Accy963 Professional Practice Taxation For Assessment Answers

you need to again have an introduction to what you think the key tax issue is and how you are going to approach it, then undertake the discussion in the body and have a conclusion for this part as well.

Answer:

Issue:

The present situation determines the net amount of tax payable by Jordan and his wife Cameron for the income year of 2016/17. Additionally, the existing scenario will lay down the tax that is payable by Jordan and Cameron in regard to the individual transaction. The assessment is tax is based on taking account of incomes and excluding the expenses in the event of calculating tax liability.

Laws:

1. taxation ruling of TR 95/9
2. FC of T v Hayley (1958)
3. section 8-1 of the ITAA 1997
4. subsection 51 (1)
5. taxation ruling of TD 92/154
6. Lodge v Federal Commissioner of Taxtion (1972)

Applications:

According to the taxation ruling of TR 95/9 traveling from and to home at the work place is considered as the personal expenditure and an individual tax payer is not allowed to claim allowable deductions. It is understood from the current situation of Cameron and Jordan that they had incurred a traveling expenditure to and from home (Barkoczy 2016). As held in the case of FC of T v Hayley (1958) for an expenditure to meet the test of deductibility the expenditure should possess the characteristics of an outgoing that is incurred at the time of gaining the assessable income. As evident from the current scenario of Jordan and Cameron a deduction is disallowed under subsection 51 (1) since the traveling expenditure formed the part of private expense and a deduction is not allowed in such context (Saad 2014).

Conversely when arriving at the taxable income of Jordan and Cameron the amount that is received for superannuation shall be included in the taxable income. Nevertheless, the Australian taxation office provides that an individual can include the amount of superannuation in the taxable income but they can claim a tax offset of 15% on the taxable sum of superannuation income payment that is received by them (Lang 2014).

According to the taxation ruling of TD 92/154 child care expenditure paid by the person are not allowed for deductions under subsection 51 (1) of the ITAA 1936. As held in the case of Lodge v Federal Commissioner of Taxtion (1972) child care expenditure is not considered to be relevant in gaining or generating the assessable income (Miller and Oats 2016). From the circumstances of Jordan, it can be understood that Child care expenses will be disallowed from being regarded as allowable deductions under subsection 51 (1) of the 1936 since the expenses possess the nature of private or domestic feature. Additionally, it is noticed that both Jordan and Cameron has incurred a private living expense of $18,000 which is cannot be considered allowable under subsection 51 (1) of the ITAA 1936 (Woellner et al. 2016).

An expenditure of $32,000 related to holiday home will be regarded for deductions till the time when the holiday home has been rented out by the taxpayer. The holiday home has been rented out for five months and the taxpayer can only claim deductions for a period of five months. Expenses incurred by Cameron on investment property will be considered for deductions till the investment property was rented out. Cameron bought forward a capital loss of $7000 for a share portfolio however Cameron has not reported capital gains from the sale of share portfolio. As a result of this she is not allowed to offset capital loss because capital loss can be only offset on the event of capital gains.

For an expenditure to qualify for deductions must meet the criteria of deductions test under section 8-1 of the ITAA 1997 (Robin 2017). Conversely, it is noticed that a credit card interest expenditure of $1500 is considered to be a private expenditure and the same is disallowed from being regarded as allowable deductions.

Conclusion:

The conversation can be concluded by stating that expenditure having the nature of private will not be regarded as allowable deductions. The computation of net income tax payable by Jordan and Cameron is derived by considering relevant legislation and case laws that were relevant in this context.

Issues:

The following study is based on the ascertainment of the tax liability of Cate who is employed for a part time purpose to carry out the administrative work of Jordan. The case study provides that Cate is a minor and was not engaged in full time employment however the amount received from employment would be considered as taxable income.

Rule:

1. Taxation ruling of IT 2489
2. Division 6AA of the part III of the ITAA 1997
3. Subsection 102 AE (2)

Applications:

The taxation ruling of IT 2489 provides that child under the age of 18 and engaged in the full time employment will be held accountable for the purpose of tax (Barkoczy et al. 2016). Additionally, it has been laid down under division 6AA of the part III of the ITAA 1997 defines that a person under the age of 18 may be imposed tax at the rate which is higher than the adult. From the current situation of Jordan, it is found that Cate has been employed to perform administrative work.

Division 6AA lay down that all the incomes derived would be considered for assessment given the exception that a minor fall within the purview of anticipated income under subsection 102 AE (2). The division lay down that is necessary to determine the extent of indulgence of minor in the activities of the person’s business or employment (Anderson, Dickfos and Brown 2016).

The case study evidently lay down that the employment income generated from carrying out the administrative work of Jordan will eventually result in lower tax liability for Jordan but the amount received by Cate would attract tax liability. From the current case study it is understood that Cate is under the age of 18 and employed in a part time administrative work. The sum received by her would be considered for taxation purpose.

Conclusion:

As evident from the above defined from the current discussion it can be stated that Cate was indulged in the part time administrative work and will be held liable for tax relating to amount derived by her. 

Reference List:

Anderson, C., Dickfos, J. and Brown, C., 2016. The Australian Taxation Office-what role does it play in anti-phoenix activity?. INSOLVENCY LAW JOURNAL, 24(2), pp.127-140.

Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.

Barkoczy, S., Nethercott, L., Devos, K. and Richardson, G., 2016. Foundations Student Tax Pack 3 2016. Oxford University Press Australia & New Zealand.

Lang, M., 2014. Introduction to the law of double taxation conventions. Linde Verlag GmbH.

Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.

ROBIN, H., 2017. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.

Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.

Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law Select: Legislation and Commentary 2016. Oxford University Press.