A: I. calculation of net tax payable for 2016-17
Medical levy surcharge is not provided to the individual and their dependents when it crosses the base tier allocation of income $ 180000 or less. In this case, as the income is less than $ 180000 therefore, it falls within the base tier and no surcharge is to be provided. Cosmetic surgery cost is done for personal purpose therefore; the costs related to cosmetic surgery are excluded from the deduction list of taxable income calculation (ato.gov.au, 2016). Medical levy is charged on taxable income at a rate of 2% from 2016 onwards.
II: calculation of tax offsets
In Australian taxation law, the individual with dependent children under 21 years is allowed to receive a tax offset for the medical expenses. Clarissa, the single resident with dependent children falls under the second category of a single with dependent children tax slab. Moreover, as Clarissa has received family tax benefit part A and has no private health insurance, therefore, she and her dependents are eligible for medical levy surcharge.
B. Calculation of net tax payable for 2016-17
Destiny is also not covered by private health insurance therefore, Destiny is also eligible medical levy surcharge but as the taxable income falls in the base tier of $ 90000 or less therefore, a surcharge is zero.
In this case, Fringe benefits that are not included in the taxable income are included as reportable fringe benefit income.
Purchase of assets and the property are not included in the deduction list, therefore, the purchase of washing machine, ceiling fan and purchase price of the property are not included in the list of assessable income. The expenses related to work-related expenses like, stationery and other work-related journals expenses are excluded from the list of deductions as the expenses are more than $ 300 and no receipts proving those expenses are kept. Therefore, without any evidence, no work-related expenses can be claimed. Construction cost is of $ 140000 are exempted from the calculation of taxable income as the construction are not fulfilling the three criteria as mentioned in Australian taxation law.
The construction is not based on extensions, improvements, alterations of the building.
The construction is related to alterations and improvements on structures (ato.gov.au, 2016)
Protection of environment earthworks
The taxpayer Sunil has purchased a township for investment purpose and therefore, the above criteria are not fulfilled, which shows that construction expenses could not be claimed for deduction.
Calculation of taxable income of ANNA
The electronic weighing platform has shown the opening value of $ 27450 with a purchase price of $ 90000 and sales proceeds with $ 37450. The value of increasing cost $ 80000 can be treated assessable income for the year 2016-17. In case of a low pool, the amount of sales register proceeds are deducted from the low pool balance of $ 2000. The increasing balance is taken as the part of taxable income. The amount received from the proceeds of lawsuit settlement against the damages of reputation loss is excluded from the list of assessable income because those expenses are treated as personal expenses (thepersonalinjurylawyers.com.au, 2016). Personal expenses are excluded from the calculation of taxable return calculation under Australian taxation law. Purchase of new drinks refrigerator, storage cupboards are treated as the assessable income. In both the cases, the amount of purchase is being seen and as the opening stock amount is not provided, therefore, the purchase of both the items are treated as the part of the assessable income. All the depreciable assets that are included by ANNA are calculated by adjusting the purchase cost against the adjusted value. The increasing cost of $ 36930 is included in the list of assessable income of the taxpayer.
Calculation of taxable income of Cameron
Calculation of car deduction expenses in two methods
In this method, the expenses list of 12 weeks is to be taken into consideration. In logbook method, the business Km is divided by the total Km and then 100 multiply the KM that is derived from the calculation. In this case, the percentage of car usage KM is reported to be 35%. Therefore, in this method, the car expenses are (35% of 6440)= $ 2254.
Therefore, car deduction of $ 2254 can be claimed for this purpose.
Cents per km method
In this method, total business km and number of cents are taken into consideration for the purpose of calculation. 85 cents per Km (5500*85%) are taken as the calculating amount. Therefore, expenses of $ (5500*85 cents per Km = 4675 can be claimed. Therefore, highest of the amount $ 4675 is taken as the deduction.
As per the Australian taxation law, the four methods are used for car expenses deduction. Four methods namely, logbook method, ⅓ expenditure method, 12% of expenses method and cents per Km method are used but in this case, from 2016 onwards only two methods are used. The methods namely log book and cents per Km method are used for calculation of car deduction expenses. The car deduction expenses (highest of the logbook method and the cent per Km method) are taken into consideration. Trading stock amounts are calculated by adjusting the opening balance of trading stock with the purchase cost and replacement cost. The cash payment and the market price used for selling the stock are also used for the adjustment purpose. The amount of $ 199900 is to be taken as the increasing cost of the trading stock. As per the Australian Taxation law, the increasing cost of the trading stock is treated as the taxable income. In this case, the expenses related to accounts payable are also adjusted with the stock trading expenses.
Explanation of uncorrected deduction claimed by Gaylord
Gaylord shows assessable income like gross salary for from airlines and east coast buses, travel allowance and fully frank credits correctly. In case, of deduction certain mistakes are seen. As per the Australian Taxation law, any expenses related to the work can be claimed only when three conditions are fulfilled:
1. Expenses are paid by the individual taxpayer and not reimbursed
2. The expenses directly related to income earning
3. Valid record is there for the expenses claimed for deduction
In the deduction list laundry for airline, uniform as estimated falls under compulsory work-related expenses category. Therefore, a full deduction can be claimed for the expense and it is assumed that evidence is kept for proving the expenses. Laundry of bus uniform are also fallen under the compulsory uniform related expenses therefore, a full deduction can be claimed for the expenses. As the expenses are less than $ 300 therefore, written evidence is not compulsory (taxtoday.com.au, 2016).
Skin care products, grooming and hairdresser cost used during flights for the purpose of employment are deemed as private expenses, therefore, cannot be claimed for deduction. Although the expenses are done for job purpose deduction of those expenses cannot be claimed. Therefore, Gaylord has wrongly claimed the deduction.
Travel luggage is not claimed because those expenses are considered as the private expenses in the Australian Taxation Law. Therefore, these expenses need to be excluded from the deduction list of Gaylord. Further, the expenses of travel cost related to Australia needs to be adjusted with $ 700 as those expenses are held and no receipt of the same can be shown. Evening shift allowance can be claimed for deduction as it is helping Gaylord in earning income.
As per the Australian Taxation law in Logbook method at least 12 weeks logbook are to be kept but Gaylord has only kept 4 weeks logbook therefore, he cannot claim a deduction in respect of car expenses in terms of logbook method. Deduction in respect of car expenses can be kept for actual expenses method. In that case, ⅓ of the expenses can be claimed for deduction.
Revised taxable income sheet
Calculation of net taxable income of Alberto
Winning from the casino is an exempted income therefore excluded from the assessable income calculation. Mortgage-related expenses and their interest related expenses for work preparation are not claimed for deduction in Australian taxation law. Therefore, the amount is excluded from deduction list.
Calculation of Net Tax Payable
In this case, redundancy of the salary is calculated by adjusting the years of service with the taxable component of the salary. In this case, 20 years and 11 months is taken as 20 years only. Therefore, redundancy payment is calculated with the long-term amount of $ 117840 and 95000-taxed amount is multiplied with 0.20. Tax offset is provided on the expenses that are that are related to salary redundancy and superannuation income. In this case, the tax offset are divided into two components namely, 15% of the taxed element is not given to Dave because the taxpayer is less than 60 years. Individual of less than 60 years are not given tax offset. The PAYG withheld are deducted from the net tax payable. As DAVE is taking the benefit of private hospital expenses therefore, the taxpayer can claim no medical levy surcharge. As per the Australian taxation, law the taxpayer covered with private hospital insurance gets the benefit of rebate but surcharge benefit is not given to those taxpayers.
Cardio twister, the personal exercise equipment falls under the category of exempted income. The amount of personal exercise equipment with an amount less than $10000 is exempted from the list of income. Therefore, Paul could not claim a deduction of $ 200 capital gain income. As capital loss is related to any asset can be adjusted to the next year balance. Therefore, capital loss of $ 5200 can be adjusted against the capital gain income. The bribes that are given are part of the exempted income therefore; it could not be claimed for deduction. In this case, as the trading stock has no opening balance, therefore, the amount of purchase is treated as an increase in stock. Increasing stock can be claimed as assessable income. The trading stock has passed the income test $20000 but other three tests are not passed, therefore, an amount must be carried forward.
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