Q18 (Disposal of depreciating assets)

Required: The following are all resident taxpayers. In each case, calculate the deduction available for decline in value as well as any assessable income (if any) arising from the disposals during the 2017/18 tax year.

c) Joe sold office equipment from his law practice on 1 November 2017 for $600.The office equipment had an original cost of $1,800 but was added to the low value pool in 2015 when it became a low value asset. The low value pool had an opening balance of $3,500 and there were no additions to the pool during the year.

Note :For q 18 part C we have to use the explanation below

Q11 (Superannuation lump sum and income stream)

On 14 August 2017, Tammy Gochi, aged 53, retired from her job as chief executive officer of Megacorp Limited to commence service as a volunteer for Whalepeace International. She received a superannuation lump sum of $160,000 which entirely comprised an element taxed in the fund. PAYG tax of $34,500 was withheld from the lump sum.

During the remainder of the 2017/18 tax year, Tammy also received a superannuation income stream benefit of $40,000 from the fund. PAYG tax of $9,780 was withheld from this amount. The entire amount was taxed in the fund.

Tammys only other income during the 2017/18 tax year was gross salary of $36,290 for the period up to the date of her retirement. PAYG tax of $9,035 was withheld by her employer. Tammy has private hospital insurance.

Required:

1. Calculate Tammys taxable income for the 2017/18 tax year.

Gross salary = 36290

Super lump sum = 160,000

Sup income stream = 40,000

Total Assessable income is = 236,290

1. Calculate Tammys net tax payable or refundable for the 2017/18 tax year.

Notes : Part a answer is right I only need i need help with part b however we have to use this below :

Its Australian Taxation

10.10 LOW VALUE DEPRECIATING ASSETS POOLS Non-business taxpayers and non-small-business entities may elect to claim deductions for the decline in value of depreciating assets costing less than $1,000 ("low-cost assets") through a low-value pool - s.40-420. A depreciating asset whose decline in value was calculated using the diminishing value method for a previous income year can also be pooled where its opening adjustable value is less than $1,000. The decline in value of a low-value pool is: Where the depreciating asset was acquired in a previous year - 37.5% of the asset's opening adjustable value. Where the depreciating asset is acquired in the current year - 18.75% of the cost of the asset. A taxpayer who pools a low-cost depreciating asset must pool all low-cost depreciating assets acquired during that year and all subsequent years. . . Exceptions The following depreciating assets cannot be allocated to a low-value pool: Low-value assets for which the prime cost method was used to work out any deduction for decline in value for a previous income year. Horticultural plants (see the textbook Advanced Income Tax Law Chapter 5: Primary Producers). Assets for which a deduction is made under the small business entities concessions. Assets that cost $300 or less for which an immediate deduction was claimed - see Immediate deduction for certain non-business depreciating assets costing $300 or less. Certain depreciating assets used in carrying on research and development activities - see the Research and Development tax concessions (contained in the textbook Advanced Income Tax Law Chapter 4: Companies). Assets costing $100 or less acquired by non-small business entities are immediately fully deductible and, therefore, cannot be allocated to a low-value pool. Disposal of Low-value Pooled Assets If a low-value pooled asset is disposed of (sold, scrapped, lost, destroyed, or given away), then the closing balance of the pool for the year is reduced by the amount of the termination value. Where the termination value exceeds the closing pool balance, the excess amount is included in the taxpayer's assessable income. The pool's closing balance then becomes zero. Illustration: Low-value asset pooling Fred, a non-small-business entity taxpayer, acquired a Laptop computer on 15 May 2018 for $900. He also has a Desktop computer originally purchased for $4,000 but having an adjustable value of $600 on 1 July 2017. Fred has previously used the diminishing value method. Both computers are wholly used for income producing purposes. Required: (a) Calculate the deduction for decline in value using low-value asset pooling, and the closing balance of the pool for the year ended 30 June 2018. (b) Calculate the deduction for decline in value using low-value asset pooling, and the closing balance of the pool for the year ended 30 June 2019. Solution: (a) Decline in Value deduction for 2017/18 is: Laptop computer 900 x 18.75% $ 169 Desktop computer 600 x 37.5% 225 394 Low-value pool closing balance is: (900 169) + (600 225) $ 1,106 (b) Decline in Value deduction 2018/19 is: 1,106 x 37.5% $ 415 Low-value pool closing balance is: 1,106 - 415 = $ 691 10.11 NON-SMALL-BUSINESS ENTITY TAXPAYERS Non-small-business entity taxpayers are allowed an immediate deduction for low- value assets costing $100 or less. The small business entity test criteria are discussed in Chapter 6: Small Business Entities. All other assets are separately depreciated according to their effective life, unless the taxpayer elects to use a low-value asset pool. 10.12 SMALL BUSINESS CONCESSIONS The following concessions in relation to depreciation apply where a small business taxpayer (SBE) has an aggregated turnover of less than $10 million (see Chapter 6: Small Business Entities). If a taxpayer chooses to use the simplified depreciation rules, they must use them to work out deductions for all depreciating assets that the rules apply to. Summary of tax treatment of element taxed in the fund Age of recipient Lump sum Income stream Tax-free (not assessable income or Tax-free (not assessable 60 and over exempt income). income or exempt income). Assessable. Assessable. Taxed at 0% on the first $200,000 in Preservation age to 59 2017/18 (i.e. "the low cap amount). Taxed at marginal rates. Taxed at a maximum of 15% on any A 15% tax offset is available. excess over $200,000 in 2017/18. * Assessable. Below preservation Assessable. A 15% tax offset is available if age Taxed up to a maximum of 20%. * the benefit is a disability benefit. Departing Australia super payment DSAP tax 38%. (DSAP). DASP for Working Holiday Makers DSAP tax 65% (WHM) * plus 2% Medicare Levy in all cases where applicable. 10.10 LOW VALUE DEPRECIATING ASSETS POOLS Non-business taxpayers and non-small-business entities may elect to claim deductions for the decline in value of depreciating assets costing less than $1,000 ("low-cost assets") through a low-value pool - s.40-420. A depreciating asset whose decline in value was calculated using the diminishing value method for a previous income year can also be pooled where its opening adjustable value is less than $1,000. The decline in value of a low-value pool is: Where the depreciating asset was acquired in a previous year - 37.5% of the asset's opening adjustable value. Where the depreciating asset is acquired in the current year - 18.75% of the cost of the asset. A taxpayer who pools a low-cost depreciating asset must pool all low-cost depreciating assets acquired during that year and all subsequent years. . . Exceptions The following depreciating assets cannot be allocated to a low-value pool: Low-value assets for which the prime cost method was used to work out any deduction for decline in value for a previous income year. Horticultural plants (see the textbook Advanced Income Tax Law Chapter 5: Primary Producers). Assets for which a deduction is made under the small business entities concessions. Assets that cost $300 or less for which an immediate deduction was claimed - see Immediate deduction for certain non-business depreciating assets costing $300 or less. Certain depreciating assets used in carrying on research and development activities - see the Research and Development tax concessions (contained in the textbook Advanced Income Tax Law Chapter 4: Companies). Assets costing $100 or less acquired by non-small business entities are immediately fully deductible and, therefore, cannot be allocated to a low-value pool. Disposal of Low-value Pooled Assets If a low-value pooled asset is disposed of (sold, scrapped, lost, destroyed, or given away), then the closing balance of the pool for the year is reduced by the amount of the termination value. Where the termination value exceeds the closing pool balance, the excess amount is included in the taxpayer's assessable income. The pool's closing balance then becomes zero. Illustration: Low-value asset pooling Fred, a non-small-business entity taxpayer, acquired a Laptop computer on 15 May 2018 for $900. He also has a Desktop computer originally purchased for $4,000 but having an adjustable value of $600 on 1 July 2017. Fred has previously used the diminishing value method. Both computers are wholly used for income producing purposes. Required: (a) Calculate the deduction for decline in value using low-value asset pooling, and the closing balance of the pool for the year ended 30 June 2018. (b) Calculate the deduction for decline in value using low-value asset pooling, and the closing balance of the pool for the year ended 30 June 2019. Solution: (a) Decline in Value deduction for 2017/18 is: Laptop computer 900 x 18.75% $ 169 Desktop computer 600 x 37.5% 225 394 Low-value pool closing balance is: (900 169) + (600 225) $ 1,106 (b) Decline in Value deduction 2018/19 is: 1,106 x 37.5% $ 415 Low-value pool closing balance is: 1,106 - 415 = $ 691 10.11 NON-SMALL-BUSINESS ENTITY TAXPAYERS Non-small-business entity taxpayers are allowed an immediate deduction for low- value assets costing $100 or less. The small business entity test criteria are discussed in Chapter 6: Small Business Entities. All other assets are separately depreciated according to their effective life, unless the taxpayer elects to use a low-value asset pool. 10.12 SMALL BUSINESS CONCESSIONS The following concessions in relation to depreciation apply where a small business taxpayer (SBE) has an aggregated turnover of less than $10 million (see Chapter 6: Small Business Entities). If a taxpayer chooses to use the simplified depreciation rules, they must use them to work out deductions for all depreciating assets that the rules apply to. Summary of tax treatment of element taxed in the fund Age of recipient Lump sum Income stream Tax-free (not assessable income or Tax-free (not assessable 60 and over exempt income). income or exempt income). Assessable. Assessable. Taxed at 0% on the first $200,000 in Preservation age to 59 2017/18 (i.e. "the low cap amount). Taxed at marginal rates. Taxed at a maximum of 15% on any A 15% tax offset is available. excess over $200,000 in 2017/18. * Assessable. Below preservation Assessable. A 15% tax offset is available if age Taxed up to a maximum of 20%. * the benefit is a disability benefit. Departing Australia super payment DSAP tax 38%. (DSAP). DASP for Working Holiday Makers DSAP tax 65% (WHM) * plus 2% Medicare Levy in all cases where applicable