Taxation Law Clothing Business Purchase

Question: Discuss about the Taxation Law for Clothing Business Purchase. Answer: The owners of clothing business purchase many products from the manufacturers and whole sellers so that they can sell these clothes to the customers in the market. They deal with more than one retailers and shops. There administrative work includes the service related to customer and maintaining the stock of the company[1]. The income earns by an individual either from providing services or for continuing any business is assessable to tax under section 6-5 of the ITAA 1997 as an ordinary income. The section 6-20 of the ITAA 1997 states that certain exemptions are available for the person, which he can claim while calculating his total income[2]. In the given case, the company Tom ltd started its business in Australia. The nature of the business is to sell clothes on retail basis to its customers. The company Tom Ltd seeks an advice based on ATO rulings and recent case laws for tax implication. According to Australian Law individual who resides in the country can claim an exemption on the starting amount of $6,000 under the head tax-free threshold. The section 8-1 of the ITAA 1997 states that a person can claim deduction for the amount spent on dividend or interest prescribed by the act[3]. Particulars Cost of Goods sold Bonus Bad debt Legal fees Dividend received Income tax paid Issue dividend to shareholders Gross total income Reason (Opening stock + purchases-closing stock) Expenses Loss Expenses Income Expenses Expenses Amount [(120,000+180,000)-160,000] $10,000 $15,000 $30,000 $35,000 $15,000 $280,000 Amount $140,000 Exempted ($15,000) ($30,000) $35,000 ($15,000) $280,000 ($165,000) The taxable income is computed under section 4-15 of the ITAA 1997 and since the company is earning a loss during the year so the company does not require paying tax on the loss. Hence, the company Tom Ltd is not eligible to pay tax during the year[4]. After analyzing the whole case it was found that the company met with a heavy loss during the year by issuing dividend. Therefore, it is advisable for the company to hold the issue of dividend for next assessment year. References and bibliography: Evans, C., Hansford, A., Hasseldine, J., Lignier, P., Smulders, S. and Vaillancourt, F., 2014. Small business and tax compliance costs: A cross-country study of managerial benefits and tax concessions.eJournal of Tax Research,12(2), p.453. Lignier, P. and Evans, C., 2012, August. The rise and rise of tax compliance costs for the small business sector in Australia. InAustralian Tax Forum(Vol. 27, No. 3, pp. 615-672). Ma, D., 2015. Small business tax compliance burden: what can be done to level the playing field. Scollo, M., Bayly, M. and Wakefield, M., 2015. Availability of illicit tobacco in small retail outlets before and after the implementation of Australian plain packaging legislation.Tobacco control,24(e1), pp.e45-e51.