1. Income tax in Australia is imposed on individual and business income and revenue at progressive rates. The Australian Taxation Office regulates taxation and provides information to taxpayers. 2. Joe's employment income including salary, overtime pay, and bonuses are taxable. Mining Matters can deduct business expenses and Joe's allowance for tools is not taxable. Rental income minus expenses like repairs is taxable for Joe. 3. Capital gains made from the sale of assets acquired after 1985 are generally subject to capital gains tax, but the painting Donna purchased in 1984 is exempt since it was bought before the capital gains tax regime began.

1. Income Tax Law

2. Income Tax Law in Australia
Income tax is tax imposed by the government on individual or entities which varies with income
and revenue. Income tax in Australia accumulates to the major revenue stream for the
government since its initial imposition. Income tax in Australia is levied upon three different
individual sectors; Personal, business and capital. Current income tax laws in Australia indicate
that no tax would be imposed on the income of AUD $18200, while 19cc would be charged as an
income tax on every AUD $1 earned after $18200 and so the income tax in Australia appreciates
at an increasing rate. This indicates that in Australia your income tax rises with your income.
Australian taxation office
A body designed to effectively regulate the tax reforms with in the boundaries of
Australia, Australian taxation office provides detailed information and specification regarding
the taxation system, including the imposition of the income tax in Australia. Various legal
procedures are required and the Australian taxation office provides the information for these
procedures to the businesses such as looking for the registration, reports and returns, payment to
Australian taxation office and the tax obligation regarding the employees of the business.
Australian Taxation office also has a website which provides all the basic information that may
be required regarding the taxation system in Australia and leak our important information
regarding the taxation that every individual living in Australia should be familiar with.
1. Advise to Mining Matters and Joe on Employment Income and Business
Expenditure
Australia's income tax system works on the self-assessment principle. This means the
Income Tax Office, which is the authority that collects tax for taxpayers in Australia, initially

3. accept that the information that a taxpayer provides about their income and deductions are
accurate and work out the tax that the taxpayer is liable to pay on this basis. However, the
Australian Tax Office can also ask the taxpayers to show records to support the information
provided in the income tax return filed, so it is important to keep the necessary records to verify
claims for any tax payer.
A tax payer is supposed to lodge a tax return for any year in which he or she or it carries
on a business.
For taxpayers that receive income from employment, their total income will include
income from emoluments. This includes:
 salary, wages, overtime, bonus, remuneration.
 gratuities.
 the estimated annual total of any quarters or board or residence.
 the estimated annual total of any other allowance granted in respect of
employment (in cash or kind).
 stipends.
 commission, or other amounts for services.
 directors’ or management fees.
 retiring allowances or pension, accruing in, derived from or received in Fiji.
All incomes are subject to tax, however, some payments are exempt from tax. Special
provisions for exemptions are available for taxpayers that derive income from foreign sources.
[Income Tax Assessment Act 1936, Vic, S159ZR]

4. If an Australian resident for tax purposes, you pay tax in Australia on your employment
income, such as salary, wages, commissions, bonuses and allowances earned from Foreign
Service unless it is exempt from Australian tax. From 1 July 2009, there is a limited exemption
for foreign employment income from particular types of Foreign Service. [Income Tax
Assessment Act 1936, Vic, S6AB]
Nonresidents are taxed only on their Australian-sourced income. Married couples are
taxed separately.
The tax year in Australia starts at 01 July and ends on 30 June the following year.
The tax year 2012-2013 is from 01 July 2012 to 30 June 2013. The tax year 2013-2014 is from
01 July 2013 to 30 June 2014 [Income Tax Assessment Act 1936, Vic, S3].
The Australian Income Tax Assessment Act 1936 states that wages of a resident person
are subject to income tax. The amount earned by Joe thus, in matters of his wages of $70,000 is
taxable. Overtime payment of $25,000 is however under the allowances and is to be withheld by
his company Mining Matters. This is an allowance subject to PAYG withholding. If, however,
Mining Matters does not withhold Joe’s tax from his allowances, the overtime wage will
considered into his income for the year and will be taxable. In this case, Joe can acquire a
reimbursement from Mining Matters, his employer.
Bonuses given to Joe for his work completed within normal course of employment are
also taxable under the Income Tax Assessment Act 1936. This amount will be included when
determining taxable income of Joe. However, if tax is withheld from any amount of bonus paid,
Joe is not liable to pay tax on that bonus [Income Tax Assessment Act 1936, Vic, S24K]

5. Taxable entities are resident companies (including limited partnerships) and the
permanent establishments of non-residents that derive income from an Australian source.
A company is resident in Australia for tax purposes if it is incorporated in Australia or,
although not incorporated in Australia, it carries on business in Australia and has either its
central management or control in Australia, or its voting power controlled by shareholders who
are residents of Australia. Corporate income tax applies to a resident entity's worldwide income,
including capital gains.
Mining Matters is a business operating in Australia and is subject to its business income
being chargeable to tax at the rate prescribed by the Australian Tax Office. Apart from its
business income being chargeable by tax, Mining Matters is also allowed several expenses to be
deducted from its income tax assessment that are related to business operations. Generally the
Australian Income Tax laws state that operating expenses are claimable from the Australian Tax
Office with some exceptions. Likewise, Australian Income Tax laws and statutes state that
capital expenses such as installation of new plants and heavy machinery is to be claimed over
time with some exceptions.
The Income Tax Assessment Act says that allowances paid to the employee for the use of
business operations is not taxable. Goods supplied or allowances paid to purchase tools for use at
work is not taxable. This amount will be deducted from the employee’s income for the year. For
Mining Matters, this allowance for tools and machine is business expenditure. In tax terms, this
is deductible under the Income Tax Assessment Act 1936 and should be allowable for deduction
by Mining Matters when submitting their annual taxation returns [Income Tax Assessment Act
1936, Vic, 82KZMG].

6. Supplying of uniforms and special specific to work clothes are also not taxable in any
way. Thus this amount will also not be included in the taxable income. For Mining Matters this
will be classified as normal business expenditure and will be allowed as deductible business
expenditure in tax terms as the expenditure was incurred in direct relation to the running of the
business.
Any rewards given during membership of a union are not taxable under the Income Tax
Assessment Act. So the engraved plaque is not taxable under law
Business expenditure incurred by a business before start-up is not deductible against
income from personal earnings or salary. Pre-commencement expenditure is not deductible under
business income of a taxpayer. So all expenses incurred by Joe in the start up of his business will
not be deducted from income taxable. Salary paid to his brother Ted will be a deductible expense
if tax has been collected by Joe on Ted’s salary. If it has not then, tax will not be deductible from
business income. Also the amount of the salary will not be one that Joe pays to Ted. In this case,
the salary will be assumed at arm’s length and normal market wages for Ted’s job and skills will
be considered for the purposes of Income Tax.
2. Advise to Joe about Tax rules.
Expenses that can be claimed for income earned under Rental Income are advertising
costs (for tenants), bank charges, body corporate fees, borrowing expenses, council rates,
depreciation (decline in value of depreciating assets), insurance, land tax, property agent fees or
commissions, repairs and maintenance (stationery, telephone, water charges, gardening and
mowing, pest control), and travel undertaken to inspect the property or to collect the rent. Since
repairs and maintainence costs are an allowable expense, the cost of the, Replacement of the old

7. wooden steps with new concrete steps because some of the old steps were suffering from wood
rot; Repainting the exterior of the house and Repairs to the front and back doors where they were
damaged by burglars is deductible against rental income earned by Joe. Rental Income earned by
Joe is $15000 and will be the amount taxable less the commission paid to its agent Ray White
Real Estate. The repairs done will also be deducted except the installation of the air conditioning
units as they are neither repairs nor maintainence. Salary paid to painter will also be deductible.
It is advisable to keep in mind though that repairs and maintenance are only deductible to the
extent that is done to derive rental income. So an apportionment that is acceptable and fair
should be used to divide income taxable and deductible [Income Tax Assessment Act 1936, Vic,
82KZMG].
Interest Income is taxed and that tax is withheld by the person making payment. In Joe’s
case it is the Commonwealth bank.
Medical expenses are calculated as follows
Family status ATI
threshold
What can I
claim?
Single
(single at 30 June 2013 and no dependent
children)
$84,0
00 or less
20% of net
medical expenses over
$2,120

8. above
$84,000
10% of net
medical expenses over
$5,000
Family
(with a spouse at 30 June 2013, or
dependent children at any time during the year, or
both)
$168,
000* or less
20% of net
medical expenses over
$2,120
above
$168,000*
10% of net
medical expenses over
$5,000
According to this table Joe can claim medical tax relief according to net spent by him on
his child. The expenses calculated in Joe’s scenario are 1500 plus 4000 paid to private medical
health insurance premiums [Income Tax Assessment Act 1936, Vic, 159P, 159Q]
Any expenses incurred by Joe over his other son are not taxable or deductible. That is
classified as a personal expense and will not be reimbursed or deducted from income.
3. Advice to Donna about Income from Capital Gains.
A capital gain or capital loss is the difference between the cost to get an asset and what
was received when disposed of it.

9. Tax is paid on capital gains which happen when a capital asset such as the painting held
by Donna, is sold for a gain on the original cost of the asset. It forms part of the income tax and
is not considered a separate tax, although it is generally referred to as capital gains tax (CGT).
If one makes a capital loss, one cannot claim it against income but can use it to reduce a
capital gain in the same income year. If the capital losses exceed the capital gains or one makes a
capital loss in an income year, there is no capital gain. A person can generally carry the loss
forward and deduct it against capital gains in future years.
All assets a person had acquired since tax on capital gains came into effect (on
20 September 1985) are subject to CGT unless specifically excluded. This means that Donna’s
painting purchased in 1984 is not subject to Capital Gains Tax under the Income Tax Assessment
Act 1936 [Income Tax Assessment Act 1936, Vic, 159P, 159Q].
Selling assets such as real estate or shares is the most common way a person can make a
capital gain or capital loss. CGT also applies to intangible assets such as business goodwill.
Some of the other main personal assets are exempt from CGT, including homes, cars, and
most personal use assets, such as furniture. CGT also doesn’t apply to depreciating assets used
solely for taxable purposes, such as business equipment or fittings in a rental property.
So in conclusion we can see that the gain from selling Donna’s painting is not taxable
since it was purchased before 1985 [Income Tax Assessment Act 1936, Vic, 159P, 24AX].