HA3042 Taxation Law - Income Tax Final Assessment Answer

Question 1

Advise Michelle of her tax consequences from the following transactions:

1. Donation of $500 to the building fund of her local public school.
2. Donation of $50 to her local public library (as a result, she does not need to pay membership fees of $20 that year to borrow books from the library).
3. Payment of $900 membership fees to the real estate agents' association. Michelle is a professional real estate agent, but she has not been working as one for the last two years following the birth of her child. However, she maintains her membership of the association as she intends to go back to work one day.

Answer box will enlarge as you type

1. The donation of $500 to the building fund of Michelle’s local public school may be eligible to be deductible gift recipients. 
2. Yes, the donation of $50 to her local public libraray is deducted from the gross amount of taxpayer’s income. 
3. Michelle can clam upto $42 per income year for the cost of each subscription of real estate agents’ association. 

Question 2

What are the key taxes levied which can be collected by State and Territory in Australia? 

ANSWER:

Industries can save cash via compensable the accurate quantity on period besides winning benefit of slightly tax concessions that they are eligible to. The main taxes touching commerce are Company (income) Tax, Capital Gains Tax (CGT) and the Goods and Services Tax (GST). These taxes are entirely established through the Australian Government.

State governments do not charge at all sales taxes still they do levy stamp duties on a assortment of dealings. In summary, the GST rate of 10% is charged on maximum goods and services used up in Australia. A corporate which is registered for GST would include the GST in the sale prices it charges.

Question 3 

Why are the concepts of resident important in the taxation system? In what circumstances are individuals treated as a resident of Australia?

ANSWER:

A Tax Residency Certificate benefits you avoid double taxation. It is a charge of tax on the identical revenue through two or more countries. On the way to privilege income tax liberation under the DTAA treaty, a Tax Residency Certificate is compulsory from the tax authority of your resident nation.

You're an Australian resident if your residence (the place that is your permanent household) is in Australia, unless we are contented that your permanent place of abode is external Australia. A domicile is a place that is measured to be your permanent home by law.

An Australian resident is a individual who resides in Australia also has authorization to persist permanently—either because they are: an Australian citizen; the holder of a permanent visa; or a protected Special Category Visa holder

Question 4

Nikita is a university student. She recently purchased a new computer from a retailer in Singapore as the computer was not yet available in Australia. The computer is for her personal use. The computer cost AUD $3,000 and was shipped directly to Nikita’s home. What are the GST consequences arising from the above information?

ANSWER:

GST is owed on imported goods unless the goods are covered by an exemption. The A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) statuses that the importer shall pay GST at the same time and in the same manner as customs duty is compensated.

some education courses, course materials and related excursions or field trips.

But some of the educational course, its related material, excursions or educational trips are exempted from GST. 

Since, computer is directly shipped to Nikita’s home and that too for persobal use. 

Hence, no tax exemption can be availed by Nikita. 

Question 5 

ABC Co Ltd is a base rate entity, which has less than $2 million aggregated turnover. ABC Co Ltd derives income for the current income year (all from Australian sources) comprising net income from trading of $90,000, franked distribution from public companies amounting to $21,000 (carrying an imputation credit of $9,000), unfranked distributions from resident private companies amounting to $21,000 and rental income of $5,000. Calculate the net tax payable by ABC Co Ltd for the year ended 30 June. 

ANSWER:

The base rate entity are the not-for-profit companies. The Income Tax Act of Australia has provised certain slab limits for different ranges of income of such organization for the purpose of paying tax. 

The amendment has provided that from 21-22 financial year, base rate entities shall apply the 25% company tax rate, which previously was 27.5%. 

So, in the given instance if ABC Co. Ltd. Flat rate of 25% on current year’s income of $90000 shall be levied, that is, $27000.

Question 6 

How do you define the term ‘tax avoidance’? Give at least one example.

ANSWER:

Tax avoidance is somewhat lawful technique used by means of a taxpayer on the way to diminish the sum of income tax payable. Specific taxpayers in addition companies can use methods of tax avoidance towards lesser their tax bills. Tax credits, deductions, income exclusion, and loopholes are methods of tax avoidance.

For example: Tapping cash in a 40(k) or deducting a charitable donation are seamlessly permissible approaches of dropping a tax bill (tax avoidance), as long as you trail the guidelines. Concealment possessions, profits or else data in the direction of escape legal responsibility characteristically creates tax evasion.

End of Final Assessment

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