Taxation Law and Practice

Part A: Calculation of Taxable Income
DEXTRESS HAIR AND BEAUTY PTY LTD

Reconciliation of Accounting Profit to Taxable Income

Year ended 30 June 2015
Item

Section/Case/ Tax Ruling Supporting Calculations/Justifications $
Accounting Profit

$ 200,000
Tax Adjustments :

1. Service income

2. product sales

3. Apprentice rebates

4. Income Received in advance

5. Gain on sale of Mercedes

6. Interest income

7. Purchase

8. Interest expense

9. Bank Fees

10. Legal Fees

11. Accounting Fees

12. Entertainment

13. Rental Expenses

14. Annual Leave Expenses

15. Accounting Depreciation

16. Interest on a preference share

17. loss on disposal of land

18. Lease expenses

19. Other Tax Deductible Expenses

taxation ruling it 2639

ITAA (1997) law

No ruling exist in favour

Tax Ruling IT2450

IAAT 1997

IAAT 1997

IAAT 1936

IAAT 1997

IAAT 1997

IAAT 1997

IAAT 1997

IAAT1936

IAAT 1997

IAAT 1997

IAAT 1997

IAAT 1997

IAAT 1997

170000-10000-4000

Given it is personal service income; tax deduction can be claimed on expenses incurred in the provision of the service (Delany, 2011).

50000-5000

The ITAA 1997 act allows for expenses incurred in sale of a product to be tax deductible (Business, 2016).

No adjustment can be made as the tax deduction on apprentice no longer applies in Australia

The income can be deferred for taxation until when it should be incurred (Teck, 2002).

698-174.5

Depreciation deduction allowed for gain in sales of an asset held for business purposes.

1000-100

Tax deduction can be claimed on interest income on expenses incurred in realizing the income if it’s a form income from an investment (Scott, 2007).

No deductions on assets purchased for income generation

10/100*300

1500+750

The law allows for tax deduction on expenses incurred in maintaining a bank account (Payne, 2012).

No changes expected

2250+300

One is entitled to make a tax deduction claim of $ 300 on working expenses.

No changes

1400000+10000

30000+2500

No changes

5000+300

No changes

No changes

1686000

45000

20000

0

523.5

900

(200000)

(330)

(2250)

(7000)

(2550)

(2000)

(150000)

(32500)

(500)

(5300)

(5000)

(400)

(1,174,748)

Taxable Income

$ 169845.5

Part C: Critical Thinking and Teamwork

Mind mapping technique played an instrumental role when it comes to completion of the project. First, it aided in the process of making notes related to the project, hence, allowing for an easier referencing during the undertaking of the project, when the points were needed to answer questions related to the project. Also, it helped in summarizing the major concepts of the project, thereby, having a well-planned guideline in place on how to tackle all the project activities in a systematic manner. Lastly, it aided in sharing of knowledge through braining storming processes that made it easier for every group member to make contributions needed in completion of the project.

References

Business (2016). Personal Services Income for Sole Traders – Tax Guide | business.gov.au. (2016). Business.gov.au. Retrieved 8 May 2016, from http://www.business.gov.au/business-topics/tax-finance-insurance/taxation/Pages/personal-services-income-sole-traders.aspx.

Delany, T. (2011). Personal Services Income: where to from here?. Revenue Law Journal, 21(2011), 85.

Payne, K. (2012). Taxation law: ATO rules on when dividend distributions can be franked. Keeping Good Companies, 64(3), 176.

Scott, P. (2007). Pennicott, Scott — “Resolving the Personal Services Income Dilemma in Australia: An Evaluation of Alternative Anti-Avoidance Measures” [2007] JlATax 2; (2007) 10(1) Journal of Australian Taxation 53. Austlii.edu.au. Retrieved 8 May 2016, from http://www.austlii.edu.au/au/journals/JATax/2007/2.html.

Teck, T. H. (2002). When is Income under Long-term Contracts Derived?. Revenue Law Journal, 12(1), 6.
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Posted on May 18, 2016Author TutorCategories Question, Questions