|Assessment Details and Submission Guidelines |
|Trimester ||T3 2020 |
|Unit Code ||HI6028 |
|Unit Title ||Taxation Theory, Practice & Law |
|Assessment Type ||Individual Assignment |
|Assessment Title || Case Studies of Specific Deductions and Tax Liability |
Purpose of the assessment (with ULO
|Students are required to follow the instructions by your lecturer to confirm any relevant information. You also need to follow any relevant announcement on Blackboard to confirm the due date and time of the assignment. |
The individual assignment will assess students on the following learning outcomes:
|Weight ||This assignment task accounts for 25 % of total marks in this unit. |
|Total Marks ||This assignment task accounts for 25 marks of total marks in this unit. |
|Word limit ||Max 2000 words (acceptable to be 10% above or below this word limit). |
|Submission Guidelines |
Instructions: Please read carefully to avoid mistakes.
|• ||The assignment must be in MS Word format, no spacing, 12-pt Arial font and 2 cm margins on all four sides of your page with appropriate section headings and page numbers. |
|• ||Note: Assessment task is set around the work that you have done in class. You are not expected to go outside the content of the unit, but you are expected to explore it. |
Assignments’ Instructions and Requirements
Jahid (a mechanic) paid for the following items during the current tax year (2019-2020) and has approached you asking which of them are deductible from his salary income. He is a single tax resident for the year:
Explain in detail (using a table for all the items above) with relevant tax laws and cases.
Kindly use the four sections below for each case in your table.
QUESTION 2 - (15 MARKS)
Calculate Total Assessable Income, Taxable Income, Tax Liability, Medicare Levy and Medicare Levy Surcharge, if applicable, for the tax payer (Judy) with information below:
There are various provision has been defined in the ITAA 1997 for the purpose of calculation of the taxable income and tax liability. This provide the assessment of the income of the tax payer as per the income tax provision. It include the assessment of Jahid and Judy for the financial year.
Question 1 Tax liability of Jahid
Facts of case study
According to provided case study, some of the facts are described below:
Appropriate case law
According to Australian Taxation Law (2020), tax payer are allowed for claiming deduction for expenditure made for work or exceptional to non work related expenses that are disbursed by payer of tax in order to perform job as employees in business. Here, payer of taxes are required to provide evidence or proof in type of bill or any invoice received by them for charged paid by them. Moreover, it is important to know about category of expenses such as work based as well as non work or other extraneous expenses. They are described below:
Work related expenses- It is defined as expenses that are incurred in business related with work. Several works takes place at business to perform activities and operations (Hoyle, Schaefer and Doupnik, 2018). Some of them are described below:
Non-work or other extraneous expenses- It is defined as expenses that has occurred for extra or non work performance (Karabarbounis and Neiman, 2019). The different types of expenditure made for non work are mentioned below:
For claiming of expenses incurred for work are required to follow basic rule which should be kept in mind. They are as follows:
Applicability of law as well as cases
This case has to follow above rule provided in report. According to Income Tax Assessment Act, 1977, Jahid has occurred with different expenses for the time period of 2019-2020 that are connected with work and non-work or extraneous expenditure but allowed for deduction of various expenditure that can be ascertain with help of following mentioned rule (Nikolaev, 2018). Jahid has incurred different expenses which are as follows:
The following could be states such as:
|Expenditure liable for deduction||Amount ($)|
|Cost of protective sunglasses as well as shoes||600|
|Add: Cost of compulsory uniform ||700|
|Total amount liable for deduction ||1300|
The other non-compulsory amount which is $300 has to be bear by Jahid which is regarded as private expenditure and is not liable for deduction from his salary.
The report has concluded that it is important to solve arise issues of taxation whether liable for deduction or not. According to Australian Law Taxpayer, Jahid is working as mechanic who is liable to get deduction on different expenses such as cost of protective shoes as well as sunglasses that is mandatory to be worn at time of performing work and protecting from unforeseen contingency at environment and types of works that has carried out by Jahid. Cost that has occurred for compulsory uniform is obligatory to be spend by payer of tax and liable to get deduction whereas on other side, expenses that are incurred for non compulsory uniform is because of personal choice as well as regarded as private expenditure and does not liable for deduction under Australian Taxation and provisions.
Question 2 Tax liability of Judy
The income of assessable is the ordinary income which rendered from personal services, or the law is based on income as specified with undertaking the income tax. The receivable income from the equipment of hired by the public with providing functions of services as well as facilities to the organization. Taxable purpose is to depreciate the amount of assets as income of assessable treated. The capital gain, interest of loan income is included in other income as considering. In beneath, the figure is showing the scenario of Judy’s report from total income to investment income and its total assessable amount (Albarea, Bernasconi, Marenzi, and Rizzi, 2020)
|Salary income ||$ 8333.33||$ 100000|
|Income from investments||$ 1666.67||$ 20000|
|Total amount of assessable income ||$ 10000||$ 120000|
In above table, the amount of total income is assessed by $ 120000, it included in the income of Judy.
It is the income which is also known as gross adjustable income, or it owes the money of tax from government as the total amount of income. It is deductible income from taxable amount of exemptions included salaries, wages, compensation, unearned income, or the income from investment as well. An amount of income is calculated under the taxable income which comes in surcharges. The table shows the Judy’s taxable income of total in below as considering-
|Total amount of assessable income||$ 10000||$ 120000|
|Less: Deductions of allowable ||-||-|
|Judy’s net taxable income ||$ 10000||$ 120000|
Hence, Judy’s net income of taxable is shown in table of above as $ 120000.
Income tax of Miss Judy as calculated on the total taxable income
The taxable income is a rate of slabs which is considered by the authority of government on individual basis of criteria. As individually examine the criteria based on tax liability or income with undertaking the tax liability attained in below assumptions of limitations imposed the threshold. The tax payable is included in income tax on resident basis, during the year of financing. Provide the rate of slab as individually is generally considered in income tax (Blaylock, Lawson, and Mayberry, 2020)
Figure 1: Tax rate 2019-2020Figure 2 Tax rate 2020-2021
Miss Judy’s rate of tax is considered for the year of 2019-20 as follows in below-
|Income slabs or limits||Rate of tax|
|Income raised up to $ 18200||Nil tax|
|From $ 18201 to $ 37000||19 % over or above $ 18200 to $ 37000|
|From $ 37001 to $ 90000||$ 3572 + 32.5 % from $ 37001 to $ 90000|
|From $ 90001 to $ 180000||$ 20797 + 37 % from $ 90001 to $ 180000|
|Over or above $ 180000||$ 54097 + 45 % from $ 180001|
In above table, the rate of tax is comes in under of slab as $ 90001 to $ 180000. Hence, the rate of tax is calculated on the income of taxable are s $ 20797 + 37 % (120000-90000) = $ 20797 + $ 11100 = $ 31897 for $ 120000.
Medicare is mainly reckoned as the scheme of residents for the Australian accessing regarding health care facilities. It is the fund which provides free subsidiary of health treatment by professionals involving the specialists, doctors, optometrists or dentists are accommodating for free treatment of public which are patients in hospitals of public. It charged 2% tax on income for the individuals certain across threshold earning or not holding covers on private hospital that is mainly required for pay the cost of Medical levy is curing service provided to public regarding health care with proper facilities. Assessment of taxable income is mainly calculated under the liability of Medicare levy regarding their equipment which is essential for their patients. According to the government law, they get funds from fulfilled the conditions of several with hazards of its merits. In Judy’s case, it can be treated at Medicare on income of tax to generating the amount which is allowed by the programming (Saarah-Mensah, 2020).
Medical levy surcharge
It encouraged people for taking out the patients of private hospital which designed by MLS to cover private hospitals or its demand is reducing day-by-day. The income of MLS is determined towards the rate of paid in taxable income as differentiated. It charged the rate of tax is 1%, 1.5%, 1.25%on levied the taxable income, benefits on fringe repots of total, or any amount with distribution of trustable family tax which is payable as per the consideration.
However, the income of family is exceeded on threshold but the personal income generated for MLS as targeted were $22,801 or minimization. The surcharge of medical levy is being noticed in tax return provided by information of MLS payable as liability on regards of work given.
According to the rule, the income of family or people is received the amount of tax as benefit. Regarding the purpose of surcharge medical levy is entitled for receiving the profit of tax as 1.25%. As considered the benefit which provide to family or people income on the 1.5% regarding the taxation. Moreover, the taxable income of charging the benefits is receivable for the people along their families.
As in the Judy’s case, the income of her family is considered as-
$120000 + $150000 = $270000
In rate of above is examined the surcharge of medical levy charges of tax on 1.25% of total income. For consideration, the surcharge of medical levy is being calculated as the following in under-
$270000 x 1.25% = $3375
The loan is paid on higher education which interest is deductible from the amount of tax. Federal agencies provided loans on student interest with indefinite suspense regarding claim on deductible taxation. The tax deductible is allows on interest of student loan and amount of subtract is $2,500 or more as reckoned. In Judy’s case, the amount of deductible taxation is shown in below table-
|Annual income ||Student loan rate |
Below 75,145 - 79,652
79,653 - 84,432
84,433 - 89,498
89,499 - 94,868
94,869 - 100,560
100,561 - 106,593
106,594 - 112,989
112,990 - 119,769
119,770 - 126,955
126,956 - 134,572
134,573 or an above
Less than 5.0%
The student loan is calculated for the payment as follows-
$120000 x 9% = $10800.
The liability of tax is an amount of taxation owed by authorities of government likewise state, local, or federal governments. The payment of tax is used for funding the social programs or the role of administration. Current or tax liabilities is incurred in liabilities of short-term during the year of paid tax. The amount of taxation on liabilities for the operations of businesses as penalties, tax lien, tax charges. On income tax laws is obligated, the earning of income from individuals with their compliances tax application from the income source. As liability amount is payable to government is included in debt tax which owed from the authorities of tax (Sowa, Kault, Byrnes, Comans, & Scuffham, 2018).
Judy’s liability is considered as total liability of taxation which is payable in during the year of tax liability are generally pay. In below, the table is shown the liability of tax as total of Mrs. Judy as follows-
|Particulars ||Paid amount of tax |
Surcharge of Medicare levy
|Total amount of Judy’s Tax liability ||$ 48292|
In above table, it is shown that amount of tax liability as total is considered of $ 48292. Hence, the tax liability of Judy’s income is receivable from the sources of taxable income, Student loan, Medicare levy or surcharges of Medicare levy (Svetalekth, 2020).
From the above report it can be observed that, tax payer has to pay tax on the earned by them s per the provision of the ITAA 1997. Jahid was allowed to claim his expenditure which was incurred for the business purpose. But he cannot claim those expenditure which has not been incurred for the business. While Judy has to offer her income as per the ITAA 1997 and require to pay tax.