ACCG8124 Divulged Key Implication Of Taxable Income And Liability Assessment Answer

Answer :

1. Introduction

Every business entity has to comply with the tax laws of the country in which the entity is operating. Tax law and regulation have been established and defined by the government and imposed on the taxpayer. They have to offer their income of the financial year as the rules of taxation and pay the tax as per tax rate decided by the government. In this report, it is an analysis that what income has to be offered as per the taxation law and what would be the tax amount for the BM fine jewelry privet limited (Australian taxation Office, 2020). Tax compliance is the obligation that the taxpayer has to follow to avoid the penalty cost for noncompliance with taxation law. This report has divulged the key implication of the taxable income and liability which needs to be undertaken by the individual for its taxation income.

2. Amount to be included in the company’s taxable income

As per the ITAA 1997, there are some income and expenditure which are to be included and no included in the taxable income and every taxpayer has to follow the rule while calculation of the income as per income tax act (Australian taxation Office, 2020). However, tax exemption and tax deductions are to be considered while determining the tax treatment and determine liability of the tax of the individual. Following are the tax treatment of each item shown in the income stamen of the BM fine jewelry privet limited:-

As per the income ITAA 1997 if the revenue of the company is lower than the $ 10,00,000 then it will be considered as the Small business enterprises hence the BM fine jewelry privet limited will be considered the small business enterprise (Australian taxation Office, 2020). 

For the computation of the income tax return to any tax as per the ITAA 1997, some rules have to keep in mind while preparation of taxable income:-

• All the expenditure which has been incurred for the business purposes allowed to be deducted from the business income (Australian taxation Office, 2020).  
• All the income which has been earned from the ordinary activity of the business will be considered as the business income of the company.
• Capital expenditure is to be amortized or depreciated over the life of such expenditure.
• Stock is to be valued at the cost unless there is reasonable evidence to value at a higher price (Australian taxation Office, 2020).  
• Operating expenses are those expenses that have incurred for the daily business activity for instance advertisement expenses, finance cost, printing and station expenses, bad debts, transportation cost, parking cost, employee benefit, salary and wages, rent, electricity, and telephone expenses water expenses (Murphy, 2019).

3. The taxable income for the tax year ended 2019/20.

As per the provision of the ITAA, 1997 following are the calculation for the income for tax purpose of the BM fine jewelry privet limited:-

                              Source:- ( Please refer to the spreadsheet for details calculation) 

From the above calculation, it can be seen that business income of the company is $ 483750 which are required to be offered for tax purpose and the income from the sale of land will be $(166666.67) which is the long term capital loss of the company and require to be adjusted from the total income of the company (Taylor, & Wenzel, 2019). Hence after deducting the loss from the sale of land the net income of the BM fine jewelry privet limited is $317083.33 (Australian taxation Office, 2020).  

4. Tax payable for the tax year ended 2019/20.

As a peer, the ITAA 1997 following are the tax slab rate has been provided for the tax calculation:-

With the compliance of the above tax rate following are the tax calculation of the BM fine jewelry privet limited (Australian taxation Office, 2020).  

       Source:- ( Please refer to the spreadsheet for details calculation)

From the above, it can be observed that the company is required to pay a tax of $ 115783.36 in the current year (Maley, & Maley, 2018). However, taxable income has been computed by assessing the tax amount accompanied by the deduction and exemption available on the assessed income (Australian taxation Office, 2020).  The taxable income has been computed by using the tax payable based on the slab rate given by the Australian taxation authority. 

Conclusion

From the deep dissuasion of tax provision in the above report, it can be observed and conclude that business organization requires to follow the tax provision which has been established by the government of that country in which they are working. BM fine jewelry privet limited has to follow the tax provision and offer the correct income statement for the tax calculation as provided in the above report. However, it has been found that the proper tax planning and methods are required by the assesse to determine the right amount of tax payment and overall tax liability on the earned income.