Law

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
ParticularAmount in $
Gross Income79000
Brown Family Discretionary Trust20000
Fully Francek Divided20000
Sale of share800
Interest income475
Rental income35000
Total Income 155275
Investment expenses250
Mortgage repayments25000
Repairs2000
Rates2500
Brokerrage cost300
Total expense30050
Debt20000
Insurance500
Donation900
Income protection insurance policy1000
Total of taxable deduction22400

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
Sales3,45,000
Cost of sales60,000
Gross profit 285000
Exempt income10,000
Dividends (fully franked)10,260
Interest received900
Compensation from a client4,000
Net capital gain4,000
Total operating profit 314160
Less: operating expenses 
Advertising (print, net, signage, flyers)1,000
Bad debts900
Bank Charges150
Capital expenditure (qualifies for immediate deduction)3,000
Cost of sales60,000
Sub-contractor expenses23,000
Depreciation expenses2,000
Electricity800
Entertainment2,000
Environmental protection (disposal of chemicals)600
Fines (speeding and parking tickets)500
Insurance600
Interest expenses within Australia1,200
Lease expenses within Australia4,000
Motor Vehicle 3rd Party insurance550
Motor Vehicle expenses (petrol & maintenance)4,000
Motor Vehicle Registration1,200
Rent expenses11,800
Stationery & Office supplies200
Tea, coffee, sugar & milk for staff use100
Telstra (Phones & Internet)2,000
Wages45,000
Total Operating expense1,64,600
Net income before tax1,49,560

 

ParticularAmount
Income end of year149560
Income from other resources–  – – – –
149560
Depreciation expenses500
Taxable income of year 149060
Corporation income tax according Australia government 30%44718
Income after tax104342

 References

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).

 

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