TAX RETURN

Tax Return for Mike Roberts

[Instructor name]

Introduction

Mike needs to prepare his individual tax return for the year. He has to deal with all sections of the tax return. Then he also needs to know as to which income is taxable and which other income is not taxable. Then he needs to know as to which of his expenditures are deductible in the tax return and to what extent. Also, he needs to know as to which of his income could not be reported on his tax return for the year. Mike also needs to know the status of his capital investments and associated capital gains. He also does not know as to how the fringe benefits that he received will be accounted in the income tax return.

Tax Return 2011

Salary and Wages

Mr. Mike received the gross payment of $ 176,060. Of these, $ 3,200 were for telephone allowances. However, the PAYG tax withheld was $ 50,233. So, the amount of tax withheld by the employer cannot be deducted from the total taxable income. Hence, the new salary and wages remain $ 176,060. The taxable income also needs to include $ 2,220 which Mike received as paid leave payment. This makes the taxable amount equal to $ 173,840.

This income is payable under the S. 6(5) of the Income Tax Assessment Act, 1997. However, the term ordinary income has been defined in the case Scott v. C of T (NSW) (1935) 35SR (NSW) 215, p. 219, which says that ordinary concepts of income and mankind should be used in determining as to what constitutes income. The provision of the law (ITAA) in the given section S. 6(5) is 4 which states that if you are a self-assessment entity than the tax is payable and due.

Allowances, earnings, tips, director's fees, etc.

The allowances that Mike received include the $ 3,200 for telephone provision. Further, Mike received fringe benefits of $ 14,295. These are mostly noncash allowances and are not included in the assessable income as per S. 23L of ITAA, 1936. These two allowances have to be included in his taxable income. However, we need not double count as the fringe benefits are already included in the gross salary. However, Mike has another source of earnings which is his lecturing at the university. He earned a total of $ 2,780 of which the PAYG withheld was $ 960. So, the net amount to be included is $ 2,780. Hence, the total taxable income becomes $ 179,820. Also, the frequent flyer points that Mike earned and utilized cannot be assessed or deducted as those represent his intimate relationship.

The relevant legislation is ITAA, S. 6(10). The provision for inclusion is 4 which states that your assessable income includes statutory income from all sources. The frequent flyer points are endorsed by the case of Payne v. FCT (1996) 96 ATC 4407. In this case, the points that accrued to Mr. Payne arose from a personal relationship rather than through his contractual relationship with the employer.

Gross interest

Mike earned interest on ...