Assignment Task:

Introduction
In this rapidly changing economic circumstance, there are various taxation policies which are required to be followed by an individual to evaluate the taxation liabilities. The assessment of tax in relation to the gift and liability of tax on the gift received has been considered in the initial part of this report. In the final part of the report the computation of tax liability as per the Australian taxation rules and regulations in regards of capital gain has been determined. The major aim of such report is to build a key understanding about the tax planning and evaluation of taxation liability in the individuals so that they can determine the amount liable to be paid on their earned capital gain. 

QUESTION 1-

a. Tips from the customer –
Legislation – As per the regulations of Income Tax Assessment Act, 1936 a gift will not be considered as an income in the hands of the recipient. On the other hand, if a person receives a tip by providing services to the customer, it will be regarded as an income of the receiver. 
Taxability – Hence as per the provisions of Income Tax Assessment Act, 1936 and relevant case laws, the tips received by Emmi shall be taken as her income because it is received from the services given by her.

b. Income from working in the Crown Melbourne restaurant.
Legislation- An income provided by the employer to the employee as salary will be taken as the income and it shall be taxable in the hand of the recipient. 
Taxability - The income received by Emmi as her salary or wages from the restaurant shall be considered as her income hence the tax has to be paid by her accordingly. 

c. The gift from a regular customer-
Legislation – As the provisions of income tax assessment Act 1936, says that in ordinary course of business, any gift received by the customers will always be considered as an income for business and it would be taxable on the account of such person who received the gift. For the purpose of assessment of income taxable for the gift received other than cash, the fair value of such gift shall be considered. 
Taxability- Relevant to the provisions detailed above, the gifts other than cash i.e. perfume shall be taxable for Emmi. Hence the taxable value of perfume shall be assessed by its fair value in market i.e. $250. Irrespective of the fact that whether the perfume is used by Emmi or not, the taxation liability shall not be imposed on Emmi. 

Entertainment event paid by the employer
Legislation –The Income Tax Assessment Act 1936 also has the provisions regarding the charge of taxation on the gifts, rewards and entertainment received by an employee. All these benefits shall be taxable on the hand of employee of they are provided by the employer or in relation to business activity or income earning activity. However these benefits will not be liable to taxation if they are received on some special occasions or from relatives.
 
Case- In the given scenario, Emmi has received an entertainment event from her employer which is awarded to her for her hard work. The entertainment event was financed by the employer of Emmi and the cost of meals for Emmi has also been paid by the employer. This reward received by Emmi as a part of business activity hence it is considered as taxable. 
Taxability- Thus, the reward granted to Emmi was paid by the employer and it falls into the business activities. The rewards received by Emmi shall be taxable in her hands and she needs to show such reward in her income statement also. 

d. Christmas gift received from her father
Legislation –According to the provisions of Income Tax Assessment Act, 1936 any gift given by the relatives on some special occasions i.e. festival, birthday or marriage or with the love and affection will not be considered for the taxation and it shall be exempted. 
At the same time any gift received by an individual in regards of earning income or while doing some business activities, then it shall not be exempted and such person is liable to pay the tax. 
Case- In the given case, a Christmas gift has been received by Emmi from her father who falls under the definition of relative hence the gift given by father to Emmi shall not be considered related to business activities. 

QUESTION 2

a) Sell of the residential house-
Legislation- The income tax assessment Act, 1997 says that any transfer of capital assets like property, real estate, shares and securities creates the tax on a capital gain. Some assets are exempt from such tax i.e. personal car or motorbike, residential units and some other depreciable assets such as business assets or fittings in rental property or assets acquired before 20th September 1985. 
Case- In the given scenario, Liu has sold her residential property which was purchased before 1985 i.e. in the year 1981 for $55,000. The value of such a house is $630000 in present. 
Taxability- The capital gain shall be chargeable on the assets held by an individual for more than 12 months after deducting the gain by 50%. Hence in case of Liu, the tax on capital gain shall not be charged on the difference amount on the actual cost of the house and such gain shall be exempted for the purpose of income tax. 

b) Sell of personal care-
Legislation- The income tax assessment Act, 1997 says that any transfer of capital assets like property, real estate, shares and securities creates the tax on a capital gain. Also, some assets are exempt from the levy of such tax such as personal car or motorbike, residential units and some other depreciable assets such as business assets or fittings in rental property or assets acquired before 20th September 1985. 
Case – In the provided scenario, Liu has sold her personal asset for the value of $8000 which had the cost for $37000 in the year 2011.
Taxability- No taxa shall be chargeable on the sale of a personal car. 

c) Sell of active business-
Legislation- As per the taxation laws, the capital gain is the tax incurred on the sale or transfers of the capital assets i.e. the property which has generally the useful life of 12 or more months. The going concern business and the partial assets involved in the business are also considered as the capital assets. Such tax shall be chargeable on the capital gain and calculated on the assets which have been purchased after 20th September 1985. 


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  • Posted on : February 22nd, 2019

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