According to the provisions of the Australian Taxation Law, the following are the sources of income for a person residing in Australia;
In the aforesaid case, the three income of Hillary will be considered as income from other sources. Hillary is a mountain climber in profession and she is not a writer in profession. The income of Hillary for the mountain climber profession will be taxable under the heading Income from profession. However, the income she generated from writing of the life story is not a part of her profession. The same thing is applicable for the sale of manuscript and photographs of mountain climbing. These three incomes are not related to her profession but was the income from other sources. Thus, it can be concluded that the three payments of income are income for her personal extertion. No, my answer will not differ if she wrote the story for her own satisfaction and only decided to sell it later
Eric provides his employee with the use of a car for 183 days during the FBT year. During this period the car travelled 16,000 km. Eric purchased the car last year for $50,000. The employee contributed $1,000 towards the cost of running the car and has provided Eric with relevant documentation.:
The statutory percentages for car fringe benefits provided by the Australian Taxation Law are as follows:
|
Total Kilometers travelled during the year |
Statutory Percentage |
|
Less than 15,000 |
26 |
|
Between 15,000 to 24,999 |
20 |
|
Between 25,000 to 40,000 |
11 |
|
Above 40,000 |
7 |
The number of days the car travelled is 16,000 kilometers
The base value of the car is $50,000
The employee’s contribution towards the running the cost of car is $1,000
Number of days the car used by the employee is 182 days
The calculation of the taxable value using the statutory method is:
(Base Value of Car x 20%) x Number of days the car used by the employee/Total number of days in a year – the contribution of employee towards the running the cost of car
($50,000 x 20%) x 182/365-1000 = $3986
Your client is a parent who lent $40,000 to her son to provide a short-term housing loan. The agreement is that the son will repay $50,000 at the end of five years. The loan was made to the son without any formal agreement and without any security provided for the sum lent. In addition, the client (the mother) has informed you that she told her son that he need not pay interest. However, the son repaid the full amount after two years and included in his payment an additional amount which was equal to 5% pa on the amount borrowed. Only one cheque was presented for the total amount.
In the aforesaid case, the assessable income of the parent can be calculated by using the following formula i.e.
Amount received from the son+ the original amount of borrowing x 5% x 2
$50,000 + $40,000 x 5% x 2 = $54,000
The total assessable income of the parent will be $54,000
According to the current tax slab provided by the Australian Taxation Office for the financial year 2017-18 are as follows;
|
Taxable income |
Tax on this income |
Effective tax rate |
|
$1 – $18,200 |
Nil |
0% |
|
$18,201 – $37,000 |
19c for each $1 over $18,200 |
0 – 9.65% |
|
$37,001 – $87,000 |
$3,572 plus 32.5c for each $1 over $37,000 |
9.65 – 22.78% |
|
$87,001 – $180,000 |
$19,822 plus 37c for each $1 over $87,000 |
22.78 – 30.13% |
|
$180,001 and over |
54,232 plus 45c for each $1 over $180,000 |
30.13 – less than 45% |
The assessable income is the income which is generated by any person during a particular financial year according to the guidelines provide by the Australian Taxation Office. However, in some cases all the incomes generated cannot be considered as a assessable income. According to Australian Taxation Office income generated from personal dealings cannot be considered as assessable income due to the principle of Mutuality. In the aforesaid case, the income of the parent is not taxable due to the principle of mutuality as the relationship of mother and son is a personal nature and it cannot be considered as a business dealing or investment on the part of the parent.
The principle of mutuality is a legal principle generated through case laws. This provides that where a few numbers of persons contribute towards a fund controlled by each of them for a common purpose and any profit obtained from that fund cannot be considered as income taxable under the provision of Australian Taxation Office.
Scott is an accountant who purchased a vacant block of land in Brisbane on 1 October 1980. On 1 September 1986, Scott built a house on the land. At the time, the land was valued at $90,000 and the cost of construction was $60,000. The property has been rented out since construction was completed. On 1 March of the current tax year, Scott sold the property at auction for $800,000.
Discounted Method for calculation of Capital gain
Capital Proceed $800,000
Less Cost of construction $60,000
Discount Capital Gain $740,000
Net Capital Gain (50% of Discount capital Gain) $70,000
According to the Australian Income Tax law, it has been provided that all the assets whether tangible or intangible in nature as case may be if acquired before 20 September 1985 is known as Pre-CGT and is exempted from tax. As per the aforesaid provision the land was purchased in the year 1980 but the construction of the house was done in 1986. Thus, the house is the property which comes under the taxable asset.
Discounted Method for calculation of Capital Loss
Capital Proceed $200,000
Less Cost of construction $60,000
Discount Capital Gain $140,000
Net Capital Gain (50% of Discount capital Loss) $70,000
From the above calculation, it can be concluded that if Scoot had sold the property to his daughter, he would have suffered a capital loss of $70,000 under the discounted method of Income Tax.
If the owner of the property was a company instead of an individual, the company would have paid 30% on the net capital gain and will not get ant capital gains tax discount. For individuals the rate paid is the same as the income tax rate for the same year.
References
Australia, D. (n.d.). The basics of Capital Gains Tax. Retrieved from https://www.delisted.com.au/capital-gains-tax/basics: https://www.delisted.com.au/capital-gains-tax/basics
Calculating Capital Gains Tax in Australia. (n.d.). Retrieved from https://www.gotocourt.com.au/: https://www.gotocourt.com.au/civil-law/calculating-capital-gains-tax/
Office, A. T. (n.d.). Capital gains tax. Retrieved from https://www.ato.gov.au/: https://www.ato.gov.au/General/Capital-gains-tax/
Office, A. T. (n.d.). CGT assets and exemptions. Retrieved from https://www.ato.gov.au/: https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/
Office, A. T. (n.d.). Choosing the indexation or discount methods. Retrieved from https://www.ato.gov.au: https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-capital-gain/Choosing-the-indexation-or-discount-methods/
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