Tax Deductions, Capital Gains, And Business Taxation: A Comprehensive Guide

Assessable income as per Income Tax Assessment Act 1997 is the income of a tax payer which is considered for the purpose of calculating his or her taxable income.
Ordinary incomes are income from salary and income from business. Statutory incomes include but not limited to capital gain and dividend.
Tax audit, Revenue audit and E-Audit. Tax audit is the audit conducted with the objective of evaluating the tax liability reported by a tax payer. Revenue audit is to assess the validity of revenue reported in income tax return and e-audit is the electronic audit.
Residents are liable to pay income tax in Australia for all income whereas non-residents are only responsible to pay income tax on the income accruing or receiving in Australia. Residents are liable to file income tax return on or before the due date no such requirements is there for non-residents.
Resides test considers an individual’s residence in the country. In case an individual resides in Australia, he is an Australian resident for tax purposes. Domicile test considers the permanent home of an individual. The 183-day test considers whether an individual has stayed 183 days or more in a tax year with or without any breaks to determine tax residency of the individual. The superannuation test is for the employees of Australian Government working overseas.
Principle number 5 is in relation with independence. The professional must have adequate arrangements to manage conflicts of interest while discharging his duties and responsibilities as a tax professional in the country.
Not to have any financial interests with the clients except providing professional services as tax professional and should not accept any other engagement in the organization apart from providing professionals services as tax professional to the client.
John should communicate directly with Daniel and let him know that this is against the professional code of conduct and he will not be including any fictitious expenditures to comply with the professional code of conduct as a tax practitioner.
A tax payer must keep at-least for 5 years however, in special cases Australia Taxation Office may order taxpayers to maintain records for longer period than 5 years. In such cases tax payers will have to keep record for such long periods for income tax purposes (Braithwaite, 2017)

Scenario Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Lodgement date
Scenario 1	31 October
Scenario 2 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	31 October
Scenario 3	31 October
Scenario 4	29 October
Scenario 5	28 February
Scenario 6	29 April
Scenario 7	28 July

Note: For actual scenarios please referred to the question.

1. Bank account details.
2. Bank statement.
3. Contract agreement.
4. Supporting documents of income.
5. Supporting documents of expenditures.
The details of the supplier including name and address of business and ABN number.
1. Individual with salary income.
2. Individual with income from profession.
3. Individual with income from business.
4. Companies conducting business operations.
5. Individual with capital gain (James, Sawyer & Wallschutzky,

Scenario	Income type
A lotto win	Exempt income
Wages	Assessable income
A capital gain	Statutory income
A gift received from a friend	Assessable income
A car allowance from an employer	Non-Assessable income
A tax refund cheque	Non-Assessable income
Bank interest received	Assessable income
A family tax benefit	Exempt income

Interest on home loan of $16,200 is not tax deductible.

1. Interest on credit card of $276 is not tax deductible.
2. Interest on investment property of $14,360 is tax deductible.
3. Interest on personal loan is not tax deductible.
4. Insurance on home of $630 is not tax deductible.
5. Insurance on car of $540 is not tax deductible.
6. Insurance on investment property worth $570 is tax deductible

Name	Taxable income	LITO
Bill	14 500	NA
Sally	35 000	$445
John	56 600	$151
Fred	69 300	Nil
Allie	78 844	Nil

Name	Taxable income	Residence status	Tax
Steven	34 000	Resident	3,001.81
Martin	65 400	Non-resident	–
Gary	65 400	Resident	12,801.49
Russell	17 500	Resident	Nil
June	17 200	Non-resident
Harry	19 750	Resident	294.31
Sharon	110 930	Resident	28,675.22
Hanna	90 320	Non-resident	Nil
Courtney	224 864	Resident	74,419.47

Yes, as it is essential for the baker while working.

1. Yes, as safety boots are essential or safety and security of the factory workers.
3. since it is plain uniform.
4. No, as it is not special glasses essential for the road repairer to do the job as such.
5. No, as it is not special glasses essential for the road repairer to do the job as such.
6. Yes, as it is part of hospital administration.
7. Yes as it is essential for the services of the doctors.
8. Yes, as it is essential for the work performed by the wielder to keep his eyes safe.
9. Yes, as it is essential for the identification of the football club one represents.
10. Yes, as it is part of the uniform of the chef.
11. Yes, as it is essential for the baggage handlers to wear the ear plugs.
12. Yes, it is for the organization.
Belinda will be allowed to get deduction for laundry expenses of her uniform even if it is washed along with other personal clothes of Belind

Particulars	Total expenses	Tax deductible
Petrol	1,600.00	1,309.09
Depreciation	2,812.00	2,300.73
Registraion	350.00	286.36
Insurance	600.00	490.91
Tyres and battery	1,075.00	879.55
Servicing	525.00	429.55
Total tax deductible expenses		5,696.18

Asset	Original cost	Opening adjustable value	Depreciation rate	Depreciation	Closing adjustable value
Electric guitar	$3,600	$1,289	20% DV	$257.80	$1,031.20
Drum set	$3,000	$550	10% PC	$300	$250.00
Electric keyboard	$4,000	$961	30% DV	$288.30	$672.70

Michael will be able to claim $550 as depreciation for tax purposes in 2013/2014 return

An enterprise means an organization conducting operations of business with the motive of earning profit from business

Particulars	Amount ($)
Total fees charged including GST	60,500.00
Thus, GST collected (60500 x 10/110)	5,500.00

Business expenses	6,600.00
GST paid (6600 x 10/110)	600.00

GST Payable (5500-600)	4,900.00

Name	Gordon Smith
Trading name	Awesome Furniture
Do you have more than one trading name	No
Do you have a tax file number	Yes
Tax file number	TFN 999 999 999
Contact phone numbers	0402 111 211
Main business location or address	269 Harold Street, Croydon, NSW, 2136
Postal address for service of notices and communication	PO Box 206, Ashfield, NSW 2135
Email address for correspondence	: [email protected]
Do you wish to register for access to the Tax Office’s online services for business?	NA
Bank Account Name	Gordon Smith
Bank Account Number	123456
Other information	Not applicable due to lack of information

Particulars	Amount ($)	Amount ($)
Sale proceeds	240,000.00
Less: Settlement fees	5,500.00
Net proceed from sales		234,500.00
Less: Cost base:
Cost of the property	175,000.00
Stamp duty	5,000.00
Solicitor fees	2,000.00
		182,000.00
Short term capital gain		52,500.00

Fringe benefit tax is paid by the employer for providing non-monetary benefits of certain kind to its employees. Examples include:

Providing car to an employee for work and private purpose.
Providing interest free loan to the employees.

		Tax deductibility
Doctor union fee	450	Deductible
Laundering of compulsory uniform	90	Deductible
Jacket when working night shifts	85	Deductible
Stethoscope	120	Deductible
Text book –Diabetes management	70	Deductible
Text book –Law for doctors	65	Deductible
Taxi fares when called in at short notice	70	Deductible
Plain watch	60	Non deductible
Phone calls to check shifts	8	Non deductible
Shoes	85	Non deductible
Scissors to cut surgical gauze	15	Capital expenditure

Reasons:

The expenditures which are not tax deductible is because these are not expenditures necessary for the profession of the doctor.

Requirements:

The expenditures must be incurred for the profession and all necessary records and documents shall be maintained.

Task 2:

Answer 1:

Particulars	Amount ($)	Amount ($)
Sale proceeds		215,000.00
Less:
Solicitor’s fees	1,500.00
Real estate fees	4,000.00
		5,500.00
Net proceed from sale		209,500.00

Less: Cost basis
Cost of acquisition	150,000.00
Stamp duty	5,000.00
Solicitor’s fees	2,000.00
		157,000.00
		52,500.00
Less: CGT discount @50%	26,250.00
Net capital gain		26,250.00

Answer 2:

Income tax return
Name	Gordon Smith
Particulars	Amount ($)	Amount ($)
Revenue		57,560.00
Less: Allowable expenditures
Particle boards	9,624.00
Various tools	755.00
Insurance expenditure	580.00
Telephone expenses	900.00
Stationery expenses	890.00
Rent	15,000.00
Advertisement expenses	438.00
		28,187.00
Taxable income		29,373.00

Income tax liability		2,122.68

Answer 3:

Part a:

Questions	Answers	Reasons
What are the primary sources of your income?	Income from business, interest on investments and dividend	To have a basic knowledge about the differ sources of income.
The amount of turnover of your business in last three years and in the current year?	$50,000; $55,000; $62,000 and in current year $75,000.	To make a preliminary assessment about the tax slab of the client.
The amount of interest you earned this year?	$1750.	To assess the tax liability for interest.
Is the dividend fully franked?	Yes	Whether dividend will be taxable or not.

Part b:

Income tax return of David Lucas.

Name	David Lucas
Particulars	Amount ($)	Amount ($)
Income from salary	55,630.00
Unit trust distribution is not taxable	–
Capital gain	260.00
Interest from overseas bank	47.00
Bank interests	84.00
Dividend (not franked)	50.00
Net income from investment property
Rent received	13,240.00
Interest expenses	(10,700.00)
Agent commission	(910.00)
Repair	(128.00)
Rates	(930.00)
Advertisement	(45.00)
		527.00
Taxable income	56,598.00

Tax liability	9940.84

References

Braithwaite, V. (2017). Taxing democracy: Understanding tax avoidance and evasion. Routledge.

James, S., Sawyer, A., & Wallschutzky, I. (2015). Tax simplification: A review of initiatives in Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1).

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