LAWS20060
QUESTION 1
i. Work Related Expenses
The Australian law in D2 work related travel expenses state that travel expenses incurred in performing work as an employee of a company can be in actual expenses such as public travels in Webjet air travel. The business analyst can claim tax deductions with written evidence on the expenses incurred while working (ATO, 2017).
ii. Income Tax Compensation
The crane hire company has received the amount as compensation. This is considered as a capital gains tax and consequences for the recipient of the compensation amount. This amount is usually included in the assessable income of the recipient under Part IIIA of the Income Tax Assessment Act 1936. The act states that if the amount of compensation is received by a tax payer in respect to the disposal of a damaged underlying asset, then the amount is considered as a representation of a recoupment of all or part of the total costs of acquisition of the asset (LAW ATO, 2006). However, no capital gain or loss arises in respect to the damaged crane until the crane hire company disposes the underlying asset.
iii. Gift Taxation
The free holiday received by the nightclub manager can be considered as a gift from the alcohol supplier. In Australia, there is no gift tax but the tax office has the power and obligation to treat certain payments as gifts. However, this does not qualify as such an instance. The nightclub can claim tax deduction for the fully paid holiday received since this situation satisfies the following conditions. The gift has been made to a deductible gift recipient, the gift involves the voluntary transfer of money to pay the holiday expenses and the gift also complies with the relevant gift conditions.
iv. Company Taxable Income
Not-for-profit companies prohibit the distribution of money or property to its members, even in the case of refunds or returning excess money. Therefore, this is a canoe club which must lodge its tax return each year regardless of the taxable income realized. The canoe club has the same tax rates as other companies. The canoe club, like other taxable companies has no tax-free threshold and therefore taxable at all taxable income levels, which is 27.5% for a small club as the canoe club. The capital gains from the canoes purchased will also be treated as other companies for income tax purposes (ATO, 2017)
v. Prizes Tax Returns
The payment made by the television station to the Australian footballer should be classified as a prize or award since it is something he has won for being the best in the AFL. The AFL player must declare the tax returns on the value of the prize received, which in this case is in form of cash (ATO, 2017).
vi. Building Apprentice Expenses
As a building and construction employee, some work-related expenses can be claimed as tax deduction. The building qualification for the apprentice qualifies as a work-related expense in the self-education category. The building apprentice can claim a deduction on this expense since the course also meets sufficient connection with his/her current employment as well as the maintenance and improvement of specific skills and knowledge (ATO, 2017).
vii. Self Education Expenses
This is also a self-education expense but the individual cannot claim a deduction. The individual’s expenses in the short course in art management are directly related to becoming an art director. However, it is not an eligible course since it does entails the maintenance and improvement of the specific skills in art which is the individual’s current employment. The individual hopes to become an art director and hence it does not have sufficient connection with the assumption that he is currently unemployed in the art industry (ATO, 2017). This course will enable him to get new employment, making the self-education expense non-tax deductible.
viii. Work Make-Up And Work Dresses Expenses
This is a work related clothing expense which an individual can claim. This may be a compulsory work uniform which identifies you as an employee of the company with strictly enforced policy surrounding it. This circumstance calls for a tax deductible expense. There is also clothing considered uniquely designed for the employer or even logo free, plain or generic white shirts or trousers suitable for staff wear. These are known as non-compulsory dresses, but they have to be designed by AusIndustry in order to be tax deductible (H&R Block, 2017). However, make-up is not considered as part of non-compulsory work uniform and hence may not be included in deductible expense.
ix. Travel Expenses
Trips between home and the office are generally considered as private travels. However, in some circumstances, an individual can claim deductions. The only circumstances when you can claim the cost of travelling are when travelling directly between two separate workplaces, if your home was a base of employment, if you need to carry bulky equipment or tools your employer requires for work and you could not leave them at workplace and if you travel from your home to an alternative workplace for work purposes and then to the normal workplace (ATO, 2017). However, you can cannot claim the cost driving your car from office to home just because you perform minor related tasks, you do so more than once a day, you are on a call, there is no public transport at the office, work at business hours and you do some work at home.
x. Work Place Travel Expenses
Tax deductions can be claimed when travelling between two workplaces, which is from one employer to another employer. The tax laws provide that you can claim the cost of travelling when it is directly between two separate workplaces, when it is from your normal workplace to an alternative workplace and also when shifting the places of employment.
QUESTION 2
Manpreetis is an international student studying at CQU, Sydney and therefore she is generally regarded as an Australian resident for tax purposes. This means that the she should pay tax on the earnings at the same rate as any resident. Generally, Manpreetis should declare all the income she has earned both in Australia and internationally on her Australian tax return (ATO, 2015). However, since she is an overseas student she probably has a temporary visa which mean she is a temporary resident. As a temporary resident, most of her foreign income is not taxed in Australian and she may also not need to declare it on her Australian tax return. This means that the income she receives from her parents from abroad to Help her with her living expenses in which includes $20000 and the $10000 distribution from her trust fund account set up in India does not have to be reported in the annual tax returns for fiscal year 2016/2017.
From the taxation formula, the income tax rate for Australian residents is $35,001 to $80,000 30% (or 30 cents for each $1) $4,350 plus 30 cents for each $1 over $35,000. Since Manpreetis earns more 450000 her net tax payable is $13500. However, she can claim tax deductibles in the expenses she has spent on her studies ($18500), the $2,000 she has spent on her computer and printer for educational purposes and the new $500 she has spent on her new mobile for work purposes. The tax rates for the deductibles however, have not yet been stated clearly and she can state them on her filings.
References
ATO. (2015, May 30). Studying in Australia. Retrieved from ATO: https://www.ato.gov.au/Individuals/International-tax-for-individuals/Coming-to-Australia/Studying-in-Australia/
ATO. (2017). D2 Work-related travel expenses 2017. Retrieved from Australian Tax Office: https://www.ato.gov.au/Individuals/Tax-Return/2017/Tax-return/Deduction-questions-D1-D10/D2-Work-related-travel-expenses-2017/?=redirected
ATO. (2017, June 11). Other income Deductions. Retrieved from Australian Tax Office: https://www.ato.gov.au/Individuals/Income-and-deductions/Income-you-must-declare/Other-income/
ATO. (2017, August 11). Self-education expenses. Retrieved from Australian Tax Office: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Self-education-expenses/
ATO. (2017, June). Travel between home and work and between workplaces. Retrieved from ATO: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Vehicle-and-travel-expenses/Travel-between-home-and-work-and-between-workplaces/
H&R Block. (2017, August). Claiming a tax deduction for work clothing. Retrieved from H&R Block Tax Accountants: https://www.hrblock.com.au/tax-tips/claiming-a-tax-deduction-for-work-clothing
LAW ATO. (2006, November). Income tax: Capital gains treatment of compensation receipts. Retrieved from LAW ATO: http://law.ato.gov.au/atolaw/view.htm?locid=txr/tr9535/nat/ato
