Letter of Advice Taxation Law

Question: Discuss about the Letter of Advice Taxation Law. Answer: Letter to Dan Brown (Tax Client) Dear Brown, I am glad to advise you regarding the taxation matter. For a better understanding at the outset I am sending you the most useful information about the recommendations along with the facts that you have rendered to me. In case where there are unclear tax law provisions I have used my judgment to form an opinion. I have tried to resolve those issues in your favor as much as possible (Ferraro 2015). The Internal Revenue Service is not bind by my opinion and can disagree with the same. If they challenge my opinion and any unfavorable judgment comes then you will be liable to pay further tax. The facts stated below are based on the earlier correspondence received from you. If you find any information as incomplete then please let me know as early as possible. As per the information provided you are resident Assesee of Australia having taxable income from salary, interest income, dividend income and profit on sale of investment. HELP debt is a compulsory repayment. It is deducted in proportion to increase in income. It is not deductible under tax. Any payment made by the employer is only deductible. Currently Dan is required to pay $10834.00 for repayment. If one sacrifices any amount from salary for contribution to superannuation then that amount will not be included in the taxable salary (Edmonds et al. 2015). If the Assesee is covered under Private Health Insurance then he can claim rebate for the same. But if Assesee is not covered under this scheme then Medical Levy is charged @1.5% and if the income exceeds threshold limit then he is further required to pay Medicare Levy surcharge (Gupta 2015). Based on our research it is advised that you should take private health insurance so that his taxable income gets reduced and his tax liability is reduced (Dabner 2015). It was pleasure working with you in this project and I am looking forward to work with you in future. Best Regards, Net tax payable/ refund situation 2015/16 FY Income 2015/16: Total Taxable amount Authority Assesable Income: sales $404,545.45 Note 2. Dividend Income(fully franked) $30,371.43 InteresT Received $1,800 Compensation for damages $600.00 Net Capital Gain $7,000.00 Total Assesable Income $ 444,317 Expenses: Advertising $2,900.00 Bad Debts $1,500.00 Bank Charges $150.00 Capital Expenditure $2,500.00 Cost of Sales $4,545.45 Note 2. sub contractor Expenses $20,000.00 Depreciation Expenses $5,500.00 Electricity $500.00 Environment Protection( disposal of cleaning chemicals) $600.00 Insurance Premium $1,500.00 Interest expenses within Australia $2,000.00 Lease expenses within Australia $5,000.00 Motor Vehicle 3rd Party Insurance $550.00 Motor Vehicle expenses (petrol maintenance) $6,000.00 Motor Vehicle Registration $1,000.00 Rent Expenses $20,800.00 Stationery Office supplies $400.00 Tea, coffee, sugar milk for staff $200.00 Telstra (Phone Internet) $2,350.00 Wages $60,000.00 Total Allowable Expenses $ 137,995 Total Assessable Income $ 306,321 Income tax liability $ 91,896.43 Less: Credits Franking Credit $9,111.43 Total net income tax payable $ 82,785.00 NOTE 1. Dividend Income Cash fully franked Dividend 21260.00 Add: Framking Credits 9111.43 Dividend Income 30371.43 2 GST Collected on sales 40454.55 Less: GST paid on purchase 454.55 Amount to be paid to ATO 40000.00 Assumptions: 1. Lease expenses are paid for building. 2. Motor Vehicle are only used for business purpose 3. Interest is incurred for the purpose of obtaining business income Reference Dabner, J.H., 2015. Partners or combatants: A comment on the Australian Tax Office's view of its relationship with the tax advising profession.Available at SSRN 2707914. Edmonds, M., Holle, C. and Hartanti, W., 2015. Alternative assets insights: Super funds-tax impediments to going global. Ferraro, R., 2015. Legal reasoning-The gateway to teaching great tax advice.Taxation in Australia,50(4), p.189. Gupta, R., 2015. Understanding clients ties to a tax practitioner: the mediating influence of trust and service satisfaction.Available at SSRN 2636648.