Taxation course - summarization

Topics: Taxation, Tax, Capital asset Pages: 22 (2843 words) Published: October 18, 2013
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DEDUCTIONS

GENERAL DEDUCTIONS
s.8-1

-incurred in gaining or producing assessable income

-necessarily incurred in carrying on a business

Exclusions:

- capital expense

- private or domestic expenses

- expenses incurred in producing exempt income

- expenses which are specifically disallowed under the Act

Others

1. Clothing and uniforms

- protective, occupation specific uniforms, compulsory uniforms and embossed uniform

2. Home office or home study

Occupancy costs
(interest, rates and taxes, depreciations of furniture )
Running costs
(Electricity, Heating)

Operate from home
YES
YES

Choose to do some work from home
NO
YES

3. Travel expenses

- between workplaces

- if they have to take heavy tools

- if the taxpayer don’t have a regular fixed place of work (piano teacher)

- if work commence at home

STATUTORY DEDUCTIONS (division 25)
DIV. 25

1. Tax related deductions
s.25-5

- paid to a recognized tax adviser

2. Repairs
s.25-10

3. Lease document expenses
s.25-20

- preparation, registration or stamping

4. Borrowing expenses
s.25-25

- stamp duty for loan, application fees, valuation fees and broker’s fees

- deduction in the term of the loan (max 5 years)

- calculation: e.g. amount 500, loan period 5 years, days in first year 100

1 year: (500/1825 days in 5 years)x100 days=27.39

2 year: (473/1725 days left)x365 days

5. Mortgage discharge expenses
s.25-30

- expenses incurred to discharge a mortgage given as security

6.Bad debts
s.25-35

- the debt must be written off as bad during the year

-the debt must have been bought into account as assessable income

7. Losses by embezzlement (caused by theft, stealing)
s.25-45

8. Payments of pensions/retiring allowances (only if it can be shown to be in the future interest of the business) s.8-1

AMMOUNTS WHICH CAN”T BE DEDUCT OR WHICH ARE LIMITED (division 26) DIV.26

NOT DEDUCTIBLE

1. Fines and Penalties
s.26-5

2. Leave payments provision
s.26-10

3. Club fees and leisure facilities
s.26-45
s.26-50

4. Illegal activities
s.26-54

LIMITED DEDUCTION

1. Assistance to students
s.26-20

-HECS-HELP not deductible

-FEE-HELP deductible (if it meets the requirements of s.8-1

2. Self education expenses (HECS-HELP not an expense of self education)

a) self education travel only if:

- start and end at same place

- otherwise only the travel to school is deductible

b) limitation

First 250$ are not deductible
s.82A

ENTERTAINMENT DIVISION 32
DIV.32

-is not deductible
s.32-5

-deductible under FBT
9A FBTAA

BUSINESS-RELATED CAPITAL COSTS
s.40-880

Capital expenditure in relation to:

- to a business

-a former business

-a proposed business

-the liquidator or winding up a business operated as via a company

Deductible in 5 years, 20% in each year

PREPAID EXPENSES

a) full amount deductible if:

- made on or after 25 May 1998

-less than 1,000$

-would otherwise be deductible under s.8-1

b) SBE- is fully deductible if 2 conditions are met:

-will be done in 12 months

-the eligible service period ends before the end of the following year

c) SBE (if the above conditions are not met) than deduction limited as follows: (Deduction x period in CY(days))/Eligible service period (days)

DONATIONS (division 30
DIV.30

-is over 2$

-if is something bought or purchased from a charity is NOT a donation

-donations to political party are deductible up to 1,500$

SUPERANUATION (division 290)
DIV.290

-Employers can claim the full cost of superannuation provided to their employees...
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