Relative Sections and Legislations †Free Samples to Students

Question: Discuss about the Relative Sections and Legislations. Answer: Introduction: The current study is based on the determination of the taxable income of Jordan and Cameron. The study will take into the considerations the amount of tax payable by Jordan and Cameron from their respective transactions. The study will additionally lay down the assumptions for considering and omitting the expenditure at the time of computing the tax liability. Computation of Taxable Income of Jordan Particulars Amount ($) Amount ($) Assessable Income Gross Salary 180000 Add: PayG 58000 238000 Australian Sourced Rental Income (Jordan Share) Rental Income from Holiday House (Jordan Share) 2000 Investment property Rental Income (Jordan Share) 11000 Australian Sourced Interest Income Bank Account (Jordan Share) 1000 Superannuation Jordan 80000 Total Assessable Income 332000 Allowable Deductions Interest paid on mortgage home 12000 Interest paid on investment property 23333 Interest paid on holiday house 13333 Work Related Expenditure 2200 Expenses on holiday homes 6250 Tax Agent Fees 900 Expenses on investment property 7500 Total Allowable Deductions 65517 Total Taxable Income 266483 Tax on Taxable Income 93149 Add: Medicare Levy 5330 Less: PayG 58000 Add: Taxable Value of Fringe Benefit Car 4000 Less: Rebate on Private Medicare Insurance 714.44 (4000*17.861%) Less: 15% Tax Offset on Superannuation Benefit 12000 (80000*15%) Total Tax Payable 31764 Computation of Taxable Income of Cameron Computation of Taxable Income of Cameron Particulars Amount ($) Amount ($) Assessable Income Gross Salary 120000 Add: PayG 35000 155000 Australian Sourced Rental Income Rental Income from Holiday House (Cameron Share) 2000 Investment property Rental Income (Cameron Share) 11000 Australian Sourced Interest Income Bank Account (Cameron Share) 1000 Australian Source Dividend Income Fully Franked Dividends 14000 Gross Up Franking Credits 6000 Superannuation Cameron 60000 Total Assessable Income 229000 Allowable Deductions Bank Loan on Share Portfolio 3500 Work Related Expenditure 1000 Donations 500 Tax Agent Fees 700 Total Allowable Deductions 5700 Total Taxable Income 223300 Tax on Taxable Income 73717 Add: Medicare Levy 4466 Less: PayG 35000 (4000*17.861%) Less: 15% Tax Offset on Superannuation Benefit 9000 (80000*15%) Total Tax Payable 34183 In computing the taxable income of Jordan and Cameron the amount that has been received by them for Superannuation will be initially included in their respective taxable income. However, Jordan and Cameron are entitled to a 15% of the tax offset on the taxable component of the super income stream payment received by them. According to the Australian taxation office travelling to and from home is regarded as the private expenditure and an individual taxpayer are not allowed to claim allowable deductions. As held in the case of Lunney v FC of T (1958) an expenditure should possess the essential character of outgoing incurred in producing the assessable income (Coleman and Sadiq 2013). In the present context a deduction will be denied in respect of subsection 51 (1) traveling from and to home incurred by Cameron and Jordan are not allowed for deductions since they represent the nature of private expenditure. As held in the taxation ruling of TD 92/154 a deduction is not generally allowable for child care expenditure even though it is prerequisite for an employee to derive and make payment so that one can go and earn income. As held in the case of Lodge v. FC of T (1972) an individual is not allowed to claim deductions on child care expenses since it is neither relevant or incidental in gaining assessable income (Kenny 2013). The expenditure incurred on child care will not be allowed as allowable deductions for both Cameron and Jordan since no form of private expenditure is allowed for deductions. The personal living cost of $18000 are disallowed from being considered as the allowable deductions for both Cameron and Jordan. Expenses related to holiday home of $15,000 has been only deducted up the extent the holiday home was rented out. The holiday home was rented out for a period of 5 months and a deduction for five months have been claimed which stands $13333. Expenses on investment property is also rented out for only 10 months and as result of this the expenditure incurred has been apportioned for a period of 10 months only with an approximate value of $23333. The capital loss bought forward by Cameron of $7,000 cannot be allowed for offset since Cameron did not reported any Capital gains. Hence, such losses can be offset only against capital gains. According to the Australian Taxation Office credit card, expenditure can be claimed as allowable deductions only for paying the business tax liability (Krever 2013). In the present context, the credit card expenditure will not be allowed as allowable deductions since the expenditure was not used for business purpose and deductions are not allowed for this purpose. The above stated discussion effectively lay down that the net amount of tax payable by both Jordan and Cameron respectively. Additionally, relative sections and legislations have been considered in arriving at net tax payable by them. The present issue is concerned with the determination of the tax assessment of the assessable income of the minors under the age of 18 that are not engaged in the full time employment. The income tax ruling of IT 2489 is applicable to the unmarried children that are under the age of 18 and are engaged in the full time employment are liable to pay tax for their income. Division 6AA of the part III of the ITAA 1997 defines that an individual at the age of 18 years might be taxed at the rate higher than the adult (Morgan, Mortimer and Pinto 2013). As evident from the current case study it can be defined that Jordan employed his younger daughter Cate to carry out the administrative work for him as the personal assistant. As defined under the Division 6AA all the types of assessable income are eligible for tax unless the income of the minor falls inside the purview of the excepted assessable income under the subsection 102AE (2) (Woellner 2013). Additionally, the extent to which the minor had effective conduct and control and effectively participated in the functions of the taxpayers business or employment. As understood from the current context the receipt of employment income in the hands of Cate would ultimately help in reducing the tax liability of Jordan but may attract a liability to tax for Cate (Woellner et al. 2014). It is assumed that Cate is under the age of 18 and under the division 6AA Cate will be liable for tax for the amount of income received from her part time employment. Computation of Tax Liability for Cate Particulars Amount ($) Amount ($) Assessable Income 20800 Tax on Taxable Income 494 Low Income Tax Offset 445 Total Tax Payable 49 Conclusion: The above stated discussion can be concluded by stating that the income received from the part time employment will be regarded as taxable income for Cate which will attract tax liability. Reference List: Coleman, C. and Sadiq, K. (n.d.).2013 Principles of taxation law. Kenny, P. (2013).Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths. Krever, R. (2013).Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters. Morgan, A., Mortimer, C. and Pinto, D. 2013.A practical introduction to Australian taxation law. North Ryde [N.S.W.]: CCH Australia. Woellner, R. (2013).Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia. Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. 2014 Australian taxation law.