HA3042 Taxation Law Tutorial Questions Assignment Answer
The person who is earning income and liable to pay tax return has to calculate income tax (Cerioni, 2015). This is regarded as direct tax which should be paid by same individual whose has calculated income. The given report is based upon Australian tax law which has to compliance with it in every situation. The tax payer includes partnership business, trust, company, individual and many more. According to ITAA 1997, various provision are made for compliance of income tax as well as computing taxable income and deductible expenses are explained in this report.
Provision to deduct expenditure made for repair (Case 1)
According to ruling made under 97/23, if any expenditure is made by payer of tax for earning business to include such expenditure then it will be liable for reduction from income at time of calculating income. As per ITAA 1997, it provides provision to treat expenditure made for maintenance as well as repairing of assets during conducting of enterprise.
Furnaces Pty Limited is regarded as enterprise as well as using chimney at organisation (Kane, 2015). In this regard, they have received notice for closing of enterprise if they does not possess new chimney. Here, business has brought new chimney as well as replaced with old one. The business is claiming expenditure for replacing old assets as it is regarded as revenue expenditure in order to compute under taxable income as per ITAA of 1977.
Analysis of provision according to ITAA 1997/36
According to provision made under ruling of 97/98, if any assessment is made for expenditure to enhance capital assets that has applied in enterprise which will be regarded as revenue expenditure and allowed for reduction of taxable income at time of calculation. Such type of expenses is divided into two aspects. The first is regarded as demolishing expenditure for old assets as well as second is regarded as purchasing of new property. Here, demolish expenditure will be regarded as revenue nature expenses as well as allowed for reducing in same year. On other side, capital assets is regarded as purchasing cost which will be regarded as capitalised and reduced over time period of depreciation. This will be regarded in case study called Law of Samuel Jones Company vs. IRC, where company purchased fresh capital asset as well as demolished old property. Here, business has claimed for demolished charged which is regarded as revenue expenses along with costing of new asset has capitalised under depreciation over period.
If any business has incurred expensed for repair as well as maintenance for improvising sets of capital or increasing working capacity without altering changes in physical substance and regarded as revenue expenses and liable for deduction from taxable income of enterprise. In case of purchase of fresh asset it will be regarded as capital expenses as well as amortise over life time of property.
The above summarised that as per act of 1977, there are provision made for assessable incomes as well as deductible expenses. Here, Furnaces Pty Limited need to capitalised their expenses which has incurred to buy new assets for enterprise and expenditure incurred for demolishing old assets that will be allowed for deduction in terms of revenue expenses to calculate about income that is taxable. Here, new assets has purchased and liable for depreciation over useful life of such property.
Analysis of provision made for individual payer of tax (Case 2)
The individual payer of tax need to offer all types of their earning that they have earned during financial year to assess according to provision of income tax under 1997 act of income tax (Klenert and et. al., 2015). ITAA focus on providing provision where income comes from salary, capital gain, house property, profession and other sources. The given case study focus on income arise under different heads should be computed according to provision as well as tax should be paid to relevant authorities.
Analysis of case fact
According to given case study, Anushka who is regarded as resident of Australia and liable for taxpayer (Klenert and et. al., 2018 ). She has conducting business as well as performing part time basis job in that place. Also she has earned income from both sources. In addition to this, she has made investment in stock market and receiving dividend income from business where share has brought by him. Here, ITAA 1997, provision will be applicable for computing taxable income of payer of tax.
Analysing provision of franked dividend received by payer of tax
The franked dividend is regarded as income in shareholder hand that has received through shareholding in company. This is taxable in company’s hand as well as paid through company during distribution of dividend. This consists of franked credit that has allowed for deduction to compute taxable income of payer of tax. Franked credit is measured on basis of following:
Dividend received *applicability of tax rate
The given is tax rate provided as per status of income
|Status of Income||Providing of tax rate||Amount of Tax|
|Up to 18200||No requirement of tax||Tax nil|
|18201 to 37000||19 cent over 18200||$3572|
|37001 to 90000||32.50 cent over 37000||$17225|
|90000 to 180000||37 cent over 90000||$27529|
|180001 to above ||45 cent over 180000|
|Total tax needed to be paid ||$48326.00|
Provision of implication as well as tax computation
|Particular||Amount in terms of $|
|Received of salary||81000|
|Tax that has paid through employer ||29000|
|Gross salary ||110000|
|Add: Profit of business||30000|
|Add: Franked dividend gained during financial year||7000|
|Add: Dividend in terms of gross ||3000|
|Add: Unfranked dividend||1200|
|Total income that is taxable||151200|
|Less: All deductions ||5000|
|Total income ||146200|
|Payable tax ||48326|
|less: Gross franked dividend ||3000|
|Net payable tax ||45326|
The above indicates about implication of tax, which has concluded that payer of tax need to calculate about income of taxable under ITAA 1997. The total income which is made by Anushka which is $146200 as well as liability of tax for same is regarded as $48326. Dividend franked credit should be reduced by 300 as well as final liability of payer of tax is $45325.
Analyse of fringe benefit tax (Case 3)
Whenever employer is provided with facility to employee for office use through any charges are made from him then it will be considered as fringe benefit (Martin and Connor, 2017). This is regarded as taxable facility as well as liable for paying tax on such value of facility. If fringe benefit is provided for use of personal for employee then they should be fully taxable as well as charged on employer. According to provision of FBTTA, fringe benefit is regarded as non cash facilities that are provided through employer to their employees as well as not covering under head of wages as well as salary. Therefore, it will be regarded as taxable along with tax to be paid by their employer for such facility.
Facility of lunch provided by employer to employee as well as cost for them was $1000 per head
According to assessment of fringe benefit act of 1986, different are the conditions that should be satisfied for non tax liability under fringe benefits. They are as follows:
- Facility of lunch that has provided by employer to employee does not include facility of alcohol beverage.
- The providing of short lunch is not regarded as taxable fringe benefits
- Cost made by employer is regarded as reasonable and defined under criteria of standard cost.
- The facility of lunch need to be provided at office during office working hours.
- If employer has provide lunch facility at remote areas as well as outside premises of office and if cost incurred for such is lower than $300 then it will be regarded as exemption.
The above indicates about that if employer has provided with benefits of fringe for lunch then it would costing more than $300 then liable for fringe benefits as well as employer need to pay taxes.
Honorarium provided in kind of car worth $500 as well as used 90% for office purpose
The honorarium is provided to individual having professional qualification in order to serve service in particular areas (Melkevik, 2016). This is not regarded as amount of salary as it is known as compensation that is paid to that person who provided all types of services to people. This is income tax part for individual who received it and included in return tax of income. Therefore, spot club has to provide car to that person who has made full disclosure with purpose of tax as well as payer of tax need to provide proper declaration for amount of honorarium and liable for income tax from perspective of income tax.
Therefore, it has found that honorarium is not regarded as taxable income.
Christmas gift provided with value of $60 to employee
The gifts are provided by employer to employee for motivating them as well as rewarding for work performance in business and on other side, if any gift is not exceeding $300 value then it will be considered as minor fringe benefit (Panayi, Haslehner and Traversa, 2020). According to ITAA of 1997, it is not taxable under any head.
The given case study indicate that if any employer has provide gift to employee with value of $60 which is low as comparing to $300 then it is regarded as minor benefits of fringe and does not liable for paying any taxes.
Facility of computer to employee to work from home but employee using it only 50% for office use
In current time of pandemic, all employees has provided with facility to work from home as they cannot come home due to lockdown and spread of viruses (Prebble, 2015). This is regarded as fringe benefits that has provided by employer to employee and liable for paying tax by employer for getting of such facility. The value of taxable for benefit of fringe will be regarded as that part which was not used for any other purpose. Therefore, if facility of computer is provided to work from home then it should be used for purpose of office which is not liable for any taxes.
Property of office is used by Director and not receiving remuneration
The facility provided by business to their employees and does not liable for any charge then it is regarded as fringe benefit service (Pistone and et. al., 2019). In case of service applied for other use than office then it is regarded as taxable under fringe benefit. Employer will be coming under provision of FBTA. Therefore, the director of company took truck for their personal use as well as regarded as taxable benefit of fringe. Here, company need to pay tax for such kind of facility that has provided to director.
The report summarised that fringe benefit tax is regarded as liability of employer as well as required to be paid under authority of government. The taxable value made for fringe benefit which will be regarded as part for that when not used for purpose of taxes. Therefore, computer facility provided to work from home is used for purpose of office and does not fall under category of tax.