Question

Part 2a –

Tax Return Information Jake Smith is an Australian resident and also one of your clients. Jake has the following events during the year.

1. During the entire 2018 income year, Jake worked for MD & A Architects. Jake was provided with his PAYG Payment Summary for the period 1 July 2017 to 30 June 2018. Gross salary was $86,000. Payg tax withheld was $19,820.

2. Jake uses his car for work. Jake was reimbursed for 6,000 kilometers travelled during the year at 75 cents per kilometer. PAYG withholding of $1,500 was deducted during the year.

3. Jake earns interest of $100 during the year (gross). Jake did not provide the bank with his tax file number.

4. Jake received an unfranked divided of $3,500 on 18 June 2018. Jake participated in a dividend reinvestment scheme so that he received an additional 198 shares in the company.

5. Jake purchased 1,000 ANZ bank share on 1 March 2015 at $22 each. Brokerage costs on purchase were $50. Jake sold 500 ANZ bank shares on 1 June 2018 for $24 each. Brokerage costs on sale were $55.

6. On 12 May 2018, Jake sold his “cricket bat” collection. This consisted of 5 cricket bats that were signed by famous people. The great “Sahin Tendulkar” has signed one of the bats. Ricky pointing had signed one of the bats which was worth considerably less than 3 ACC304 Assignment Assessment 3 the bat signed by Tendulkar. Jake purchased the bats between 1999 and 2004 for a total cost of $2,600. He sells the entire collection for $900.

7. Jake failed to keep a log book but wishes to claim his Mazda 3 motor car if possible. Jake’s diary notes indicate he travelled 7,420 kilometers. Total car expenses including depreciation are $6,200. He estimates (has a guess) that his business percentage is 95 percent. Jake does not have a second motor car.

8. Jake owns a mobile phone which he uses for work. His mobile telephone call costs for the 2018 income year totalled $1,400. Jake estimates that 60% of these calls were workrelated. Jake failed to keep his receipts and can’t provide any material documentation.

9. On 1 May 2018, Jake paid the invoice which he received from his previous tax agent for the preparation and lodgement of his income tax return for last year. The tax agent's fee was $400.

10. Jake is not married and does not have health cover.

Advise Jake as to the tax implications of each of these 10 items and the impact it will have on his tax return. Students should quote sections of law where appropriate. In addition, students should calculate Taxable income only (showing brief workings).

700 words (1 paragraph on each item)

Answer 1

As Per Indian Income Tax Act ,1961 The answer of the Que is as follows.

As Per Income Tax Laws Prevail in India the income which is accrues and arise in India is Taxbale in India. Therefore, rather Mr. Jack is an austrilian Resident Income Earn by him in India is taxable.

1) Gross Salary of $ 86000 will get taxable in his hand and as far as withholding of amont is concerned it get setoff against the Tax liability Payable by Mr Jack.

2) Reimbusrment of Car expenses is taxable as perquisites in hands of Mr Jack (0.75*6000)= $4500

3) Interest Income will be taxed as income From Other Sources therefore $ 100 Taxable in hands of Mr. Jack.

4) The dividend will not be taxed in the hands of investors.

5) As the shares sold after 12 month Long term capital gain will arise and long term capital gain is exempted in hands of seller U/s 10(38).

6) The Sale of Cricket Bat signed by Famous Cricketors will be classified as an Capital Assets as it is an Archilogical Collection since the bats are sold at loss therefore there is long term capital loss Of $ 1700.

7) Since Mr. jack is receiving salary and therefore no other expenditure relating to this will allow.

8) No Documentory Evidence no deduction.

9) As Mr.Jack is salaried employee no other expense will be allowed.

Taxable Income :- $90600 and a Long term capital loss of $1700