Income Taxation Law & Practice : Law Assessment

Law Assessment Question : Determining resident status of Basil for tax purpose considering ITAA36 s6 (1)

Basil is a citizen of England and has been working in Australian Law Assessment on working visa. The criteria for the payment of tax in Australia depends upon whether the taxpayer is a resident of Australia or not and it is also important to find out the source of income. if the income in earned in Australia then the individual is subject to pay tax irrespective of the nationality provided that there is double taxation treaty between Australia and other countries (Balakrishnan, 2011).

Section 995- 1 of the ITAA 1997, provides detail views with respect to determination of tax and Taxation Law Assessment in Australia. This is very important for migrants and thus helps both the Australian Government and migrant workers to determine the amount of tax to be paid to the Australian Government.

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To accurate determine four steps are carried by the individuals or government agencies:

  1. a) An individual working in Australia for more than 6 months is considered normal resident and therefore, they are subject to Law Assessment computation of tax if their income tax falls within the tax threshold.

Basil arrived Australia on 28 August 2013 and it is assumed that he started from the working the same date. Therefore, till 15 May 2014, Basil has been staying in Australia Law Assessment for more than 6 months or more than half of the years. In this context, Basil is a normal resident of Australia and therefore, he is liable to pay tax (Wood, 2012).

  1. b) Along with regular salary, Basil also receives regular Superannuation from his employers and therefore, he automatically becomes a resident of Australia as per the Australian Law Assignment Helps and therefore, he is liable to pay tax to the government (O’Sullivan, 2012).
  2. c) Source of income: Basil works in Australia and at the same time he earns money a company which is a resident firm of Australia. Therefore, it is clear that Basil source of income is in Australia and hence, he is liable to pay tax in Australia. In this context, it is to be noticed that Basil has different sources of income including UK but he would be charged only to the extent of amount earned only in Australia (Selto et al. 2008)
  3. d) Income tax threshold: The annual income of Basil is $144,000 and therefore, he falls under income tax threshold. In this context, it is to be remembered that he also enjoys other benefits which are subject to tax deduction, the overall tax liability of the Basil would be low but at the same time he is liable to pay 15% on the taxable income so computed (Kenny, 2013).

After considering different parameters, it is clear that Basil is a resident of Australia and at the same time he is liable to pay tax at the rate of 15% on the taxable income.

Advising Basil assuming as an Australian resident

  • Salary and rent subsidy

For the purpose of getting salary and rent subsidy, it is important that Basil qualify for social security income support payment, more than the base rate of Family Tax Benefit Part A or a service pension. As Basil get and rent allowance of $600 per month he can further get rent allowance in the computation of tax (Choate, 2010). Basil has two children and under Australian Tax, Basil would receive a total subsidy of $112.00 Rent Subsidy provision of the Australian Tax.

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The total salary of Basil is $144,000 per annum but also has income in other nations. As he is a residence of Australia, he is liable to pay tax on the income generated outside of Australia and therefore, his total income amounts to $180,000 per annum. In this context, it is to be remembered he can get a salary deduction under section 2(5) of the Income Tax Act, and thereby availing subsidy of total $20,000 in any of the financial year (Chapman et al. 2007).

  • Motor vehicle, phone account and holiday

Basil travelled to Hong Kong and the total cost was borne by him. However, he is entitled to get reimbursement from their employees before August 2014. As of June 30, 2014 he has not raised the matter with their concerned authorities, it is important that he speaks with them and receives reimbursement. Getting reimbursement would also help them to reduce the total burden of tax on Basil and this would also help him to get certain amount of concessions on the money spent in holidays (Carbone, 2013).

While respect to motor cycle, he gets a total benefits of $680 from his employer. In this context, he can receive some level of benefits in the form of concessions and deductions as he is a family man. This can be done by showing that he uses motor cycle for office purpose in a year travels around 120 miles for office.

  • English rent

Basil is a resident of Australia and therefore, he is liable to pay tax on the income earned both in Australia and abroad. Income of Basil comes from house rent, interest on their investment and shares. Taxation in their investment can be avoided by investing taking advantage of tax treaty between Australia and UK Law Assessment (Bhimani et al. 2008) all the investment needs to be brought under the ambit of these treaties and these steps on behalf of Basil would help in minimising tax liability.

  • English shares and Australian shares

Income from English is liable to be taxed in England under their current law. In this context, treaty between England and Australia can explored for better finding better investment opportunities. This would help Basil in paying tax in both the countries and this would also help Basil increasing their income from abroad. In case of income from Australian shares, Basil is required to pay tax on the income earned from these shares. In this context, investing the income earned from shares in Australian Government bonds and securities would help me to do my law assignment Basil in minimising tax and at the same time it would enable Basil in increasing the source of income and also capital base (Balakrishnan, 2012).

  • Chairs

In this context, investment needs to be made with maturity of more than 2 years. This would help Basil and other investors in increasing their capital base.

Law Assessment Part B:

Family Value Stores [FVS] is a large department store in a Melbourne. Sales are made on the following terms:
*By what is called “take-now; pay-later”.

Task 1:

  1. a) FVS should return on a cash basis as it would help them in better estimation of actual income earned during a particular period. This would also help them to avoid over-estimation of cash-inflow and thereby reducing their tax liability. In this context, following cash basis of method for accounting and recording the transaction would help them in better maintenance of cash and at the same time ensuring that lay-by policy can be utilised from time to time (Australian Competition and Consumer Commission, 2014.
  2. b) When lay-by sale method is followed income is derived when customers pays for the goods in at least two-instalments. Income is also derived when until the full price of the products have been realised by the sellers from the buyers. In this context, it is important for both buyers and sellers enter into agreement stating different provisions and how they would be terminating in case of disputes. Termination fees are also considered as income under this process as it forms an integral part of an income (, 2014).
  3. c) Tax treatment

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Tax treatment on deposit

Tax is calculated on the interest or dividend earned by the investors. However, it is to be noted that there exists a certain threshold on which crossing this threshold, the income is charged. However, income from government deposits is exempted while computing tax (, 2014).

Tax treatment on progress payment:

The liability of tax reduces when progress payment are made in comparison with tax payment made at the end of the month. In this scenario, it is important for investors to make progress payment.

  1. d) Trading stocks are subject to more tax liability than any other investment as most of the investments are short-term in nature and thereby attracting huge amount of tax in the form of capital gain tax. Therefore, it is important to hold these securities for more than 1 year as to avoid short-term capital gain tax (, 2014).

Task 2:

Table 1: Details of flow of cash

For the year ended June 30
particulars amount $
sales 1,125,000
deposited received 112500
balance to be paid 1,012,500
per month balance 91125
Progress payments received 700000
Balance owing 515000
Cost of goods 690000
  1. i) The FVS is going to earn the best possible part of the balance of the various payments of the balance of the organisation credit purchase. They will be able to generate the amount of the $91125 per month as the balancing amount with the interest. They will be able to meet amount of the $ 700000 as the progressive payment in total for Law Assessment. So it can be said that the organisation will able to meet the interest to increase the income also they are able to collect the money. The option will enable the most possible effective reporting of the income more than the cost of the goods sold due to the interest they are charging fort the post date payment. They will be able to recover the cost effectively as well as they will also be able to meet the increased rate of profit from the process.  More profit will make them more sustainable in the market.  They will charged with tax but the charge will be much more lower (Carbone, 2013).
  2. ii) The total transaction of the credit sale will be charged under the head “Goods and services tax” (GST) of the Australian tax council. The organisations will charged or imposed by the tax of 10% on almost every goods, services the organisations are offering to the customers. The user of the credit sale strategies will impose with the mentioned rate of tax in Australian law assessment help.

Basically the GST is charged on the businesses that are registered under the Australian government. The rate of GST will be added on in the price of sales the organisation is making to their customers in the Australia. They can be able to claim credits for portion of the GST that is included in the price of sales or the cost of the sales they made in credit. Registering in the Australian government is must for availing the options of the GST. Only the owner needs to get registered for the GST even if they might operate more than one business. The GST is charged on the products once and the rate will composite with the transactional process (Choate, 2000).

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The registered business for GST and sale act will be charged with the GST for the goods and services they use to sell in the Australian market or to the Australian customers. All the sale and purchase is charged by the GST unless those are categorised under the ‘GST-free’ or ‘input taxed’ section. The government or the tax authority will Issue tax invoices for the parties involved in the various parties of the credit purchase and sales. This will remain prove of payment for the remaining parties to meet the final tax return submission at the end of the year. The involved parties like FVS can be able to claim GST credits if they are registered under the Australia tax council.

As FVS is a GST registered business under the Australia Taxation law Assignment Help council thy will required to pay the required rate off tax in the years as they use to collect the remaining amount throughout the year. They are issued with the tax invoices to the contract customers. Accordingly they need to collect GST and submit the amount to the authority with the business activity statement (BAS). The organisation FVS needs to put the collected GST in a separate bank account apart from the commercial business entity account. This will make the organisation easy to report the GSB to the authority (Kenny, 2013).

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