TAXATION LAW AUSTRALIA

Taxation Law Australia

Australian Taxation law

Question 1)

Your client, John Black, runs a small real estate agency. The business is structured as a discretionary trust with his company, White Pty Ltd as the trustee for the "Black Family' rust'. John and his wife Jill are the only directors of the company. The trust has an ACN, an ABN, and is registered for GST.

Answer 1)

AUSTRALIAN TAXATION LAW

Receipts

commissions paid from sales of real estate

$178,000.00

rental income from a beach-front unit in Surfers Paradise

$35,000.00

interest from bank deposits

$4,500.00

fully-franked dividend from shares in NAB

$16,000.00

Payments:

body corporate fees for the unit

$8,000.00

salary to part-time receptionist

$30,000.00

interest on money borrowed to purchase the unit

$15,000.00

borrowing expenses on a new loan to re-finance the unit

$4,000.00

fees to a book-keeper

$500.00

new office equipment with an estimated life of 20 years

$1,500.00

new office equipment with an estimated life of 30 years

$2,300.00

taxi fares to and from work

$1,100.00

 

Condition

Tax loss

$40,000.00

 

Depreciation (30% most other depreciating assets with an effective life of less than 25 years)

$40,000.00

$12,000.00

Cost of Construction

$87,000.00

 

Depreciation new office equipment with an estimated life of 20 years (deduct most newly acquired assets at either 15% or 2.5% in the first year, regardless of when they were acquired during that year.)

$1,500.00

$225.00

Depreciation new office equipment with an estimated life of 30 years (deduct most newly acquired assets at either 15% or 2.5% in the first year, regardless of when they were acquired during that year.)

$2,300.00

$345.00

"Black Family' Trust'

30 June, 2010

Receipts

 

Commissions paid from sales of real estate

$178,000.00

 

Rental income from a beach-front unit in Surfers Paradise

$35,000.00

 

Interest from bank deposits

$4,500.00

 

Fully-franked dividend from shares in NAB

$16,000.00

 

Total Receipts

$233,500.00

 

 

Payment

 

Corporate Fees

$8,000.00

 

Salary to the Part Time Receptionist

$30,000.00

 

Interest Expense

$15,000.00

 

Borrowing Expense

$4,000.00

 

Fees to Book keeper

$500.00

 

Depreciation Expense

$12,000.00

 

Depreciation new office equipment

$225.00

 

Depreciation new office equipment

$345.00

 

Total Payment

$70,070.00

 

Tax Loss

$40,000.00

$30,070.00

Net Income

 

$203,430.00

John Black's personal tax liability

 

 

Receipts:

 

Exempt income from service in the Australian Army Reserve

$2,000.00

 

Private health refunds

$3,000.00

 

Fully-franked dividend from Toll Holdings

$12,000.00

 

Total Receipts of John

$17,000.00

 

 

 

Payment

 

Rates on principal place of residence

$3,000.00

 

Medical fees for John

$1,500.00

 

Fees paid for maintaining

$12,000.00

 

Hospital Insurance Premium

$2,000.00

 

Total Payment by John

$18,500.00

 

Less Tax Loss

$1,500.00

$17,000.00

Net Income

 

 

$0.00

Treatment of Each Item

SBE pool concept

The concept behind SBE is related to the depreciation rule which has been applied in this question. These rules are made for the small businesses as a substitute for the allowances rules of the uniform capital which work for the deductions for most depreciating assets.

There are certain rules which are stated below:

Depreciable assets costing around less than $1,000 each are immediately write off that is low-cost assets;

A pool of general small business on which rate of 30% is deducible on the deprecating assets with an effective life of less than 25 years, such as motor vehicles and computers;

A pool in a long-life small business on which rate of 5% is deducible on the most depreciating assets with an effective life of 25 years or more, such as wharves and cement silos, and

Deduction on ...