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ACC3TAX Taxation
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ACC3TAX Taxation
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Course Code: ACC3TAX
University: La Trobe University
MyAssignmentHelp.com is not sponsored or endorsed by this college or university
Country: Australia
Question:
Assessment criteria: Assignments will be assessed against the SILOs for the assessment. In particular, assignments will be assessed based on objective demonstration of the following:
1) Acting as a team, engagement of critical thinking and interpretation skills to correctly identify the issues to be analysed in the case study.
2) Application of critical thinking, interpretation and analytical skills to develop a meaningful analysis of the issue(s) previously identified, with detailed and analytical application of tax concepts, tax principles, legislation and case law. Mere citation, transcription or repetition of theory, concepts, legislation and case law without proper application will not attract any marks.
3) Correct application of tax concepts and case law principles to calculate tax liability (if required). Calculations must be fully stated and supported by applicable legislation and case law (where case law is required).
4) Elaboration of a solution to the issues presented in the case study, referring to the elements analysed and concluding the case. Applying the relevant legislation, identify and discuss the tax implications related to the sale of Brent Wilson’s house, and calculate any net capital gain which may arise thereof.
2) Applying legislation and case law, advise Brent Wilson on whether he could claim a deduction in relation to the legal fees incurred in May 2019.
3) Considering the information provided by Brent Wilson as well as your answer to items 1 and 2 above, prepare Brent Wilson’s statement of taxable income and calculate his final tax liability including Medicare Levy for the year ending 30 June 2019, stating the applicable legislation and case law (note: calculation of private health insurance rebate not required).
Answer:
Answer to question 1:
As defined under the “section 108-5 of the ITAA 1997” the CGT asset can be defined as any kind of property or the lawful equitable rights that cannot be characterised as the property. The land and buildings are also regarded as the CGT assets under “section 108-5 of the ITAA 1997”. According to the “section 104-10 (1) of the ITAA 1997” a CGT event A1 happens when there is a disposal of the CGT asset. It is necessary that the time of the CGT asset event such as when an individual taxpayer enters into the transaction for disposing the asset.
As defined by the Australian taxation office an individual’s house is usually exempted from the capital gains tax. However, the taxpayer obtains the entire main residence exemption if the taxpayer uses any part of the dwelling for generating the income such as renting out the room or running the business (Jover-Ledesma, 2014). For a taxpayer to determine the capital gains they need to know the market value of the house when the used is used for generating income.
The main residence exemption is usually applied to the taxpayer when the dwelling qualifies as the main residence. If the taxpayer owns two or more dwellings it becomes obligatory to ascertain whether the dwelling is the main residence for the taxpayer and hence eligible for the main residence. Whether the dwelling forms the main residence of the taxpayer it is necessary to determine the matter of fact.
According to the Australian taxation office to determine the proportion of the capital gains or loss which is taxable as the amount that reasonably having the regard up to the extent to which the owner have been using the land to deduct the amount of money borrowed to purchase the property. If the taxpayer began using the main residence for generating the income the taxpayer is generally taken to have acquired the asset till the time when the home is first used to generate income.
The Australian taxation office defines that the capital gains or loss which is taxable represents the amount that reasonably have the regard up to the extent to which the taxpayer has been able to deduct the interest on the money that is borrowed to purchase the house (Woellner, 2013). In majority of the cases the proportion of the area of floor or the home is set aside for generating the taxable income and period the taxpayer has used the home to generate income.
Wilson used 10 square metres out of his 200 square meters’ house for running his private consultancy. Therefore, the proportion of house that was used by Brent for generating the taxable income stands 5% of the total floor area. Therefore, the capital gains is calculated below;
Calculations of Net Capital Gains
In the books of Brent Wilson
For the year ended 2019
Particulars
Amount ($)
Amount ($)
Proceeds
1000000
Cost Base
400000
Add: Stamp Duty
20000
Add: Conveyance fees
8000
Total Cost Base
428000
Net Capital gains
572000
Assessable Portion (572000 x 5%)
28600
(Capital gains x percentage of floor area) = Assessable Portion
50% CGT Discount
14300
Answer to question 3:
Calculations of Taxable Income
In the books of Brent Wilson
For the year ended 2019
Particulars
Amount ($)
Amount ($)
Assessable Income
Gross Payment
1,20,000
Add: Total Allowances
3000
Receipt from patient fees
12000
Total Assessable Income
Net capital gain on disposal of property
Proceeds
1000000
Cost Base
400000
Add: Stamp Duty
20000
Add: Conveyance fees
8000
Total Cost Base
428000
Gross Capital gains
572000
Assessable Portion (572000 x 5%)
28600
(Capital gains x percentage of floor area) = Assessable Portion
50% CGT Discount
14300
Total Assessable Income
1,49,300
Allowable Deductions
Subscriptions costs
1500
Cleaning cost
400
Total Allowable deductions
1900
Total Taxable Income
1,47,400
Medicare Levy
2948
Tax on taxable income
42170
Total tax payable
45118
References:
Jover-Ledesma, G. (2014). Principles of business taxation 2015. [Place of publication not identified]: Cch Incorporated.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. (2013). Australian taxation law cases 2013. Pyrmont, N.S.W.: Thomson Reuters.
Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.
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