Answer To: Instructions: Your case study needs to identify and discuss the tax implications of the various...
Sweety answered on Jul 15 2021
WORD REPORT
1. The given solution is framed as per the act asked in the question.
2. Assessable income is income that can be taxed, provided you earn enough to exceed your tax-free threshold. Examples of assessable income are
· Salary earned
· car, travel, clothing and laundry allowances
· interest
· dividends and other income from investments
· bonuses and overtime an employee receives
· commission a salesperson receives
· pensions
· rent.
3. The income on which tax is payable is taxable income. It is the amount left arrived at after deducting all the expenses allowed to claim.
4. Tax slab rate applicable to Michael is as follows:-
Income chargeable to tax
Tax amount
Rate of Tax
$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 $180,000
30.13 – less than 45%
5. These detail mentioned below refer to computation with respect to salary income and deduction is shown as below
Particulars
AMOUNT($)
AMOUNT($)
Gross Wages
9800
PAYG
400
Salary net of PAYG
9400
Uniform Allowance
800
Reimbursement
0
Car
(Fringe Benefit liable to FBT)
0
10200
Less-Work related allowable deduction
600
9600
6. Money which is received from working is called employment income. It may be paid cash inflow directly into bank account, or otherwise. Employment income basically mean salary received. It include normal pay, commission, bonuses (those also which are for retention with employer, casual work money or part time work money etc. It also include certain leave pay like parental leave Pay etc.
7. The fringe benefit is not exempt from fringe benefit tax , hence the amount is not assessable as income in the hands of employee.
8. Since nothing mentioned with respect to the amount spent for laundry or clothing, therefore no deduction and amount received assessable as income.
9. The reimbursement received from employer for work related item purchased is neither treated as income nor deduction claimed with respect to same.
10. The detail with respect to business income and deduction is shown as below
Particulars
AMOUNT($)
AMOUNT($)
BUSINESS INCOME
Cash received from credit sale
85000
Volume of rebate from oversee supplier
3500
Insurance recovery due to damage
11500
100000
Business expenses
Net wages to employee
12000
Superannuation to employees
1230
Superannuation guarantee charge
190
lease payment on shop and fitting
940
Depreciation
4947
Cash drawing by Michael
0
Fines for breach of Australian Customer Regulation
0
FBT
0
PAYG
0
all other expense
11700
Total expense
120887
Net loss
(20887)
11. Income from business are those income which are earned and include those income which are earned from operating activities. For the purpose of tax computation, income from business is an income which is ordinary. Expenses of business and losses of business are set off against income from business.
12. Three golden rules which signifies that a particular deduction qualifies as a business deduction are as follows:
· The expenses incurred should be used for business purpose only, Personal expenses are not allowed as deduction.
· Where any expenditure incurred is used both business purposes and personal purpose, then only business purpose income qualify for deduction.
· There must be proper report evidencing such expenditure to claim deduction.
13. Non deductible expenses include the following:
· Expenses...