tax law paper

Income tax and at what time a company is carrying on a business.

For gift is legislation Div. 30 ITAA97 while for contribution is legislation 25-55 ITAA97 (Richardson, 2002)


Yes they are exempted as they are among the list exempted

It is about the loss or destruction of a capital gain asset and how to get the capital gain and capital loss in the event of loss or destruction.


The assessable income should be related to the main source of income and should be periodical.

A gift given to an employee not related to activities related to nature of work and once gift should not be included as assessable income. The payment of money made voluntary to an individual is not assessable income as it does not related to any activity done but if the activity is an appreciation for the good work done by the employee should be included as assessable income as long it related to the main source of income and the same employer(Cuff, 2016 and Nat.

Fedn. of Indep)

Ordinary income is direct and indirect inflows made by an individual, partnership or company whether made within the borders of Australia or outside the borders of Australia during a single financial year by a resident of Australia. Examples of the ordinary income are income from salaries, commission, interests, net income, tips, wages and dividends and should be assessable income (6-5 ITAA97). On the other hand the statutory income other incomes of an individual, partnership or company which are included in the assessable income for tax purposes and these incomes are provided in the tax legislation provisions of the Australian tax authority laws (ITAA36 or ITAA97) some of the statutory income are; royalties insurance bonuses, net capital gains, work in progress payment barter transactions and bad debts recovered are includes as assessable income due to tax legislation.

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Medicare levy is the extra tax imposed on the residents’ taxable income to help the government of Australia to meet the costs of running public healthcare by the government as they are commonly known as Medicare. The levy is imposed on some level of income and threshold and should be above $22398 and those below are exempted from paying the tax. The Medicare levy surcharge is an extra tax imposed on the residents who do not have any private patient hospital insurance cover and the taxable income is above certain amount. The levy surcharge is imposed to encourage residents to have the private hospital insurance cover in order to reduce the more number of people going to seek medical care services in public hospitals and the rate is determined by the tax authority and some of the exemptions have been given. Another reason for Medicare levy surcharge is to improve the private sector to be attractive to the public MLA ITAA36 and MLA MLSFBA (Council, Australian, 2017 and Freudenberg, 2017)

The residence of an individual is determined to know the residents of Australia for tax purposes and if they are not Australian residents then they are exempted from paying tax as they pay tax to the country they are residents. The permanent place of abode is a where a person has settles permanently and has built or purchased a home, this can be either within Australia or outside Australia and for tax purposes all permanent pace of a bode resident are liable to pay tax as long the permanent place of a bode is within the boundaries of Australia. There are factors for an individual to be considered to have a permanent place a abode and they include, when an individual moves to another country with intention not to come back again to Australia and stay more than two year is considered to have permanent place of abode outside Australia but when moves with a temporary stay and come back then his permanent place of bode remained Australia and liable to pay tax. When the person has no connection with his or her family or relative back in Australia and had transferred all the money in accounts and investment to oversee and has no intention of coming or investing in Australia the individual is exempted from filing returns and tax.

The usual place of abode is where an individual stays and can be reached using the address of that place and should not be owned but be just used only for stay for a given period and under this circumstance and the person resides in Australian is supposed to pay tax but if stays the person works in Australia or owns business within the country and stays in another country is also liable to pay tax for the income made within the country. The usual place of abode in Australian tax system is regarded to be 183 days of the financial year if anyone have stayed in the country for 183 for each given financial year days consecutively then that person is considered to have a usual place of abode in Australia. The person is able to be reached or contacted via that place for any written document or official letter from his or her home country and the Australian authority. Any person falling under this category is considered as Australian resident for tax purposes (Daryl, 2018)

Not tax deductible since the government disallowed the tax deduction for any government assistance provided to the students (section 26-19 ITAA97)

The $110 amount is deductible, the trainee can claim tax deduction because the cost was incurred while traveling to school to further his study in the field related to his occupation and career, as the travel was not from work to homes (25-100 ITAA97)

The $200 is tax deductible because the cost of part of self-education which related to the occupation of the trainee accountant(Finn, Hatchett, Highfield)

The childcare is not part of self-education and this is considered personal and not related to the occupation of the trainee. The cost did not directly relate to the education.

The amount is not deductible, this is regarded as personal as does not relate to the occupation of the trainee and the expenses was incurred at home hence personal (Forsyth, Handley)

The amount is deductible because it is a requirement by the employer and falls under special case as it has been specified in terms of color and specifically to be worn at work. The pilot case of wearing the large shoes at work is a good reference (Mansfield). Therefore, $145 is deductible.

The $300 is not tax deductible as it deals with the training looking for a new job with a new employer and should not be deducted (Roberts, 2012)


The $7,000 should be subjected to capital asset gain tax because F2 allow any premium from an grant or renewal should be subjected to capital asset gain because is a proceed mad by virtue of allowing someone to use your land. Leases (Subdiv 104-F)

4 b.


Purchase price NO. of shares 10000 12000 purchase price per share 0.55 1.67 5500 20040 selling price NO. of shares 10000 12000 purchase price per share 0.67 1.18 6700 14160 CAPITAL GAIN OR LOSS $ 1,200.00 $ (5,880.00) NET LOSS $ (4,680.00) CAPITAL GAIN OR LOSS TAX 15% $ (702.00) CAPITAL LOSSTAX FOR THE YEAR $702 From the calculation above it can be seen that Deepak made a gain of$ 1,200 from the sale of the shares purchased from IOOF Pty Ltd because the selling price was higher than the purchase price. The value is arrived by subtracting the total value of selling of the shares and those of the costs of purchasing the shares ($6,700-$5,000). Deepak made a loss from the sale of shares she purchase from Greencross Pty Ltd Shares and the loss is $5,880 as it can be seen from the table above. This resulted to a net loss of $ 4,680 which will be subjected to 15% Capital Gain Tax and give $702 as capital loss tax. Deepak need to report $702 as capital loss tax on his books of accounts for tax purposes. The 50% discount will apply because Deepak is an individual (Tanti, 2011)

4 c.

Description Value

Purchase price (2010) $ 200,000.00

market value (2013) $ 400,000.00

gain due to valuation $ 200,000.00

Capital gain tax made (15%) $ 30,000.00

selling price (2019) $ 700,000.00

gain made on sale $ 300,000.00

Capital gain tax (15%) $ 45,000.00

(Richardson, 2007)

The conversion of a portion of the property into garage and late selling of the property made, Li made a gain out of the year 2013 the property value had increases and led to capital gait tax of $30,000 which was reported on that financial year. When the property was sold in 2019, it gave Li a gain of $300,000 which resulted to a capital gain tax of $45,000 which should be report on the books of accounts for tax purposes. The 50% discount should be applied because Li is an individual (Jones, 2016)

4 d.

The cost base is the total costs of acquiring or owning an asset and it included the cost for purchasing the asset and any other costs that relates to the process of getting, owning and disposing as asset and the cost base has five elements; money paid for the asset, incidental costs, owning cost capital expenditure to increase or maintain the value of the asset and the capitals costs of defending the title of the asset. For example if the purchase price of a vehicle is $45,000 and the shipping, insurance, transportation fee and other costs totaling to $13,500 are involved, the base cost of that vehicle will be (45000 +13500).on the hand the s, reduced cost base is the cost arrived at after subtracting all other costs incurred and deduction made on the asset during the time of acquisition and operation before it was sold. This is to determine if indeed the sale of that asset led to capital loss for capital lost has four element namely money paid for the asset, incidental costs, assessable amount in relation to adjustment for balance the value of the asset capital expenditure to increase or maintain the value of the asset and the capitals costs of defending the title of the asset

5 a.

Incomes from illegal activities are only subjected if the act illegal only to Australian laws and the laws cover the commonwealth, state and even territory law. When the business id illegal that means you are convicted of violating Australian law and any gain or loss made from that business should not be included when ascertain the assessable income. All other business activities that are considered as illegal in other countries but lawfully in Australia, the income or loss made by a residence within the country should be included in in the assessable income. Therefore any illegal income should be in reference to the Australian laws and no other countries or states and should have been carried out within the country undertaken by the Australian residents.

5 b.

Bank interest $ 500.00

Gambling win $ 10,000.00

Rental income $ 2,000.00

Assessable income $ 12,500.00

Bank interest and rental incomes are categorized as ordinary income hence assessable income and subjected to tax (s 6-5 ITAA97) while winning from Crown Casino is other assessable income because Crown Casino is involved in gambling businesses and all its incomes are subject to tax, therefore the $10,000 won will be assessable income and should be included when coming up with total assessable income (FCT v Stone [2005] HCE21, 2005 ATC 4234 and Brajkovich v FCT (1989) 20 ATR 1570, 89 ATC 5227).therefore the total assessable income will be $12,500( Kee,1995)

5 c.

The assessable income of an employee should include all the allowance as long they are related to the employment and services rendered by the employee (s 15-2 ITAA97) the allowances can be either direct or indirect but should be given as a result of the employee being working for that specific employer and the allowance is given to the employee due to the nature of the employment status. For the stated case the $500 given to the employee by the employer is assessable income because it is given by an employer to the employee by virtue of the relation and is given periodically.

5 d.

Tax Rate Threshold $20,000.00 $24,900.00 $100,000.00

Medicare exempt 0% 0 to $ 22,398.00 exempted Medicare ‘Shade-in’ 10% $ 22,399.00-$ 26,668.00 10% Basic Medicare Levy 2% $ 26,669.00 and over 2%

Medicare levy $ – $ 2,490.00 $ 2,000.00

The Medicare levy in Australia is subjected to the residents whose taxable income is $22,399 and above but for the taxable income between $22,399 and $26,668 is subjected to a 10% levy tax rate while those with taxable income of $26,669 and above the Medicare levy tax rate is 2%.using the applicable Medicare levy tax rate, the Medicare levy payable are $0 for taxable income of $20, 000, $2,400 for taxable income of $24,900 and $2,000 for taxable income of $100,000

5 e.

Taxable Income Tax Rate $25,000.00 $ 40,000.00 $ 95,000.00

0 – $ 18,200.00 0 $ 18,201.00 – $ 37,000.00 19% $ 4,750.00 $ 37,001.00 – $ 87,000.00 34.50% $ 13,800.00 $ 87,001.00 -$ 180,000.00 39% $ 37,050.00

$ 180,001.00 and over 45% The gross tax payable $ 4,750.00 $ 13,800.00 $ 37,050.00

From the tax rate table given by the Australian tax authority, the $25,000 is subjected to a tax rate of 19% and is not subjected to Medicare levy of 2% because it is less than and the gross tax payable should be $4,750.the taxable income of $40,000 is subjected to a tax rate of 32.50% and resulted to a gross tax payable of $13,000 and $95,000 taxable income lies in the bracket of 37% as tax rate translating to a gross tax of $35,150.

References list

Richardson, Grant, and David Smith. “The Readability of Australia’s Goods and Services Tax Legislation: An Empirical Investigation.” Federal Law Review 30, no. 3 (2002): 475-506.

Reinhardt, Sam, and Lee Steel. “A brief history of Australia’s tax system.” Economic Round-up Winter 2006 (2006): 1.

Taylor, Grantley, and Grant Richardson. “International corporate tax avoidance practices: evidence from Australian firms.” The International Journal of Accounting 47, no. 4 (2012): 469-496.

Jones, Daryl. “Capital gains tax: The rise of market value?.” Taxation in Australia 51, no. 2 (2016): 67.

Council, Australian. “Strengthening the Medicare Levy to secure the future of the NDIS and other essential universal services.” (2017).

Jones, Daryl. “Complexity of tax residency attracts review.” Taxation in Australia 53, no. 6 (2018): 296.

Freudenberg, Brett, Toni Chardon, Mark Brimble, and Melissa Belle Isle. “Tax literacy of Australian small businesses.” J. Austl. Tax’n 19 (2017): 21.

Cuff, Katherine, Steeve Mongrain, and Joanne Roberts. Dual Corporate Tax Evasion. No. dp16-12. 2016.

Nat. Fedn. of Indep. Business v. Sebelius, 132 S. Ct. 2566, 567 U.S. 519, 183 L. Ed. 2d 450 (2012).

Tanti, Paul. “Capital gains tax: The obscure provisions.” Taxation in Australia 45, no. 11 (2011): 668.

Kee, Pei-Teing. “Should gambling gains be taxed as income?.” Murdoch University Electricity Journal of Law 2 (1995).

Richardson, Grant, and Roman Lanis. “Determinants of the variability in corporate effective tax rates and tax reform: Evidence from Australia.” Journal of accounting and public policy 26, no. 6 (2007): 689-704.

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tax law paper. (2019, Dec 15). Retrieved from

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