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Taxation Law: Set of Legislations - Essay Example

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An essay "Taxation Law: Set of Legislations" outlines that most of the countries fund their operations from revenues collected through taxation. This tax is imposed on various activities undertaken by the citizens of the state and among the category of this source of tax is the income tax…
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Taxation Law: Set of Legislations
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Download file to see previous pages The case under study, therefore, seeks to discuss in details all the legal aspects of income tax and the taxation structure that affects this type of tax. To give a comprehensive understanding of this, hypothetical values have been provided to help in presenting a practical application of this type of income tax. Income Tax Principles Stephanie receives annual earnings of $25,000 with the Medical Registrations Board. Over the same period, her annual expenditures are; dry-cleaning- $200, uniform replacement cost- $800, traveling- $1000, books and study cost- $2000, and HECS-HELP debt $20,000 (Black, 2011). Besides, her annual expenditure on accommodation was estimated to be $15000, on condition that she does not lease out the house or stay with someone in the flats. The above financial conditions will attract income tax policy mechanisms according to the state taxation principles. Income tax is payable by individuals, entities, and trustees annually based on the financial position of the corporation or individual. However, the state through the tax regulatory authority outlines in principle that only income attracts taxation.  Income tax = [Taxable Income * Tax Rate] - Tax Offsets The Tax Liability to be met by an individual is outlined by the formula: Tax Liability = income tax + Medicare levy + Medicare levy surcharge + HELP Repayment In the case of Stephanie, her taxable income is: $[25,000-(200+800+1,000+2,000) = $21,000] $21,000 - $15,000 = $6,000 Tax liability would be equivalent to; $6,000 + $20,000 = $26,000 Income tax has stipulations which give a guideline on how the taxation is carried out. In this case, the predicament of Stephanie presents a unique situation which needs careful deliberation. According to the Australian taxation law, the valued income tax influences the amount of tax that would be levied on any income earner. As noted in the case of Stephanie, it is arguable and evident that the amount of income tax that she earns is less when compared to the amount of tax that is supposed to be deducted. The uniqueness of this calls for careful deliberation based on legal taxation proceedings (Black, 2011). This is what the following part seeks to explore. Where personal incomes are less than the deductions, the income tax liability is not payable on individual income and instead may be deferred to the next financial year. However, in her case, her incomes exceed the summation of deductions and thus attracting taxation within the same financial year. The sample principle applies to entities and corporate institutions in the event they make losses. Such losses imply tax loss which would be carried forward as deductions in the coming financial periods. Assessable income that attracts tax liability is classified as either ordinary or statutory incomes. Ordinary incomes are defined by the common law as sources of income either from salary, interest or rent. On the other hand, statutory incomes are incomes that are included in the assessable income tax checklist, ITAA97.the law classifies the following under this category; annuities, work in progress, dividends, capital gains, and franking credits. In our hypothetical case study of Stephanie, it is clear that she has no statutory income as her income is specifically earnings generated at her workplaces with no other sources of income. ...Download file to see next pagesRead More
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