Ledesma, 2014). Therefore the insurance payment received by Samantha would be included into the taxable income for assessment purpose under section 6-5 of the ITAA 1997.Answer to question 7:
|
In the books of Mick | ||
|
For the Year Ended 2016-17 | ||
|
Particulars |
Amount ($) |
Amount ($) |
|
Assessable Income |
|
|
|
Australian sourced dividend income: |
|
|
|
Dividend from ABC Ltd |
|
|
|
Fully franked (net) |
3920 |
|
|
Gross up for franking credits (700 x 30/70) |
1680 |
5600 |
|
Dividend from DEF Ltd |
|
|
|
Unfranked Dividend |
|
1800 |
|
Dividend from GHI Ltd |
|
|
|
Fully franked (net) |
2450 |
|
|
Gross up for franking credits (700 x 30/70) |
1050 |
3500 |
|
Dividend from MNO Ltd |
|
|
|
Unfranked Dividend |
|
1400 |
|
Dividend from PQR Ltd |
|
700 |
|
Total Assessable Income |
|
13000 |
|
Tax on Taxable Income |
|
Nil |
|
Less: Franking Credit |
|
2730 |
|
Net tax refundable |
|
2730 |
Answer to A:
Under section 8-1 of the ITAA 1997 a person is allowed to claim an allowable deductions from their taxable income relating to any outgoings that is occurred at the time of producing the taxable income (Kenny, 2013). An individual is also allowed to claim deductions for expenses that are occurred necessarily in executing the business activities with the objective of gaining taxable income. The electricity expenses incurred by Ernie would be allowed as deductions under section 8-1 of the ITAA 1997 since it is necessarily occurred in executing the business activities of the taxpayer.
Answer B:
Under section 8-1 (2) of the ITAA 1997 an individual is not allowed to claim deductions for expenses that are private or domestic in nature since they are not incurred in producing taxable income (Morgan et al., 2013). The electricity expense incurred by Ian is a non-allowable deductions under negative limbs of section 8-1 (2) of the ITAA 1997.
Answer to C:
According to Australian Taxation Office an individual is allowed to claim deductions for assets that are helpful in earning taxable income. A person can claim some or the entire amount. The purchase of computer by Janice is for earning taxable income and would be allowed as deductions.
Answer to D:
According to Australian Taxation Office an individual is allowed to claim deductions for mobile phone, internet and home phone up to the extent that such expenses are incurred in earning the taxable income and have sufficient records to support such claims (Sadiq et al., 2014). Fiona would be able to claim 60% deductions from the bill of $750 as it was related to earning taxable income and have also maintained sufficient record to support the claim.
Answer to E:
As per section 8-1 (2) (b) of the ITAA 1997 any expenses of private or domestic in nature is non-deductions since it fails to meet the positive limbs criteria and non-deductible under second negative limb. As held in Lunney v FCT the necessary aspects of expenses is insufficient in being considered as the vital prerequisite in derivation of taxable income (Woellner, 2013). Stan would not be allowed to claim deductions for a sum of $200 relating to home cleaning as it is a private expenditure and non-deductible under second negative limb of section 8-1 (2) (b) of the ITAA 1997.
Answer to F:
The court of law in FCT v Lodge denied the taxpayer with deductions for child care expenditure as the expenditure was neither relevant nor incidental in the derivation of taxable income (Woellner, 2013). Rita would not be allowed to claim deductions for child care expenditure as expenditure is neither relevant nor incidental in the derivation of taxable income.
Answer to G:
The taxation commissioner in FCT v Lunney explains that an individual is not allowed to claim deductions for travel between home and an individual’s place of work as it is private in nature. Similarly, Tara would not be allowed to deduction for the yearly train ticket as it is private in nature.
Answer to H:
As per taxation ruling of TR 93/30 a person is allowed to claim deductions for home office where a relevant proportion of both forms of expenses are allowed as deductions namely the occupancy expenses and running expenditure (Jover-Ledesma, 2014). Nicole would not be allowed to claim deductions for $6,000 as the expenses was mainly for convenience and not as compulsion. The expenses was neither relevant nor incidental in generating Nicole taxable income.
Answer to I:
Self-education expenditure is deductible only when it is occurred in maintaining or increasing the taxpayer’s skills in the occupation in which he or she is employed, especially when it increases the earning capacity of the taxpayer. The self-education expenditure incurred by Stu in studying law would be allowed as deductions since it is associated to taxpayer occupation and is aimed at increasing earning capacity as well.
Answer to J:
The taxation ruling of TR 98/9 explains that an individual is not allowed to claim expenditure for self-education in which the taxpayer is not presently employed (Sadiq et al., 2014). Ron would not be allowed to claim deduction since the expenses does not hold any nexus with his employment and course undertaken.
Answer to question 9:
Answer to A:
As per taxation ruling of TR 93/30 a person is allowed to claim deductions for home office where a relevant proportion of both forms of expenses are allowed as deductions namely the occupancy expenses and running expenditure (Kenny, 2013). Stefan would be allowed to claim 20% of the total rent that is paid per year for his property.
Answer to B:
In Handly v FCT the court denied deductions to taxpayer for interest paid on home loan along with rates and insurance associated to premises. Similarly for Jo she would not be allowed to claim deductions for interest on mortgage, rates and insurance since the house was used only for convenience and not as compulsion.
Answer to C:
The court of law in Swinford v FCT allowed to taxpayer to claim an allowable deductions relating to rent paid for the portion of home since it was dedicated for business purpose (Sadiq et al., 2014). Annice would be allowed to claim deduction under section 8-1 of the ITAA 1997, for the portion of room in her apartment since it was the income producing premises.
Answer to D:
Don would be allowed to claim deductions for expenses incurred on mortgage interest and rates as well as the carpet and electricity costs since it was the only place where Don carried out his writing activities. The taxpayer would be able to claim deduction under section 8-1 of the ITAA 1997 for the portion of premises used for producing income.
Answer to E:
According to ATO an individual is allowed to claim deductions relating to the costs incurred in establishing or ending up a business this includes business establishment costs as well (James, 2014). Russell would be able to claim cost incurred in purchasing and establishing the shelf company under section 8-1 of the ITAA 1997.
Answer to F:
The cost incurred by Cherene is an allowable deductions under section 8-1 of the ITAA 1997 as it is incurred in establishing an income producing activity.
Answer to G:
In Magna Alloys & Research Pty Ltd v FCT 1980 the company was allowed to claim deductions for legal expenditure. Similarly for Mack the legal expenditure incurred in winding up the business would be considered as allowable deductions under section 8-1 of the ITAA 1997.
Answer to H:
Expenses that are preliminary to the beginning of income generating business activity is not allowed as deductions under section 8-1 of the ITAA 1997 (James, 2014). Referring to Softwood Pulp and Paper v FCT Wilf would not be allowed to claim deductions under section 8-1 of the ITAA 1997 for the feasibility expenses as they are preliminary to income producing activity.
Answer to I:
An individual is allowed to claim deductions relating to travel during the course of work. Janelle occurred the travelling expenditure relating to work purpose and under section 8-1 of the ITAA 1997 he would be allowed to claim deductions since she has retained the written records in the form of vouchers.
Answer to J:
As per ATO for a person to claim deductions an individual is required to keep the written evidence to substantiate their costs. Furthermore a person is not allowed to claim deductions for travel and accommodations if a person receives the travel allowance. Similarly Shaun would not be able to claim deductions as he failed to retain the written record and no deductions is allowed for accommodation and meals.
Answer to question 10:
|
In the books of Penni | ||
|
For the Year Ended 2016-17 | ||
|
Particulars |
Amount ($) |
Amount ($) |
|
Assessable Income |
|
|
|
Gross Salary |
|
75000 |
|
Car Allowance |
|
3000 |
|
Total Assessable Income |
|
78000 |
|
Allowable Deductions |
|
|
|
Car Expenses 44% of business use |
|
3212 |
|
Total Allowable Deductions |
|
3212 |
|
Total Taxable Income |
|
74788 |
|
Tax on Taxable Income |
|
15,853 |
|
Medicare Levy |
|
1495.76 |
|
Total Tax Payable |
|
17,349 |
Bibliography:
Barkoczy, S. (2014) Foundations of taxation law.
Brokelind, C. (2014) Principles of law: function, status and impact in EU tax law.
Coleman, C., & Sadiq, K. (2013) Principles of taxation law.
Grange, J., Jover-Ledesma, G., & Maydew, G. (2014) principles of business taxation.
James, M. (2014) Taxation of small businesses.
Jover-Ledesma, G. (2014). Principles of business taxation 2015. [Place of publication not identified]: Cch Incorporated.
Kenny, P. (2013). Australian tax Chatswood, N.S.W.: LexisNexis Butterworths.
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., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., & Ting, A. (2014) Principles of taxation law.
Woellner, R. (2013). Australian taxation law select 2013. North Ryde, N.S.W.: CCH Australia.
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