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Ques 1
Describe (80–100 words) the distinction between legislative requirements and professional standards.
Answe
Legislative requirements are the set of rules and regulations which are set by the public authorities or the government and by which each and every individual or business is bound. Whereas professional standards are the standards set by an association of persons practicing the same profession and which are agreed by them. This can also be refe
ed to as code of conduct or ethics of a professional. These standards are required to be maintained by the people who are practicing the same profession.
Question 2
· Section 4.10 of the Income Tax Assessment Act 1997 describes how to assess the tax liability of a taxpayer.  How do you work out how much income tax an individual must pay (according to this provision).  You may need to find the section on the internet.
Section 4.10 of the Income Tax Assessment Act 1997 describes the following method to work out how much income tax an individual must pay.
Income Tax for an Income Year = (Taxable Income for the Income Year * Tax rate) - Tax Offsets
Step 1 - Compute taxable income for the year as per Section 4-15
Step 2 - Determine tax liability using the tax rates mentioned in Section 4-25
Step 3 - Work out tax offsets using Section 13-1
Step 4 - Compute tax payable using the formula given above.
Question 3
· Describe some of the potential consequences of failing to submit an income tax return on time. Discuss in 80–100 words.
If a person fails to lodge the tax return before the due date then he may be imposed Failure to Lodge penalty by the Australian Tax Office. Section 8C of the Taxation Administration Act 1953 considers failure to lodge a tax return as an offence. The repercussions are such that the offender might be prosecuted for criminal charges under this section in case he fails to file his tax return with the authorities. These charges under this section are of quite serious nature and are usually charges only for severe tax-related fraud offenses.
Question 4
· How do tax offsets differ from tax deductions and why are they used? Discuss in 120–150 words.
A tax deduction is not a direct decrease in the tax amount payable by a person rather it reduces the taxable income of that person. Whereas tax offset directly reduces the tax amount owed by the person. For example, Let's assume a person has eligible tax deductions of $1000 and he falls in 30% tax
acket. Now the tax liability that he can reduce using this deduction is $1000*30% = $300. In case it would have been a tax offset the tax liability would have been reduced by $1000 directly. Thus tax offsets are used to obtain greater benefits by having a direct deduction in the taxes owed. Thus tax offsets have supreme power to reduce the tax liability directly as compared to the tax offsets.
Question 5
Why is maintaining records an integral part of satisfying income tax obligations? Discuss in 120–150 words.
The tax laws allow a taxpayer to self-assess his taxable income and tax liability and pay his taxes accordingly. But these computations should be supported with appropriate documentation so as to explain how did the taxpayer a
ive at these figures. In some cases, written records and documents may be required and called upon by the tax authorities for determining how did a taxpayer compute his tax liability. Proper maintenance of records also helps in reducing the risks of tax audits and adjustments. Alongside, it also helps in reducing the chances of disputed claims and adverse assessments. Thus overall it helps in reducing the exposure of a taxpayer towards penalties. Further, it helps the tax adviser to compute the tax liabilities in an appropriate manner.
Question 6
· Where would you find the cu
ent tax tables and descriptions of fees and charges? Discuss in 80–100 words
The cu
ent tax tables and descriptions of fees and charges and other relevant information are available on the ATO website. Although these details are mentioned in law (like Section 4-25 of the Income Tax Assessment Act) but it is far more convenient to fetch these details from a source like ATO website that lists all the details which are necessary in a proper manner. Not only the tax tables and tax rates the ATO website has all the details pertaining to tax laws which are necessary for a taxpayer to know. The link for obtaining these tables and rates is:
https:
www.ato.gov.au/Rates/?sorttype=SortByTopic&marketsegment=Tax%20professionals.
Question 7
· What is the Medicare Levy Surcharge (MLS) and who is required to pay it? Discuss in 120–150 words.
Medicare Levy Surcharge (MLS) is an additional burden imposed on the taxpayer by the government for not having a private medical cover. This was introduced by the government with an intent to reduce the burden of government hospitals by promoting the people (who earn more than a certain amount) to go to private hospitals. A person who is single and is earning an income of more than $90000 (or a couple or a family earning more than $180000) is required to pay a surcharge of 1% to 1.5% of his taxable income in case he does not have a private medical cover. The MLS is calculated on a daily basis i.e., if a taxpayer had a private medical cover for a part during the year then he will have to pay MLS only for the rest part of the year.
Question 8
· What is a deduction and what generally determines whether or not a deduction is allowable? Discuss in 150–180 words.
A taxpayer is allowed to reduce the tax liability to be settled by him by reducing his taxable income by certain amounts called as tax deductions. These deductions are the expenses which are allowed as set off against the taxable income and should have been incu
ed in relation to earning of that income. There are two kinds of deductions laid down under the law: general deductions and specific deductions. To claim a deduction relating to work the deduction must have been incu
ed by the taxpayer and he was not reimbursed the same. This deduction must be directly related to earning the income and there must be the proper document on record to support the claim. The expense which is related to work purpose is only allowed as the deduction and any expense incu
ed for the private purpose cannot be claimed as deduction from the income of the taxpayer. There are some specific deductions as well like vehicle and travel expenses etc. which can also be claimed as the deduction.
Question 9
· Describe the key features of organisational policy and procedures relating to the preparation of tax documentation for individual taxpayers. Discuss in 120–150 words.
Key features of organizational policy and procedures relating to the preparation of tax documentation for individual taxpayers:
- The policy should be clear and concise.
- It should be easy to understand and interpret.
- It should take into consideration all the legal aspects that might be involved from the tax perspective and would be included in the client's tax returns.
- The basic details of the client should be properly kept into consideration.
- - The numbers filled in the tax forms of the clients should be properly supported by evidence. Each document to support the claims made by the taxpayer...