Taxation Law and Practice Assignment

Students must complete all Parts of the Assignment.

To support the analysis in your answers refer where appropriate to the ITAA 1936, ITAA 1997, Tax Rulings and/or case law.

Part A:

You have just started a new job as a graduate accountant. Your managing partner has to do a media interview and he asks you to provide answers to some questions that will be asked. He has given you a list of questions that he has to address in his interview and he needs you to provide him with short answers to these questions and provide references so that he can check the answer if required.

1. Where is the primary source of the Commonwealth Parliament's taxation power found?

2. What are the primary sources of tax law?

3. Explain what topic Taxation Ruling TR 98/17 discusses?

4. How is the Medicare levy calculated?

5. Which Division of the Income Tax Assessment Act 1997 denies a company that has been fined under Commonwealth consumer legislation for engaging in misleading and deceptive conduct from deducting the costs of the fine?

6. Explain how Section 25-45 ITAA97 relates to specific deductions?

7. Explain the significance of  the High Court case, W Thomas & Co Pty Ltd v FC of T (1965) 115 CLR 58, in the topic of deductions?

8. Explain the three ways that a taxpayer can choose to value each item of stock on hand at the end of the income year.

9. What is the applicable tax rate for a taxpayer who has $45,000 taxable income in 2016/17?

10. Explain the PAYG tax collection system?

Part B:

During the financial year Ram paid his tax agent $1,000 to complete the previous year's income tax return. He also paid his solicitor $2,000 to draft an objection to an ATO assessment that he received two years ago. Ram also paid $50,000 in income tax.

Explain with supported reasons which of the three costs are deductible.

To support the analysis in your answers refer where appropriate to the ITAA 1936, ITAA 1997, Tax Rulings and/or case law.

Part C:

On November 11 Tina a twenty year old international student arrives in Brisbane to study at university. She works part time in a local supermarket to help with living expenses and study fees. Her earnings to 30 June are $12,000. Regrettably she does not do well in the assignments and exams and fails all subjects. With deep regret she returns to her home country.

Did the student become an Australian resident?

To support the analysis in your answers refer where appropriate to the ITAA 1936, ITAA 1997, Tax Rulings and/or case law.

Part D:

Jimmy is an Australian single full-time university student who works part time in a restaurant. During the year he has receipts as follows:

(a) Income from working in the restaurant $27,000;

(b) Tips from customers $750 cash;

(c) At Christmas time, a regular and satisfied customer gives Jimmy an expensive bottle of Scotch alcohol, worth $250. Jimmy does not drink and gives the bottle to his friend, Eva;

(d) Also at Christmas time, Jimmy's parents give him as a gift $15,000;and

(e) Each month his employer at the restaurant takes all staff including Jimmy out for dinner and the total expense of the food that Jimmy eats on these nights is $645.

What is Jimmy's assessable income for the year? To support the analysis in your answers refer where appropriate to the ITAA 1936, ITAA 1997, Tax Rulings and/or case law.

Part E:

Josie is a single Australian mortgage broker who obtains loans for her clients from various banks. She earns commission from the banks when she introduces a successful loan application to any of the banks.

Usually she works from home and at times she also visits her clients at their homes to arrange the documents for the applications. At times she visits the branches of the banks to drop in hard copies of the paperwork. 

Her home office is where she does most of the work with these applications, stores client information and keeps hard copies of the various client applications.

Her home office occupies 15% of the total space in her home. Her outgoings in relation to her home for the current financial year are as follows:

(a) Council rates $4,900

(b) Interest on her home loan $18,900

(c) Electricity and heating costs $6,800

(d) Cleaning lady $3,400

(e) Home telephone (60% of which is for business use ) $2,700

(f) Mobile telephone bill (90% of which is for business use) $7,200

Calculate how much of the above outgoings are a deductible expense for Josie?

To support the analysis in your answers refer where appropriate to the ITAA 1936, ITAA 1997, Tax Rulings and/or case law.