A Typical Taxation Law Assignment Sample

Law

A Typical Taxation Law Assignment Sample

Taxation Law

The following is an assignment done by our expert at My Assignment Services. This will give you a clear idea of the high-quality assignments we deliver to students seeking taxation law assignment help at My Assignment Services.With My Assignment Services, seeking online taxation assignment help is now not only easy, but affordable too!

Taxation

BLOCK 1 TRIMESTER 1 2017: TLAW 303 – TAXATION LAW – ASSIGNMENT QUESTION

Assessment Details

Due date: Friday, 31 March 2017    11-59 PM IN MOODLE                                                                                                     

Weighting: 40%                                                                                                                                             

Format: One Income Tax Problem Question. 

Objectives

Answer the following question with reference to the relevant legislative provisions operating in Australia concerning the application of relevant income tax rules and formulas. Do not consider the effects of legislation potentially applicable other than that specifically identified.

Assessment Task

Question 40 Marks

Giving reasons indicate any amounts that would be included as assessable income of the following resident taxpayers for the 2016/17 tax year:

(a) Nick Addison is employed by Lazarus Holdings Ltd. His net weekly wages totalled $78,000 for the year. Total PAYG tax withheld from Nick’s weekly wages from Lazarus and forwarded to the ATO amounted to $19,000.

(b) Additional wages paid to Nick as a Christmas bonus of $6,000 (net of $4,200 PAYG tax withheld).

(c) Reimbursement of out-of-pocket travel costs of $1,200 that Nick incurred during his employment.

(d) A travel allowance totalling $2,800. No PAYG was withheld from this amount.

(e) Lazarus paid health insurance premiums for Nick and his wife to the value of $2,750.

(f) $10,000 superannuation contribution to Lazarus Holdings Superannuation Fund on behalf of Nick.

(g) Chris receives casual wages as a freelance journalist. On 4 July 2016 Chris was seriously injured when he fell down seven flights of stairs whilst jogging one morning. He received $50,000 during the year from his sickness and accident insurance policy for loss of income.

(h) Chris also received $8,000 from his health insurance policy towards various operations and rehabilitation that he required.

(i) Chris received a $70,000 lump sum under a trauma insurance policy for his right foot, which eventually required amputation.

(j) Chris received a cheque for $5,400, which represented long service leave that he had accrued from several years as a part-time copywriter. This amount is net of $1,600 PAYG tax withheld.

(k) Quentin conducts business as a general medical practitioner. During the year, he received $79,000 in fees direct from patients, and $154,000 in receipts from Medicare.

(l) Warren derives business income as a removalist. During the year, due to an error by his mechanic, Warren’s truck was off the road for 4 weeks and eventually written off as irreparable. All figures are exclusive of GST where applicable. He received the following amounts from his insurance company:

Reimbursement of deductible truck repairs                              $ 14,000

Demurrage (compensation for loss of income)                            16,000

Proceeds for disposal of Truck (equal to book value)                  75,000

(m) Sandy operates a general food store. During the year, his store was subject to two armed robberies. He received the following amounts from his insurance company (exclusive of GST):

Loss of cash sales from robberies                       $ 21,000

Loss of Trading Stock                                                  7,800

Reimbursement of deductible shop repairs           3,200

Reimbursement of Medical Expenses                     2,000

(n) Troy operates an advertising agency. During the year, he has a “contra” transaction with his solicitor to the value of $25,000.

(o) Harrison derives business income as a barrister. He instructs one of his clients to pay his fee of $19,000 direct to Commonwealth Bank with whom his wife has a mortgage.

(p) Karl conducts business as a contract plumber. He completes a subcontract job for a large construction company in return for airfares and accommodation to the value of $8,000 rather than a cash fee.

(q) Rob conducts business as a lawyer. He drafts some changes to a Will for one of his clients and does not charge a fee but receives a $250 pair of cufflinks.

(r) Petros conducts business as a property developer. As a result of extensive travel throughout the year, Petros receives 178,000 frequent flyer points which he is able to redeem in the form of air tickets to the value of $3,280.

(s) Len trades as a carpet retailer. During the year, he receives cash subsidies and incentives from a supplier for selling over 2 kilometres of their carpet. This amounted to $36,000.

(t) Shelley operates a coffee shop. Fiasca, a coffee supplier gives her an espresso machine as an incentive to use their coffee. The machine is worth $12,000. They also provide her with some outdoor umbrellas and furniture with the name of their coffee. These are valued at $8,000 but must be returned to Fiasca if she ceases to buy their coffee.

Marking Guide

The question has 20 parts and for the correct answer of each part, 2 marks will be allocated.

END OF QUESTIONS

 

Taxation Law

Question

Giving reasons, indicate any amounts that would be included as assessable income of the following resident taxpayers for the 2016/17 tax year:

(a) Nick Addison is employed by Lazarus Holdings Ltd. His net weekly wages totalled $78,000 for the year. Total PAYG tax withheld from Nick’s weekly wages from Lazarus and forwarded to the ATO amounted to $19,000.

Nick’s assessable income = $78,000

Reason: Nick’s assessable income is $78,000. The $19,000 withheld tax has been deducted from his gross income. During tax calculation, the $19,000 will be deducted from his taxable income as it will be treated as a tax set off. Nick earned a total of $78,000 in 2016/2017 and, therefore, this becomes his total assessable income for the year.

(a) Additional wages paid to Nick as a Christmas bonus of $6,000 (net of $4,200 PAYG tax withheld).

Nick’s assessable income = $78,000 + ($6,000 + $4,200)

= $78,000 + $10,200

=$88,200

Reason: Nick’s Christmas bonus is treated as income, therefore, included in the assessable income. Nick’s assessable income will become the addition of total weekly wages and the bonus amount plus tax withheld. This translates into $78,000 plus $10,200 to total to $88,200.

(c) Reimbursement of out-of-pocket travel costs of $1,200 that Nick incurred during his employment.

Nick’s assessable income = $88,200 + $0

= $88,200

Out of pocket travel expenses are not income and, therefore, should not be taxed on Nick. Out of pocket expenses by an employee should be compensated for by the employer. In this case, Nick should receive untaxed compensation to the tune of $1,200. However, this is not income and it should not be included in the calculation of assessable income for Nick.

(d) A travel allowance totalling $2,800. No PAYG was withheld from this amount.

Nick’s assessable income = $88,200 + $2,800

=$91,000

Travel allowance falls in the list of allowances that added to other incomes to get the assessable income. Travel allowance is not subjected to pay as you go, but it is subjected to the graduated scale in form of taxable income. Nick’s travel allowance is added to the previous total assessable income to get the new assessable income of $91,000.

(e) Lazarus paid health insurance premiums for Nick and his wife to the value of $2,750.

Nick’s assessable income = $91,000 – $2,750

=$88,250

Reason: Health insurance premiums are treated as deductible benefits and are hence deducted from the assessable income. The amount paid by Lazarus Holdings Ltd ($2,750) will be deducted from Nick’s assessable income ($91,000). This amount is not subjected to pay as you go or the graduated scale. Its value is taken as it is.

(f) $10,000 superannuation contribution to Lazarus Holdings Superannuation Fund on behalf of Nick.

Nick’s assessable income = $88,250 – $10,000

=$78,250

Australian superannuation is usually a taxed fund. Nick’s superannuation fund has not been taxed, therefore, it is going to be taxed once it is received by his superannuation service provider: Lazarus Holdings Ltd. Since this is an expense and not an income, Nick’s superannuation contribution will be deducted from his assessable income. This translates into $78,250.

(g) Chris receives casual wages as a freelance journalist. On 4 July 2016 Chris was seriously injured when he fell down seven flights of stairs whilst jogging one morning. He received $50,000 during the year from his sickness and accident insurance policy for loss of income.

Chris’ assessable income = $50,000

Sickness and accident policy compensation can either be withheld or not withheld depending on the nature of loss of income, the payment plan and the source of the payment. In the case of Chris, the payment is from the insurer to the owner of the policy, Chris, hence there is no withholding of tax. The amount of compensation received by Chris was $50,000, thus this amount becomes his assessable income.

(h) Chris also received $8,000 from his health insurance policy towards various operations and rehabilitation that he required.

Chris’ assessable income = $58,000

Chris’ total assessable income will be $58,000. Health insurance policy compensation is treated as income. It is required that all incomes be totalled together when determining taxable income. Health insurance policy contributions will be added to sickness and accident insurance policy compensation to attain total assessable income.

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