The Employment Income: Hannah’s And Hugo’s Income Tax Treatment (Case Study Sample)

Name: Instructor’s Name: Course Details: Date of Submission: Hannah’s and Hugo’s Income Tax Treatment Tax Treatment on Hannah’s Employment Income Hannah is offered a generous salary package, which is liable to taxation. The $50,000 inducement amount to encourage her to take the job and the $70,000 allowance to cover costs related to the relocation are deductions allowed against her employment income. Therefore, the two amounts will not be taxed. According to Doerrenberg, Andreas, and Sebastian, governments do not tax the deductions that are allowed against a worker's employment income. The only income that will be taxed is the salary package. My advice to the Hugo's is that Hannah should declare her income on the tax return form and remember when calculating the tax liability that is levied at progressive rates that range from 0 to 45 percent and there is a Medicare levy of 2 percent. According to Michael, the two acts that the authorities follow in calculating the income tax are the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997, with the first one slowly being incorporated into the second one. In the case of in Brent v FC of T, the High Court decided that when an employee receives money as compensation because of rendering his or her services, such money is treated as income and, therefore, liable to taxation (Michael). Tax Treatment on the Net Profit from the Sale of the House in South Yarra Mr. Hugo sold the house at auction in October 2017 for $3,000,000, which according to the total cost used on the house, is at a net profit of more than $2,000,000. My advice to the Hugo's is that this amount is a capital gain and not income, since, it was not made from business and, therefore, will be subject to the capital gains tax. Capital gains happen when the owner of the house sells it at a net profit, and therefore, the capital gain on the sale of Mr. and Mrs. Hugo's house is liable to taxation at the normal rate that the government prescribes. Since, Mr. and Mrs. Hugo bought the house in 1998, its cost base will be indexed because the Hugos sold the house more than one year after acquiring it. Evans, John, and Youngdeok, assert that the cost base of a property will not be indexed if the owner sells it the same year that he or she acquires it. The cost base that is indexed does not include the non-capital costs. Since, Mr. and Mrs. Hugo bought the house before 21 September 1999, its indexation was frozen on 30 September 1999. Hence, the government will reduce the capital gain, which will not be indexed by 50 percent. Therefore, the capital gain that is taxable is 50 percent of the cost base, since, the Hugo's held the house for more than 1 year. There will be the capital gain tax on the house because the Hugos bought it after 20 September 1985 and the Income Tax Assessment Act 1936 (Cth) puts a property under the assessable income for taxation purposes (Michael). Tax Treatment on the Net Profit from the Sale of the Land near Inverloch The agents sold Mr. and Mrs. Hugo's land at a net profit of $2,000,000. My advice to the Hugo's is that this amount is a capital gain and will not be subject to the land tax but instead will be subject to the capital gains tax. According to Benson, land tax is a yearly tax that the government levies on a real estate property. This difference was distinguished by Judge Pitney J in the Eisner v Macomber case where he said that land tax is levied on the property's rent (Michael). Capital gains happen when the owner of the land sells it at a net profit, and therefore, the capital gain on the sale of Mr. and Mrs. Hugo's land is liable to taxation at the normal rate that the government prescribes. Since,...