Taxation Law and Practice
Task 1 Calculate of the net tax payable/ refundable situation for Jane
The Australian taxation system is one of the most popular taxation law in world. It induces approx 125 taxes including the commonwealth taxes such as the capital gains tax, fringe benefits, goods and services tax, incomes tax. Income tax department is a way of income for the country. The income of the government only depends on the income tax department. Under the Australia taxation law, people pay tax 0% to 45%. It depends on income level of the people. In this, income between $87,001 – $180,000, the tax rate is 30%.
Gross income of Jane = $79000
Jane reports interest income of $475.
Jane advises of investment expenses of $250.
Jane receives rental income of $35,000 from an investment property. The associated expenses are:
Mortgage repayments: $25,000
Repairs: $2,000
Rates: $2,500
Insurance: $500
| Calculation of Taxation | |
| Particular | Amount in $ |
| Gross Income | 79000 |
| Brown Family Discretionary Trust | 20000 |
| Fully Francek Divided | 20000 |
| Sale of share | 800 |
| Interest income | 475 |
| Rental income | 35000 |
| Total Income | 155275 |
| Investment expenses | 250 |
| Mortgage repayments | 25000 |
| Repairs | 2000 |
| Rates | 2500 |
| Brokerrage cost | 300 |
| Total expense | 30050 |
| Debt | 20000 |
| Insurance | 500 |
| Donation | 900 |
| Income protection insurance policy | 1000 |
| Total of taxable deduction | 22400 |
Assessable income = 155275
Less: Deduction = 22400
In the Australian income tax, section 80C provides provisions for tax deductions on a number of payments. It includes the some expenses that are the tax deductable. It contains the life insurance policies, superannuation/provident fund, uition fees paid to educate a maximum of two children, payments made towards construction or purchase of a residential property (Stantcheva, 2014).
Taxable income = 132875
Accruing the income tax law in section 26(1), in Australia, people are able to pay 30% above the income of $87,001. As concerning of thus Jane will pay 30% tax
Amount of tax = 39862.5
Task 2: Calculation of the net tax payable/ refundable situation for Green Pty Ltd
According the Australia taxation office, the small organisations are liable to pay 27.5% tax in Australia. But the companies that are not small organisation are liable to pay 30%.
| Income Statement | |
| Particular | Amount |
| Sales | 3,45,000 |
| Cost of sales | 60,000 |
| Gross profit | 285000 |
| Exempt income | 10,000 |
| Dividends (fully franked) | 10,260 |
| Interest received | 900 |
| Compensation from a client | 4,000 |
| Net capital gain | 4,000 |
| Total operating profit | 314160 |
| Less: operating expenses | |
| Advertising (print, net, signage, flyers) | 1,000 |
| Bad debts | 900 |
| Bank Charges | 150 |
| Capital expenditure (qualifies for immediate deduction) | 3,000 |
| Cost of sales | 60,000 |
| Sub-contractor expenses | 23,000 |
| Depreciation expenses | 2,000 |
| Electricity | 800 |
| Entertainment | 2,000 |
| Environmental protection (disposal of chemicals) | 600 |
| Fines (speeding and parking tickets) | 500 |
| Insurance | 600 |
| Interest expenses within Australia | 1,200 |
| Lease expenses within Australia | 4,000 |
| Motor Vehicle 3rd Party insurance | 550 |
| Motor Vehicle expenses (petrol & maintenance) | 4,000 |
| Motor Vehicle Registration | 1,200 |
| Rent expenses | 11,800 |
| Stationery & Office supplies | 200 |
| Tea, coffee, sugar & milk for staff use | 100 |
| Telstra (Phones & Internet) | 2,000 |
| Wages | 45,000 |
| Total Operating expense | 1,64,600 |
| Net income before tax | 1,49,560 |
| Particular | Amount |
| Income end of year | 149560 |
| Income from other resources | – – – – – |
| 149560 | |
| Depreciation expenses | 500 |
| Taxable income of year | 149060 |
| Corporation income tax according Australia government 30% | 44718 |
| Income after tax | 104342 |
Guner, N., Kaygusuz, R. and Ventura, G. (2014) Income taxation of US households: Facts and parametric estimates. Review of Economic Dynamics, 17(4), pp.559-581.
Kabatek, J., Van Soest, A. and Stancanelli, E. (2014) Income taxation, labour supply and housework: a discrete choice model for French couples. Labour Economics, 27, pp.30-43.
Stantcheva, S. (2014) Optimal income taxation with adverse selection in the labour market. The Review of Economic Studies, 81(3), pp.1296-1329.
Tanzi, V. (2014) Inflation, indexation and interest income taxation. PSL Quarterly Review, 29(116).
