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Taxation Law - Question 1

There are two laws which are related to or specifies the concept of Income Tax in Australia. The two laws are known as the Income Tax Act of 1936 and the income tax assessment Act 1997. Both these laws govern income Tax Acts, specifying that what are the Deduction and what are the amounts that have to be added while calculating that net payable income. (Anon., 30/04/2012)

Section 8.1 of the Income Tax Assessment Act 1997 talks about General Deductions. General Deductions are the amount deducted from the assessable income to such an extent that:-

  • If the amount if incurred in gaining income;
  • If the amount is expended for carrying of a business.

But the following heads of income cannot be deducted if it is a loss or outgoing of capital

Section 8-5 of the Act specifies the specific deductions which can be deducted from a taxpayer’s assessable income. (Anon., n.d.). The section specifies that deduction can be done if the provision of the Act, allows deduction. The amount that is deducted under the head of this Act is known as Specific deduction.

The section provides that if an amount is received as insurance , indemnity or other recoupment of a deductible expense is included in the assessable income. (Anon., n.d.)

Section 8-10 of the Act related to No Double Deductions. According to the section, if two or more provision of the Act states that if two or more provisions of the Act allows deduction the only deduction is done where it is the most appropriate. (Anon., 2017) (Anon., n.d.) (Anon., n.d.)

Therefore as per section 8.1 and section 8.2 of the Income Tax Assessment Act 1997 since the amount is used to build an alternative building adjacent to the old building in order to prevent the building from shutting down and after the new chimney was injected it is adding in the business only. The amount is expended for carrying of business.

Hence the amount incurred by Furnaces Private Ltd for the repair of the chimney will be deducted falling under the category of specific deductions as per section 8.5 of the Income Tax Assessment Act 1947 after applying down the principles laid down in Section 8.1 and 8.2 of the Income Tax Assessment Act 1947.

Taxation Law - Question 2

Taxable Income is the income on which the tax is paid on . It is calculated after all the deductions done that are specified as per the law whether they are specific deductions or general deductions.

Anushka’s Taxable income:-

Particulars

Answer

Net Salary Received

$81,000

Add Back Tax Paid

$29,000

Net Business profit

$30,000

Fully franked Dividend

$7000

Add Back franking credit

$3000

Unfranked Dividend

$1200

Assessable income

$151200

Taxable Income

$146200

Tax Payable

$41591

Less Refundable Tax Offset

$7000 + $1200 =9200

PAYG withholding

$30,000 – (5000) –(1200)= $23,800

Franking Credits

$3000

Net Tax Payable

$24358

The amount of Franking credit paid will be $24358 + $3000 = $27358

Bibliography for Income Tax Assessment Act

 Inquiry Into tax deductibility , s.l.: s.n. Retreived from https://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Taxdeductibility/Report

 Commonwealth Cosolidated Acts.. Commonwealth Consolidated Acts . http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/

Income Tax Assessment Act 1997. 12 October , No.38(174), pp. 27- 30.

 30/04/2012. Income tax, s.l.: s.n. retreived from

https://www.legislation.gov.au/Details/C2017C00336

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Law Assignment Help

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