05_Assessable Income - s_1

05_Assessable Income - s_1 - Unit 5 Assessable Income Lump...

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1 Assessable Income & Lump Sum Payment Unit 5 Unit 5
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2 LEARNING OBJECTIVES After this lecture, you should be able to: identify the taxable fringe benefit calculate the rental value and share option gain distinguish taxable from non-taxable lump sum payment name the types of lump sum payments that can be related back calculate the lump sum related back compute the assessable income
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3 Basis Period Assessment based on current year basis e.g. year of assessment 2003/04 from 1 April 2003 to 31 March 2004 On aggregate amount of income accrued from all sources in that year of assessment - s.11B
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4 When Income Accrued ? Assessable income accrued “Accrued” means entitled to claim payment thereof: s.11D(b) For income received after employment ceased , income is deemed to accrued on the last day of employment: proviso to s.11D(b) See Example 3, page 39
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5 When income assessable? However, income accrued is NOT assessable until it is received : s.11D(a) Income is deemed to be received when it is: made available to taxpayer dealt with on taxpayer’s behalf , or Dealt with according to taxpayer’s direction: proviso to
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6 Lump Sums on Cessation & Deferred Pay The following sums can be spread back: A lump sum or gratuity ( ) paid upon termination of: office employment, or Contract of employment A lump sum payment of deferred ( ) pay or arrears of pay ( )
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7 Spreading Back of Lump Sums The claim for spreading back must be made within 2 years of the end of Y/A in which the payment is made: proviso (i) to s.11D(b);
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8 Con’t Con’t Upon a valid claim, a lump sum is treated as accruing: During the periods in which the service were performed; Limited to 3 years ending on: Date of entitlement, or Last day of employment, Whichever is the earlier: proviso to s.11D(b)(i) See Examples 4 & 5 on pp.40 - 41
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9 Example A last day of employment: 31 October 2001 period of services: 2 years contract gratuity: $720,000 Answer: (1) without relating back $720,000 fully assessable on 31 October 2001 (Y/A: 2001/02)
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10 Example A (2) if relating back spread over 2 years (24 months) 1.4.01 - 31.10.01 (7 months) (2001/02) $720,000 x 7/24 = $210,000 1.4.00 - 31.3.01 (12 months) (2000/01) $720,000 x 12/24 = $360,000 1.11.99 - 31.3.00 (5 months) (1999/00) $720,000 x 5/24
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11 Example B If period of services: 5 years (1) without relating back same as Example A $720,000 assessable on 31 October 2001 (2001/02)
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12 Example B (2) if relating back spread over 3 years (36 months) 1.4.01 - 31.10.01 (7 months) (2001/02) $720,000 x 7/36 = $140,000 1.4.00 - 31.3.01 (12 months) (2000/01) $720,000 x 12/36 = $240,000 1.4.99 - 31.3.00 (12 months) (1999/00) $720,000 x 12/36 = $240,000 1.11.98 - 31.3.99 (5 months) (1998/99) $720,000 x 5/36 = $100,000
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To Claim Relating Back or Not? Any
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This note was uploaded on 03/21/2011 for the course ACCOUNTING 110 taught by Professor Mcwilliams during the Spring '09 term at San Jose State.

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05_Assessable Income - s_1 - Unit 5 Assessable Income Lump...

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