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Australian Tax Law Solution

QUESTION 8.4.37

Net capital gain in respect of year 2016/17 (after allowing for the partial main residence exemption).

Working note 1: - It is not material whether you will apply the main residence exemption for 6 years or not , for the period that we have to considered is the period where property is not the main residence i.e 8 years.

Working note 2 :- Calculation of capital gain:

Particulars

Amount

Sales consideration

$ 705000

Less:

Cost of acquistion(market vaue)

$475000

as stamp duty value will be considered

Capital Gain

$ 230000

Calculation of net capital gain (after allowing for the partial main residence exemption).

Total capital gain ( from the CGT event) = No. of days , where the dwelling is not your main residence/ Total no. of days in Ownership period.

= from 30th june 2009 to 30th june 2017 = 8 years

= 8years * 365 days = 2920 days .

= from 30th june 2007 to 30th june 2017 = 10 years

= 10 years * 365 days = 3650 days =

= $ 230000 * 2920 /3650 = 184000.

= Net capital gain = 2,30,000 – 184000 = 46000.

QUESTION 5.3.5

Working notes: Assume that there is no double tax avoidance agreement between Australia & other foreign countries form where income of Yvette Jankic generated.

Computation of Total Income:

Australian Income

29762

(510+21000+6252+2000)

Foreign Income

19250

(2700+3900+12650)

Gross total income

49012

Less:

Deduction:

250

Less:

Deduction:

300

Total income

48462

As between $ 37001 - $ 90000 tax rate is 32.5 % , Where tax rate on total income of $ 48462 is 32.5 %

= 48462 * 32.5% = 15750.15

Foreign rate of tax = For U.K = 300/2700 = 11.11%

Foreign rate of tax = For U.S = 2100/3900 = 53.84%

Foreign rate of tax = For New Zealand = 2540/12650 = 20.07%

Selection of rate:

For U.K = 32.5 % or 11.11% lower of following = i.e 11.11%

= 2700 * 11.11% = 299.97

For U.S = 32.5% or 53.84% lower of following = i.e 32.5 %

= 3900* 32.5% =1267.5

For New Zealand = 32.5% or 20.07% lower of following = 20.07*

= 12650 * 20.07% = 2538.85

Total relief under double tax avoidance agreement = 299.97+1267.5+2538.85 = 4106.32

Net tax payable = 15750.15 – 4106.32 = 11643.83

QUESTION 20.12.7

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:

Particulars

Amount

Gross rent received

15200

Less:

Agent commission

920

Less:

Council rate

1490

Less:

Insurance

Nil

Less:

Interest on Mortgage payment

7900

Income from rental property

4890

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)

Particulars

Amount

Interst from term deposit

$17200

(Assume 17200 is abobe the exemption limit)

Interest from saving deposit

350

(Assume 350 is above the exemption limit)

40

Less:

Bank charges related to term deposit

Leess:

Interest charged (Not deductible)

Nil

Income from other sources

$17510

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 =

Particulars

Amount

Sale price

18600

Less:

Cost of Acquistion

12000

Capital gain on quality shares

6600

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:

Particulars

Amount

Sale price

2500

Less:

Cost of Acquistion

400

Capital loss on quality shares

-1500

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 .

Particulars

Amount ($)

Gross Income

1638940

LESS:

Expenditure:

Wages paid

743900

FBT Paid

5155

Entertainment of employees

5380

Annual leave paid

14780

Rent paid

65000

Payroll tax

19430

Personal superannuation contributions for Ricky

50000

Other overheads paid

69330

Decline in value

46780

Taxable income

619185

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

Opening adjustable value

6000

Add:

Actual cost

11000

Less:

Assets sold

9200

Written down value of block of equipment

7800

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

= Depreciation of other block = 1700

Total depreciation value = 1700 + 1560 = 3260.

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