Taxation Law Assignment

Calculation Based on Total Taxable Income and Tax Payable

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Abstract

Oscar’s total assessable income is $1,079,000. The taxable income is calculated deducting the deductions

provided under S.8-1 and S.8-5 general and specific deductions respectively. So in order to get the

taxable income, we need to identify the deductable amounts in the expenditures of Oscar.

Stocking trade transactions – Oscar had the opening stock of $250,000 as on 1 July 2013 and the

closing stock $200,000 as on 30 June 2014. The opening and closing stock adjustments are referred in

S.70-35 which says if the amount of closing stock is lesser than the opening stock, the difference of

$50,000 must be deducted. But Oscar had purchased the stock of $20,000 which was not received yet.

The meaning of stock ‘on hand’ as per S. 70-35 clarifies the dilemma that this stock should be included in

calculation of closing stock or not. The dispositive power is transferred to the owner here and therefore to

be considered as stock on hand as it was held in the case FCT v. Suttons Motors (Chullora) Wholesale Pty

Limited. Also it was held in the case Farnsworth v. FCT (1948) 78 CLR 504 that the dispositive power

does not mean mere physical presence. Therefore since Oscar had received the bill of lading the stock can

be considered as stock on hand. Considering this stock as also part of closing stock the whole deductable

amount comes around $30,000.