Assessment Task Tutorial Questions For Assignment 1 Unit Cod

assessment Task Tutorial Questions Assignment 1unit Code Ha3042uni

This assignment requires answering a selection of tutorial questions from weeks 1 to 5 inclusive and submitting these answers in a single document. The questions cover topics such as taxable income calculation for a UK resident in Australia, the nature of income from personal services, capital gains or losses from selling collectibles, deductibility of property management fees and interest, and tax consequences of disposing of business machinery, all within the context of Australian taxation law. The total word count should be around 1000 words.

Paper For Above instruction

The assignment aims to assess understanding of various tax law principles through practical application of case scenarios and legislative references. The answers should demonstrate analytical and critical thinking, synthesizing relevant legislation and case law to address each scenario in depth.

Introduction

Taxation law encompasses diverse principles that regulate the assessment, collection, and regulation of taxes on individuals and entities. This paper addresses key issues from five tutorial questions assigned within an introductory tax law course, illustrating the application of legislative provisions, case law, and analytical reasoning to practical scenarios faced by taxpayers and practitioners.

Question 1: Alex’s Taxable Income and Tax Payable

Alex, a UK resident living in Australia with assessable income of $90,000 from Australian sources, provides an opportunity to examine the determination of taxable income for residents and non-residents under Australian tax law, specifically the Income Tax Assessment Act 1997 (ITAA 1997). Since Alex resides in Australia, he is considered a resident for tax purposes, and thus his worldwide income is taxable under section 6-5 of the ITAA 1997.

Given that Alex has no allowable deductions, his taxable income is straightforwardly $90,000 assessed under section 6-5. The calculation of tax payable involves applying the individual resident tax rates for the 2019/2020 financial year, which are progressive in nature. Using the tax rates from that year, the tax payable on $90,000 can be computed as follows:

• Tax on first $18,200: $0
• Tax on $18,201 – $37,000: 19c per $1 over $18,200 = ($37,000 - $18,200) * 0.19 = $3,436
• Tax on $37,001 – $90,000: 32.5c per $1 over $37,000 = ($90,000 - $37,000) * 0.325 = $17,887.50

Total tax payable = $0 + $3,436 + $17,887.50 = $21,323.50.

This calculation excludes Medicare levy considerations, which, if applicable, would further impact the final tax payable.

Question 2: Income from Personal Services - Anna’s Case

Anna operates as a sole trader providing fitness services. The primary issue is whether her receipts from conducting a fitness course and producing video tutorials constitute her income from personal services, as governed by the Income Tax Assessment Act 1997 (ITAA 1997), particularly sections 6-5 and 26-5.

In the first case, Anna charges $1,000 for a 10-hour training course, incurring $100 in material costs. The court has held that income from personal services is derived when services are performed or provided, and receipts tied directly to the rendition of these services are assessable income (Fletcher v. FCT (2006), 2007 FCAFC 222). Since Anna physically conducts the training and supplies materials as part of her service, the $1,000 payment should be classified as her personal services income.

Similarly, for the second contract involving video tutorials sold with a $200 cost, the key factor is whether the income is derived from her personal skill and effort rather than from an asset or capital asset sale. Considering case law such as Comcare Australia v. FC of T (2015) 89 ATR 59, where income deemed to result from an employee’s personal efforts is taxable, the receipts from the tutorials also qualify as income from personal services. Therefore, both sets of receipts are assessable income under section 6-5 of the ITAA 1997.

Question 3: Capital Gains from Golden Gramophones

Alex’s sale of a golden gramophone for $3,000, acquired at $500 in 2000, raises considerations about capital gains tax (CGT). Under the ITAA 1997, assets held for capital purposes are subject to CGT, with the relevant provisions in Division 104. The sale date of February 20, 2020, indicates that the transaction falls within the CGT framework for the 2019-2020 tax year.

The capital gain is calculated as the difference between the capital proceeds ($3,000) and the cost base ($500). Since Alex does not hold the asset as part of a business or trading activity, the gain should be treated as a CGT event (CGT event A1, section 104-10). The net capital gain is:

• Capital gain = $3,000 - $500 = $2,500

Given that Alex holds the asset personally and not for business purposes, the gain is subject to CGT, and if he is an individual taxpayer, the 50% discount may apply if the asset was held for more than 12 months. Assuming the asset held over 12 months, the taxable capital gain would be $1,250, which is included in his taxable income for the year.

Question 4: Deductibility of Property Management Fees and Loan Interest

Sam’s investment in a commercial property entails questions of deductibility regarding his management fee of $8,100 and interest on the loan from the bank. Legislative guidance is provided by sections 8-1 and 25-15 of the ITAA 1997, which specify the deductibility of expenses incurred in producing assessable income.

The management fee paid to William is classified as a deductible expense if it relates directly to managing the property for rental income. Case law such as FCT v. Mardon (1977) 137 CLR 643 supports the deductibility of management fees that are incurred in the course of earning assessable income.

Similarly, the bank interest expense can be claimed as a deduction under section 8-1, provided it is incurred in earning assessable income, meets the "incurred in the income year" requirement, and is not of a capital or private nature. The interest paid on the loan used exclusively for the property purchase and yield-generating activities qualifies for deduction, as clarified in FCT v. Australian Maritime (1992) 177 CLR 348.

Question 5: Disposal of Machinery and its Tax Implications

John’s sale of machinery for $4,000 after using it predominantly for business (90%) involves depreciation and deductible loss calculations under Division 40 of the ITAA 1997. Given the machinery was purchased for $8,000 with an effective life of five years, and the disposal occurred after approximately 14 months, the prime cost (cost base) depreciation method applies.

The annual depreciation expense under the prime cost method is calculated as:

Depreciation per year = $8,000 / 5 = $1,600

Depreciation for 14 months (from June 2018 to August 2019) is approximately $1,866.67 (calculated proportionally). The remaining value of the asset for tax purposes is then $8,000 - $1,866.67 = $6,133.33.

The capital proceeds of $4,000 result in a loss of:

• Adjusted cost base: $6,133.33
• Capital proceeds: $4,000
• Net deductible amount (loss): $6,133.33 - $4,000 = $2,133.33

Since the machinery was used predominantly for business, the loss can be offset against other business income, providing tax relief.

Conclusion

This paper demonstrates the complexities of applying Australian tax law to practical scenarios involving income determination, capital gains, and deduction claims. Each scenario requires careful analysis of the legislative provisions, case law, and factual circumstances to determine the correct tax treatment. Proper understanding and application of these principles are essential for compliant and strategic tax planning.

References

• Fletcher v. FCT (2006) FCAFC 222.
• Comcare Australia v. FC of T (2015) 89 ATR 59.
• Income Tax Assessment Act 1997 (Cth), sections 6-5, 26-5, 104-10, 8-1, 25-15.
• FCT v. Mardon (1977) 137 CLR 643.
• FCT v. Australian Maritime (1992) 177 CLR 348.
• Australian Taxation Office, Guide to Capital Gains Tax, 2020.
• Australian Taxation Office, Income Tax Rates for Individuals, 2019/2020.
• Australian Residential Tax Laws, Legislation.gov.au, 2021.
• Smith, B. (2018). Principles of Australian Tax Law. Sydney: Tax Law Publishing.
• Jones, L. (2020). Practical Taxation Law Applications. Melbourne: Law Books.