Organizing and Displaying Epidemiologic Data with Tabl es and Graphs
TABL 2751 Assignment
description
Transcript of TABL 2751 Assignment
![Page 1: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/1.jpg)
z5001560TABL2751Assignment
1
Introduction
RobertwhoisanAustralianresidenttaxpayerboughtahouseat$500,000in
Sydneyon1July2003.Therearevarioustransactionsoccurredwithregardto
thispropertybeforehesellitat1March2016.Thepaperprovidesadviceonthe
taxconsequenceforeachofthetransactionincludingcalculationofcapital
gain/lossonthesaleoftheproperty.Allsectionsthatareappliedinthepaper
arefromIncomeTaxAssessmentAct1997.
Rentalincome
ReferringtoYanchepSunCityPtyLtdvCT(WA)1,rentispaymentreceivedbya
lessorinreturnfortheusebyalesseeofproperty.Rentalincomeisordinary
incomethatisincludedintaxpayer’sassessableincomeunders6-5.Therefore,
rentRobertreceivedfromtenantsduring1July2005to1July2012and1
August2012to1August2013ishisassessableincome.
Incomeyear Rentalincome(assessableincome)
1/7/2005–30/6/2012 500/7*365=$26071perincomeyear
1/8/2012-30/6/2013 650/7*334=$31014
1/7/2013-30/6/2014 650/7*31=$2879
Purchasetheproperty
At1July2003,Robertsignedacontracttopurchaseahousefor$500,000that
consistsofadepositof$50,000anda25-yearsmortgageof$450,000.The
acquisitioncostisnotdeductibleunders8-1(1)2 becauseitdoesnotincurin
1 YanchepSunCityPtyLtdvCT(WA)(1984)15ATR11652
![Page 2: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/2.jpg)
z5001560TABL2751Assignment
2
gainingorproducingassessableincome.Besides,itviolatenegativelimbsunder
s8-1(2)3owingtothefacttheoutgoingisdomesticexpenditure.
Stampduty&conveyancingfees
Thestampdutyandconveyacingfeeisnotdeductibleunders8-1orspecific
deductionprovision,astheyarenotnexustotheincome.However,referringto
s110-354,theseincidentalcostsareincludedinthecostbaseas2ndelement5,
whichwillraisetaxbenefitsinthedisposalofthepropertyinthefuture.
Borrowingexpense
Theborrowingexpenseisnotdeductibleunders8-16 becauseitiscapitalin
nature.However,unders25-257,taxpayercandeducttheborrowingexpenseto
theextentthattheborrowedisusedforthepurposeofproducingassessable
income.Therefore,borrowingexpenseisnotdeductibleuntilRobertrendthe
propertyoutat1July2005.Thedeductionisspreadovertheperiodthatis
either5yearsorthelifeoftheloanifitislessthan5years.Thenon-deductible
amountofborrowexpensecanbeincludedinthe2ndelementofthecostbase.
Interestexpense
Interestexpenseisdeductibleunders8-18 totheextentthatborrowedmoneyis
usedtogenerateassessableincome.Thusinterestexpenseincurredbya
3 4 5 6 7 8
![Page 3: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/3.jpg)
z5001560TABL2751Assignment
3
purposeotherthangeneratingassessableincomeisnotdeductibleunders8-19.
AsMunrovFCT10,the‘use’testwasestablishedtoevaluatewhetheraninterest
expenseshasbeenincurredinthecourseofproducingassessableincome,and
apportionisimpliediftheprincipalisnotsolelyusedforthepurposeof
producingassessableincome.Theproportionofdeductibleinterestwillbeequal
totheproportionofcapitalthathadbeenusedtoderiveassessableincome11.In
thiscase,thehouseisnotsolelyforthepurposeofearningrentalincome.Thus,
theinterestexpenseincurredduringtenancyisdeductibleotherwisetheinterest
expenseisincludedinthecostbaseas3rdelement12.
Costofrepainting
Therepaintingexpenseincurrednotdeductibleunders8-1becausetheexpense
iscapitalinnature13.Thisexpenditureisnotdeductibleunderdivision25aswell
becausetheexpenserelatedtotheperiodbeforethepropertybecamean
income-producingproperty14.Similartoinitialrepairinlawshippingcase,the
expenditureisnotdeductiblebecausethedisrepairrelatedtopredecessor’s9 10 11 TR95/2512 s110-2513 s8-1(2)14https://www.ato.gov.au/printfriendly.aspx?url=/Individuals/Ind/Rental-properties---claiming-repairs-and-maintenance-expenses/
Incomeyear Deduction
1/7/2005-30/6/2012 450,000*7%=$31500perincomeyear
1/7/2013-30/6/2014 31500*93/365=$8026
Totaldeduction
(1/7/2005-1/10/2013)
31500*8+8026=$260,026
Totalinterestexpense
(1/8/2003–1/3/2016)
(12+214/366)*31500=$396,418
Non-deductibleinterestexpense $136,392(willbeincludedincostbase)
![Page 4: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/4.jpg)
z5001560TABL2751Assignment
4
trade.ReferringtoLunneyvFCT15,expensewithregardtoprerequisiteto
produceincomedoesnotmeanitisincurredingainingassessableincome.In
thiscase,thepurposeofrepaintingistoputpropertyintoarentalcondition,and
thedisrepairincurredbyprivateuseorpredecessor.Thus,theexpenditureof
repaintingisconsideredascapitalinnature.However,Robertcanclaim
deductionforthisexpenseundercapitalworkallowancedivision43.Asthe
propertyisnotsolelyboughtforrentalpurpose,apportionmentisrequired.
Referringtos43(c),youcanonlydeducttheamountofyouuseyourareainthe
incomeyearinthewaysetoutins43-140.Thereforeonlytheportionof
repaintingexpensewithregardtoproduceassessableincomeisdeductible..
Onceconstructioniscompleted16,taxpayerisentitledtodeductionatrate
specifiedunders43-25.
Appliedsection:s43-25 40yearsat2.5%
Incomeyear Deduction
1/7/2004-30/6/2005
(Constructioncompletedat15/6/2005)
16/365*8000*2.5%=$9
1/7/2005-30/6/2013 8000*2.5%=$200perincomeyear
1/7/2013-30/6/2014 93/365*8000*2.5%=$51
Totaldeduction 200*8+9+51=1660
Nondeductibleamount 8000–1660=$6340
(willbeincludedincostbase)
Plumber
Expendituresincurredforrepairsarenotdeductibleifrepairsarecapital
expenditure17.Inthiscase,clarifyingadistinctionbetweenrepairand
improvementisrequiredinordertoclaimdeductionforthisexpensebecause
15 LunneyvFCT(1958)100CLR47816 s43-3017 s25-10(3)
![Page 5: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/5.jpg)
z5001560TABL2751Assignment
5
expensesincurredbyimprovementarecapitalinnature.WThomas&Cocase
18highlightsthatrepairsinvolvesrestorationofathingtoaconditionitformerly
withoutchangingitscharacter.Fixingdrippingtapswasclearlytorestoretaps’
functionsothatthehousewouldreturntotheformercondition.Thisrepairisa
specificdeductionunders25-10,andthisexpenseisalsodeductibleunders8-1.
However,referringtos8-10,taxpayerscannotclaimdoubledeductionandis
requiredtoclaimdeductionunderthemostappropriatedivision.
ApportionmentisrequiredbecauseRobertdidnotholdthepropertysolelyfor
income-producingpurpose19.Nevertheless,itisdifficulttodeterminethe
proportionattributedtotheincome-producingpurpose.Iassumethedisrepair
isfullyincurredbytenants.
Appliedsection:s25-10
Incomeyear Deduction
1/7/2009–30/6/2010 $400
Costofreplacingtheentireroof
Replacementoftheentireitemisnotarepair,andthusitisnotdeductibleunder
s25-10.ReferringtoLindsayvFCT,functionalentitytestisestablishedtoassess
whetherwhatisdoneisthereplacementofsubsidiarypartofanentirety.Inthis
case,thereplacedroofisasubsidiaryofanitemratherthananentirety.
However,astheissueinvolvedfixingdrippingtaps,thedistinctionbetween
improvementsandrepairsisrequiredbeclarifiedwithregardtoreplacementof
theroof.ReferringtoWesternSuburbsCinemacase20,thereplacementofentire
ceilingdidmuchmorethanmeetaneedforrestorationduetousingabetter
material,andthusitisanimprovement.Similartothiscase,Robertreplacedthe
entireroofwithmaterialsthatarebetterthantheoriginalmaterialssothatthe
18 WThomas&CovFCT(1965)115CLR5819 s25-10(2)20 FCTvWesternSuburbsCinema(1952)56CLR102
![Page 6: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/6.jpg)
z5001560TABL2751Assignment
6
newroofchangedcharacterofpropertybyaddingnewfunction.Therefore,the
replacementofroofisimprovementwhichisnotdeductibleunders25-10.
However,theexpenseofreplacingtheroofisdeductibleunderdivision43.As
discussioninrepaintingexpense,immediatedeductionisnotallowedunder
division43buttaxpayerscanclaimdeductionsoverthelifeoftheassetunder
capitalallowancesregime.Thus,Robertisentitledtodeductionattherate
specifiedunders43-25oncetheconstructioniscompleted21.Apportionmentis
appliedtothisexpenseasthesamereasonforrepaintexpense.
Appliedsection:s43-25 40yearsat2.5%
Incomeyear Deduction
1/7/2010-30/6/2011
(Constructioncompletedat
1/9/2010)
303/365*(11000+3000)*2.5%=
$291
1/7/2011-30/6/2013 14000*2.5%=$350perincomeyear
1/7/2013-30/6/2014 93/365*350=$89
Totaldeduction 350*8+291+89=$780
Nondeductibleamount $13220
Costofreplacingcarpets
Thisexpenseiscapitalinnature,andthusitfallsunderuniformcapital
allowancedivision40thatallowstaxpayerstodeductanamountequaltothe
declineinvalueofdepreciatingassetsthattheyholdforthetaxablepurposes.
Referringtos40-30,carpetsaredepreciatingassets.Sincethecarpetwas
purchasedpost10May2006usingdiminishingvaluemethod,s40-72isapplied
here.Basevalue,effectivelife,anddaysholdarekeyfactorsincalculating
deductionfortheassets22.Basevalueatbeginningyearisdefinedbys40-10(1),
21 s43-3022 s40-72
![Page 7: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/7.jpg)
z5001560TABL2751Assignment
7
consistingfirstelementandsecondelementinthecostbase23oftheasset.Under
s40-10(1),daysholdarecountedfromthefirstdaythattaxpayersholdassets,
whichisthepurchaseddateinthiscase.Effectivelifeofassetscanbe
determinedeitherbycommissionerorbytaxpayer24.ReferringtoTR2015/2,
effectivelifeforcarpetis10years.Intermsofdeductionsinsubsequentyears,
basevalueiscombinationofopeningadjustablevalueand2ndelement25 ofcost
forthatyear26.Thedeductionratesarethesameduringthelifeoftheassetbut
choiceofdepreciationmethodcannotbechanged27.Aspreviousdiscussion,the
apportionmentisrequiredinthiscasesothatthedeductionreducedwhere
asset’sdeclineinvalueattributabletoitsuseforapurposeotherthanataxable
purpose.
Appliedsection:s40-72
Effectivelifeofcarpet(TR2015/2) 10years
Basevalue(s40-10) $8000
Incomeyear Deduction
1/7/2012-30/6/2013
(startholdingtheassetat1/7/2012)
8000*365/365*200%/10=$1600
1/7/2013-30/6/2014 (8000-1600)*93/365*200%/10=
$326
Balancingadjustmentofcarpets
Intheproblem,balancingadjustmentevents28 relatedtocarpetshaveoccurred
twiceon1July2012and1March2016respectively.Theformerhappenedwhen
23 24 s40-9525 26 s40-8527 s40-130(2)28 s40-295(1)
![Page 8: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/8.jpg)
z5001560TABL2751Assignment
8
originalcarpetswerereplacedduetobeingworn.Thelatterhappenedwhen
Robertsignedcontracttosellthepropertysothathestoppedholdingthenew
carpets.Ifterminationvalueexceedsadjustablevalue,excessisincludedin
assessableincome29.Otherwiseitisdeduction30.Basedonthefact,the
terminationvalue31 oftheoldcarpetiszerobutthereisnosufficient
informationtoderiveitsexcess.Intermsofthenewcarpet,terminationvalueis
includedinthetotalconsiderationforthehouseandthusapportionmentis
requiredindeterminingitsterminationvalue32.Thereisnosufficient
informationtocalculateitsexcessaswell.
Appliedsection:s40-285
Adjustmentvalueofoldcarpet Insufficientinformation
Terminationvalueofoldcarpet $0
Adjustmentvalueofnewcarpet 8000-1600-1280-1020-(245/365*
4100*200%/10)=$3550
Terminationvalueofnewcarpet Insufficientinformation
Legalfees&damages
Legalfeescanbeclassifiedeithercapitalorrevenueinnaturedependingonthe
purposeofincurringthelegalfees33.Undergeneraldeductionprovision,
taxpayerscanclaimdeductionforanylossoroutgoingtotheextentthatitis
incurredinproducingassessableincome34.AsRobertdidnotcarryonabusiness
withregardtorentalproperty,the1stlimbunders8-1(1)(a)isappropriatefor
thiscase.Itconcernedwithexpenseincurredintheactualcourseofproducing
assessableincome.Incidentalandrelevanttestdevelopedfromthedecisionin
29 s40-28530 ibid31 s40-30032 s40-31033 Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; 8 ATD 19034 s8-1(1)
![Page 9: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/9.jpg)
z5001560TABL2751Assignment
9
HeraldandWeeklyTimesLtdvFCT 35inwhichLegalfee&damagesincurredby
libelaredeductiblebecausetheywereincidentaltotaxpayer’sbusiness.The
principlesadvocatedinHeraldcasewereappliedinCaseC1236 whereallowing
adeductionforthesettlementofdamagesclaimwithregardtotenant’sinjuries
causedbyrentalproperty.ReferringtoAustralianTaxationofficeinterpretative
decision2003/48437,taxpayerscanclaimthecostofdefendingadamagesclaim
inrespectofinjuriessufferedbyathirdpartyontheirrentalproperty.Therefore,
theLegalfee&damagesfordefendingadamagesclaiminrespectofinjuryis
deductiblebecauseitincurredinthecourseofgainingassessableincome.
Incomeyear Deduction
1/7/2012-30/6/2013 $30000
Advertisingfortenants
Expenseincurredbyadvertisingfortenantsisdeductibleunders8-1.Tobe
deductibleunders8-1,outgoingshavetobenexustoincome.Incidentaland
relevanttestisoneofjudicialteststhatareusedtoconfirmwhetherthereisa
sufficientnexusbetweentheexpenditureandtheincome.Advertisementfor
tenantsdoesnotdirectlygenerateassessableincome.However,tenantsare
sourcesofrentalincome,wherebyitisincidentaltoproduceassessableincome.
AsWNeil&CompanyLtdvFCT38,theredundancypaymentdidnotgenerateany
incomebutitisdeductiblebasedontheobjectofexpense.Apportionmentisnot
requiredherebecausetheadvertingexpenseissolelyforthepurposeof
producingassessableincome.
35 HeraldandWeeklyTimesLtdvFCT(1932)48CLR11336 CaseC12(1952)3TBRD10037http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~negligence~basic~exact&target=J%20JA&style=html&sdocid=AID/AID2003484/00001&recStart=1&PiT=99991231235958&recnum=4&tot=7&pn=ALL:::JA38 WNeil&CompanyLtdvFCT(1937)56CLR290
![Page 10: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/10.jpg)
z5001560TABL2751Assignment
10
Incomeyear Deduction
1/7/2013-30/6/2014 $900
Mortgagedischarge
However,thisexpenseisdeductibleunderspecificdeductions25-30thatallows
deductionofmortgagedischargeexpensetotheextentthatyouusedthemoney
orpropertyforincomeproducingpurpose.Inthiscase,onlypartoftheexpense
isdeductibleunders25-30butthenon-deductibleportioncanbeincludedinthe
costbaseas2ndelementssothatitwouldminimizehistaxableincome.
Appliedsection:s25-30
Totallengthofmortgage 4597days(1/8/2003-1/3/2016)
Income-producingperiod 3015days(1/7/2005-1/10/2013)
Incomeyear Deduction
1/7/2015-30/6/2016 1000*3015/4597=$656
Totalexpense $1000
Non-deductibleamount $344(willbeincludedincostbase)
Advertisingforsale&Realestatecommission&Stampduty&legalfees
Similartotheincidentalexpenseofacquiringproperty,expensesincurredinsale
ofthepropertyarenotdeductiblebutcanbeincludeincostbase39 as2nd
elementsothattheycanreducecapitalgainfromdisposalofproperty.
Realestatefees&councilandwaterrate
Theseexpensesincurredinthecoursesofgainingassessableincome,andthus
therearesufficientnexusbetweenexpensesandincome.Hence,theseexpenses
aredeductibleunders8-1.Onlypartofpre-paidcouncilwaterrateexpenseis
attributedtoincome-producingpurposeduring2013,andthustheexpenses39
![Page 11: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/11.jpg)
z5001560TABL2751Assignment
11
needtobeapportioned40.
Incomeyear Deduction
1/7/2005-1/7/2012 2000+2300=$4300perincomeyear
1/7/2012-30/6/2013 2500+2400=$4900
1/7/2013-30/6/2014 200+3/12*2600=$850
Constructionexpenditureoftheproperty
Asdiscussioninrespectofrepaintingexpense,division43allowsdeductionfir
constructionexpenditureonbuildingsandothercapitalworks.Duetothefact
thatthehouseisrentedtoproduceassessableincome,Robertisentitledtoclaim
deductionforconstructionexpenditureonthepropertyunderdivision43atrate
specifiedins43-140duringtherentalperiods.Duetothefactthatdeduction
cannotoverwhelmamountofun-deductedconstructionexpenditure41,the
amountthatRobertisentitledtoclaimdeductionforconstructionexpenditure
dependstheamountthatpredecessorhadbeenclaimed.Thereisnosufficient
informationtoderivethedeductionthatRobertisentitledto.Besides,if
taxpayerhasclaimeddeductionforconstructionexpenditure,itwillreducecost
baseoftheproperty42.Consequentlyitwillaffectcapitalgaintaxwithregardto
disposaloftheproperty.Thereisnobalancingadjustmentwithregardtocapital
worksonsale.
Disposaloftheproperty
CapitalgainorlosscanonlybemadewhenCapitalGainTax(CGT)event43
40 s8-141 s43-1542https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Real-estate/Calculating-the-cost-base-of-real-estate/?page=243 s104-5
![Page 12: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/12.jpg)
z5001560TABL2751Assignment
12
happened.44 ThepropertyisaCGTasset45,andCGTeventA1occurwhenRobert
signsalecontract.46 Hence,thecapitalgainorlossfromdisposingtheproperty
isrecognizedon1March2016.Ifthecapitalproceedsexceedcostbased,the
excessiscapitalgain.47 Referringtos116-20,capitalproceedsis$870,000,and
thecostbaseispresentedinthefollowingtableconsistingoffiveelements48.
Roberthasheldthepropertyformorethan12monthssothatthecapitalgain
canbediscountedby50%49.
Mainresidenceexemption
RobertdidnotacquireanewpropertyinMelbourne,andassumingthathedid
nothaveanyotherpropertyinAustralia.Mainresidenceexemptioncanbe
appliedtodisregardcapitalgainfromdisposaloftheproperty50.However,
Robertcannotobtainthefullmainresidenceexemptionbecauseheusedthe
propertytoproduceincomeduringpartialownershipperiod.Accordingto
specialruleforfirstusetoproduceincome51,taxpayersareentitledtoafull
exemptionforthedwellingimmediatelybeforetheybeginrentingitout.
Furthermore,taxpayersaretakentohaveacquiredthedwellingatitsmarker
valueatthetimethattheyusedittoproduceincome52.Referringtoabsence
rule53,iftaxpayerusestheirmainresidenceforthepurposeofgenerating
assessableincome,themaximumperiodthatthepropertycanbetreatedasmain
residenceis6years.Hence,themarketvalueat1July2005isusedincalculating
costbase,andRobertisfullyexemptedfortheperiodbeforethisdate.Besides,
Robertisentitledtotreatthepropertyasmainresidenceduringhisabsencefor
44 s102-2045 s100-2546 s104-1047 s104-10(4)48 s110-2549 s115-25&115-1050 s118-11551 s118-19252 ibid53 s118-145
![Page 13: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/13.jpg)
z5001560TABL2751Assignment
13
sixyearsthatisformoneJuly2005tothirtyJune2011.
Capitalgaintax&Mainresidenceexemption
CGTEventA1 ITAA97 Value
Capitalproceeds $870,000
MoneyreceivedfromCGT
event
s116-20
(Less)Costbase s110-25
1stelement:acquisition
cost
Purchaseofproperty
s110-25(2)
s119-192(2)
$600,000
(Marketvalueat
1/7/2005)
2ndelement:incidental
cost
Stampduty(acquiring+
disposal)
Advertising(disposal)
Legalfees(acquiring+
disposal)
Borrowingcost
remaining
Mortgagedischarge
remaining
s110-25(3)
$18,000+$30,000
$1,500
$1,000+$1,800
$1,001
$344
3rdelement:costof
ownership
Interestexpense
remaining
s110-25(4)
$136,392
![Page 14: TABL 2751 Assignment](https://reader035.fdocuments.in/reader035/viewer/2022071711/577c7c231a28abe0549972b2/html5/thumbnails/14.jpg)
z5001560TABL2751Assignment
14
Repaintexpense
remaining
$6,340
4thelement:expenditure
toincreaseor
preserve/installormove
anasset
Replacementofroof
remaining
s110-25(5)
$13,220
5thelement:expenditure
toestablish,preserveor
defendtitle
s110-25(6) Nil
Totalcostbase s110-25 $809,587
Capitalgain s104-10(4) $60,403
Mainresidenceexemption:s118-115
Specialruleforfirstusetoproduceincome:s118-192
Absencerule:s118-145
Ownershipperioddays 1/7/2005-1/3/2016 3897days
Non-mainresidencedays 1/7/2011-12/31/2013 915days
TotalCapitalGain*(Non-mainresidencedays/Ownershipperioddays)=
60403*(915/3897)=$14,182
(Less)Capitaldiscountof
50%
s115-10 $14182*50%=
$7091
Netcapitalgain s102-5 $7091