Tax Purposes Under Australian Tax Law - Myassignmenthelp.Com

Questions: 1. How The Items Will Be Treated For Tax Purposes Under Australian Tax Law? 2. Calculate Manpreets net tax payable for the 2016/2017 financial year, making reference to the taxation formula, the reasons for including or excluding specific items, your calculations, and the applicable tax law. Answers: Answer 1 Facts of the case The business analyst have received certain flying points, in relation of his work from a large consultancy business. It is received free of cost for the work that he has done for the company , which is like a reward and not specifically a part of his employement salary. Application of the law As per the TR 1999/6 of the Income Tax Assessment Act 1997, if any individual is receiving flying points from a consultancy firms in relation to work related purpose.It provides that flight rewards received under consumer loyalty programs are generally not taxable. However, it also notes that FBT may apply where a flight reward is provided to an employee, or the employee's associate, under an 'arrangement' for the purposes of the FBTAA, that results from business expenditure. The flight reward might also be subject to income tax if they are received by an individual whoreceives the flight reward as a result of business expenditure Facts of the case Amount is received from a crane hiring company from its customer for a damaged crane. Application of the law As per the Income tax assessment act 1997, if any income is received by a company in lieu of any insurance then same shall be taxable as business income. In the given case the amount received from a crane company will be taxable as its is just like the amount that it recives from the insurance company in case of any damage to the property of the company. Hence the amount received will be taxable as business income. Facts of the case Free business trip that is received by an individual from an alcohol supplier. The person is a nightclub manager. Application of the law As per the specific provisions of the law, any business trip that is received by an individual is not taxable, but the individual cannot claim any deduction on the same as well. For example if the individual is spending $1000 on the trip from his own end, he cannot clai any deduction on the same. Therefore in the given case, the overseas holiday is a free business trip, because the alchol supplier and the night club manager have work relations but the manager cannot claim any deduction on the trip, and the trip will not be taxable by the IT act. Facts of the case In the given case, the assesse has received certain extra funds for the purchase of canoes, from its members and then the club returned the same. Application of the law As per the ITAA 1997, any amount of excess amount that is received by a company and that is eventually returned is not taxable. If the excess amount was not returned and was kept by the individuals in that case that amount would have been taxable. Hence in the given case, the excess amount that was received by the canoe club will not be taxable. Facts of the case In the given case, the assesse has received certain amount from a teelvsion station, being named the best footballer and the amount was paid as a price was playing well in AFL. Application of the law This case is assessable as per the TR 1999/17, if any amount is received by a sports person in relation to any services provided or any amount of revenue nature or any amount that is received as gits or awars or pizes, then that amount will be taxable. This includes the exploitation of the commercialization of the personal skills of the individuals in order to get the reaward. Hence in the given case, the amount that was paid to the sports person for his performance will be taxable by the company. Facts of the case In the given case the expenses are done in lieu of getting the building qualifications that are needed by a building apprentice. Application of the law. As per the ITAA 1997, if any expense is done in connection with getting higher education, that eventually helps in development of the skills set of theindividual, helps in development of his commercial viability and also helps in his future studies, in that case those expenses can be claimed as deduction. In the given case, the apprentice is doing an expense for development of a skill set that will help in development of his commercial viability. In that case those expenses cane be claimed as deduction. Facts of the case In the given case, the assesse has made certain expenditure for getting knwolegde in art management to eventually work as a art director. Application of the law. As per the ITAA 1997, if any expense is done in connection with getting higher education, that eventually helps in development of the skills set of theindividual, helps in development of his commercial viability and also helps in his future studies, in that case those expenses can be claimed as deduction. In the given case, the expenses are done to get knolwdege about a specific skill set that is related to the job of the assesse. There is a connection between the education and the job, thus the expenses that are done in the art course can be claimed as deduction by the assesse. Facts of the case The case is in regard to the expenses that are done in relation to the work make up and dresses , that is done to make one look presentable at the job. Application of the law. As per the ITAA 1997, if any expenses are doen by an individual that is related to the work of the individual, then that amount can be claimed as deduction. Some unique clothing ahs been stated on which deduction can be claimed like the protective clothing that is not everyday wear, Clothes that helps in identification of the occupation one belongs to, Clothing or footwear that are specifically worn to protect the individuals from any kind of injury at the work place. For all these type of clothing any expenditure done is allowed as deduction. The same is stated in the above case, if the clothes are specifically related to the work then expenses can be claimed else it cannot be claimed. For make up no expenses can be claimed by the assesse. Facts of the case This case is in relation to the overall expenses that are done while travelling between work and home. Application of the law. As per the section 8-1 of ITAA97, for any kind of expenses that are incurred while travelling between work and home, will be taxable only when the total amount is related to the work related purposes.The travel must be direct and there must not be any stop in between. In the given case the assesse can claim the specific deduction, if he is travelling directly between the office and the home for work related purposes only. Facts of the case This is in relation to the expenses that are related while travelling between work from one employer to another employer. Application of the law. As per the section 8-1 of ITAA97, for any kind of expenses that are incurred while travelling between will be taxable because the expenses are relation to the second job of the employee. As per the Laurence Fox v Commissioner of Taxation [2013] AATA 471, when a person is travelling between one employer to the employer the expenses are born in the course of employment and there are no personal benefits involved. Hence in that case the amount that the assesse incurs while travelling between one employer and the second employer will be taxable as per the given case laws. Answer 2 Facts on case 2 Manpreet is an international student who is pursuing a degree of accountancy from the CQU, Sydney and is also working as an office assistant to get some practical exposure that will help her in her studies for $45000. She also receive some amount from her parents to help her in her living expenses and also received some amount from a trust that has been set up in India by her grandmother, on the same she paid $1000 of foreign taxation. Apart from the above, she spent certain amount of money on her studies $18,500 and for computer and printer that she required in the course of her education she spent $2000 and for the mobile expenses she spent $500. Manpreet is doing the job in connection to her studies that will help in enhancing her skill set and is part of her education curriculm Applicable Case law Income received from the trust As per the Income Tax Act 1997, section 99B, if any amount is received from a trust that is not previously taxable, then total amount that was paid to any beneficiary who at any point of time was a resident during any time of the year, then such amount shall be taxable and will not be deductable from the taxable income of the beneficiary(Sadiq et al.2017). Case law applicable TD 2016/D4 As per the applicable case law, if any amount attributable from a trust is applied for the benefit of an individual, who is a resident beneficiary, then such amount may be included in the beneficiary taxable income as per the Income Tax Assessment Act 1936. TD 2016/D5 As per the applicable case law, if any amount is received by a beneficiary from the trust then that amount is not taxable as capital gain or loss and not subjected to the CGT discount purposes. Applying the same to the given case study, as per the Bamford v. FCT [2010] HCA 10, we see that the total amount of moeny that Manpreet is getting from her grandmothers trust will be taxable as her income and she will not get any CGT discount on the same. Manpreet is a beneficiary to the trust and hence the given amount of money will be taxable as per her income. Assistance to Students As per the Income Tax assessment act 1997, section 26.20, any amount that is paid to a student to support him for his higher education shall not be taxable as per the income tax act and the payment can be in any form either in cash or in kind. If any amount or any property is used by the student for his higher education, then the student is not required to pay any tax on the same. In the given case we see that Manpreet is getting every year $20,000, to assist her in her education and support her overall living expenses, and hence that amount will not be taxable as her income because she is using the same to support her higher education Double Taxation Avoidance Agreements As per the Income Tax Assessment Act 1936, if there is any income is double taxed in two countries, then the tax amount that is paid in the home country will be allowed as deduction in cases where there is a double taxation avoidance agreement between the nations. This is done to prevent the scope of double taxation of foreign income (Mitchelson, 2011). In the given case, we see that the money that Manpreet receives from her grandmother trust, has already been taxed, and on the same she has paid $1000 in foreign tax, so when the same income will be taxable in this country, she will get a deduction of $1000. It is assumed that there is a DTAA between the two countries and on the basis of the same, Manpreet will get exemption on the foreign taxation that is paid on the trust income that she receives as a beneficiary from her grandmother. Expenses on Higher Education As per the Income tax assessment act 1997, if any student is spending certain amount of money for education purpose that is important- For development of the necessary skill set for his studies For improving the salary of his employment For benefiting him in his higher education In that case the student will get necessary deduction for all kind of such expenses made. In the given case, Manpreet is spending money on her education, and also, $2,000 on a computer and printer for educational purposes, and $500 for use in his work. All these have connection with her education, will help her in further studies and development of her specific skill set that will be beneficial for her to get better job. Hence this amount will not be deductable and she will get exemption on the same as per the taxation rules. Applicable rate of taxation as per the Income tax assessment act 1997 for resident individuals. Taxable income Tax on this income Effective tax rate $1 $18,200 Nil 0% $18,201 $37,000 19c for each $1 over $18,200 0 9.65% $37,001 $87,000 $3,572 plus 32.5c for each $1 over $37,000 9.65 22.78% $87,001 $180,000 $19,822 plus 37c for each $1 over $87,000 22.78 30.13% Calculation of the Taxable Income of Manpreet for the financial year 2016/2017 Particulars Amount $ Total income from the Job Amount received from the trust Total taxable amount Deduction allowed- Money spent on studies Money spent on computer and printer for educational purposes Money spent on new mobile phone for business use Net Taxable Amount $45000 $10000 $55000 $18500 $2000 $500 $34000 Total Amount of tax payable by Manpreet as per the applicable rate of taxation Up to $18200- Nil For the remaining amount - $34000-$18200 = $15800 Tax = 19 c for every $ above $18200 = $15800*19C = $3002 Gross tax payable by Manpreet = $3002 Less: Foreign tax paid on trust income = $1000 Therefore net tax payable = $2002 Thus after applying all the necessary provisions, the total amount of taxable income for Manpreet for the financial year 2016/2017 is $2002. All the necessary explanation and assumptions related to the case study have been explained in details, in the above paragraphs. Refrences Mitchelson, P. (2011). Tax Law. Sydney, Australia: Thomson Reuters. Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., . . . Ting, A. (2017). Principles of Taxation Law. Sydney: Thomson Reuters.