Taxation Theory and Practice and Law

Taxation theory, practice and law 

Question 1

Issues:

The roots of Pablo are Portuguese though he works in Australia. The payment to Pablo was made in his Portuguese bank account. He earned revenue of $120,000 in the year. The taxation intent considers various variables which are related to identification of a citizen who is foreigner or resident.

Rule:

In Australia the evolving taxation scheme is related to the higher wages and compensation that the people get. A person can earn up to an amount of $18,000 and still there is no requirement to pay tax. A person is liable to pay tax only if he or she earns more than this amount. As per section 955-1 a person can be considered as an Australian citizen only if he or she qualifies certain situation and conditions mentioned in Income Tax Assessment Act 1997.

  • To qualify the condition it is necessary that the person must be living in Australia.
  • The accommodation of the person should be in Australia.
  • In the latest taxable year the individual should live in Australia for a minimum of 183 days or more.
  • As per the Australian superannuation scheme the person should be enrolled in the same.

Application:

The total income of the individual must meet all the following conditions as per section 6-5 Of ITAA 1997.

  • The revenue earned should be implicit or explicit in some other country or may be in Australia.
  • Rent, wages, interest and other transactions that are usual in nature should be considered as the source of income for the individual.
  • The profit that is earned by the international entities is also liable to pay the duty if the profit is earned in Australia.

Pablo is not obliged for Portuguese citizenship test because he is a Portugal resident as per the section 955-1 of ITAA 1997. This concept is very well explained in this section and act. Pablo will not be considered liable for Australian superannuation scheme in spite of the fact that he has lived in Australia for more than 183 days in total. According to the conditions, Pablo will be considered as an internal resident and not an Australian resident. Pablo has earned revenue of $20,000 in the given period. According to section 6- 10(3) of Income Tax assessment Act 1997 the revenue earned by Pablo falls under the category of taxable income. Hence, the income of Pablo is tax liable.

Conclusion:

Legitimate income tax may be considered in case of Pablo. 32.5 % of income tax is payable on an income of $90,000. If the revenue or income is more than $90,000 then the rate of income tax that is applicable will be 37%. The tax liability for Pablo can be calculated in the following way –

$90,000 * 32.5% + $30,000 * 37% = $34,350

Question 2

The tax inspection for selling of ground of the mining firm Californian Copper Syndicate ltd against Harris is considered in the given situation. The perception counts for a capital asset as per the study of the given scenario. In this case there is an issue regarding the situation where there is no profit generated from the sales of property of the company. That is beyond the natural income or natural scope of the company. The mining industry acquired the property. The key problem that was seen by the panel was that whether the benefit will be considered as monetary or it should be considered in terms of normal sales. The benefit came through a root purpose. The judgement that was given by the court appealed to obtain a reimbursement from the contract that was unavailable that was made for the purpose of revenue. The corporate income tax which are related to the mining areas of the purchased company should be paid by Californian mineral syndicate ltd.

From the common agreement of the firm copper syndicate it can be evaluated that the field mining particulars have not moved away. The corporate must give the property and gain profitability to get the desired benefit from exchanging the items that belong to the organisation. The income that is earned from selling of the property is the basis on which the court has observed the underlying implication. The court considers the issue that whether the income should be taken as revenue or should be taken as capital profit. A transaction receipt should be obtained that can be used to measure that whether the deal was done for revenue or for capital profits. This suggestion was made by the court. The court suggested that receipt was important to know the source of action. We can reach at the conclusion that a payment has to be made by Californian copper syndicate ltd. to the purchased company for the income that is earned.

Question 3

Issues:

The given case study is related to the issue of GST that is goods and services tax. A transaction has been made by two companies who work jointly. The transaction that was made between the two parties was related to Surf board that was later returned to the seller by the buyer. The product was returned by the buyer because he found that the product was incorrect or wrong. There was a refund demanded by the buyer who has already made the payment. Both the parties who were involved in the transaction followed the policy of GST. They have been registered for GST. Both the parties are equally to face the consequences of GST because a GST claim has already been made.

Application:

According to the GST act 1999, when goods are returned by the buyer because the goods are defective then the case will be considered. For every business transaction the buyers are liable to pay a GST of 10% on the amount of purchase. The buyer will pay the GST and the seller will receive the GST. The reversal of the credit for selling the good will be received by the seller. When the sale is revered in place of the original sale, the GSTR must be followed and implemented by the buyer and both the parties’ should make adjustment against the GST entries. The price needs to be extended by the seller to provide a refund to the buyer. The previous statement of the activity is entitled for the GST. Adjustment note should be issued by the seller to the buyer. Decreased adjustment will be made for the aim of refund. By using GST credit GSTR 2013/2 can be claimed by the buyer. It can be even used for claiming the GST amount that is related to the upward movement of goods. The case spots of $440 and surfs up P/I has been adjusted by the buyer. A total GST of $16,820 has to be paid for the purchase that is exclusively made for the surf board for the Billapro numbering to 370. In this case the assumption has been made that the credit sales has not been claimed by the seller. The credit not is required to levy the GST that is imposed on the surf boards. The adjustment of $640 has been made on the next statement of activity. The goods that are remaining for the buyer has no extraordinary treatment

Number of Surf Board

price

Total sale value

GST @10%

Total Bill

370

$440.00

$162,800.00

$16,280.00

$179,080.00

Conclusion:

The sales amount for 370 surf boards is $179, 080.00. This is the amount for a single sell. Close to December it was found that around 14 surf boards were defective or wrong. The total amount of GST that was implemented on the 370 surfboards amounted to $16,820. The surf board which was found defective by the buyer was returned to the seller. A credit note of $640 can be created by the seller. This can be considered as the next step that can be done by the seller to meet the issuance requirement of the refund. The credit note can be created with the balance of the remaining cash.

Question 4

Issues:

In the given case a company named Melbourne Awesome Limited is considered. The company has received revenue from Australia during the year and is accountable for the same. There is a tax obligation on the company. Even there is delivery and payment if certain interim dividend by the company.

Rule:

To reduce the taxable income the big corporate companies should always follow the rules and work according to section 205 – 10 of ITAA 1997. The sums are considered as inference credits which are assessed for dividend issuance entity. Retained earnings are considered as allowances. The income that is earned by the company is assessed. The income that is assessed considers of taxable property and dividends that are paid to the shareholders. This rule is made as per section 6 – 5(1) of ITAA. As per section 8-1 of ITAA all other exemptions are made for the purpose of obtaining certain kind of benefit in return.

Application:

The rental income data is the basis on which the income earned by Melbourne Awesome Limited is assessed. The dividends that are receivable and the exclusion which are related to the business for minimising the taxable income from the profit that is earned are also considered for the same purpose. The franking amount should have been $13,050 but with modification it has been made $12,000. With the modification there would be a tax burden on the company. Each of these decreases would be attributable by the obtainable revenue. The exemption that was made was done as per the section 8-1 of Income Tax Appraisal Act 1997.

Calculation of taxable income for Melbourne Awesome Ltd

Particulars

Amount

Net Income

$ 80,000.00

Franked Dividend

$ 28,000.00

Unfranked Dividend

$ 25,000.00

Rental Income

$ 5,500.00

Total income

$ 1,38,500.00

Less deduction under section 8-1 of ITAA 1997

$ 55,000.00

taxable Income

$ 83,500.00

Conclusion:

The taxable benefit which was measured by taking the base of mortgage interest element and dividend receipted can be acquired by Melbourne Awesome ltd. the taxable income for the assessable can be reduced by taking dividend receipted which was related to business exclusion as the base.

Question 5

The Australian taxation division has created a legal argument prosecution service. This legal argument prosecution will support all the tax payers in Australia. It will support the taxpayers as well as all other expenses and obligations which are related to the act of ATO. It even provides support to the funding requirement and clear requirements under the ATO. The lawsuit must contain some of the following conditions so that the tax payer can easily authorise the finance that is required by him.

  • The case that is to be considered should be concerned and should affect a large number of populations.
  • The interest that is to be tested in the court should be general.
  • The company should have a positive consequence at any stage tht is commercial.
  • There should be involvement of nay dispute and the dispute should be regarding a confusion related to how a rule is working.

The resolution of the case must be begun promptly by the taxpayer to escape for any kind of delay.

Question 6

(a) The revenue that is earned by the partnership firm is not taxable but the share of the profit which is earned by the partners is taxable.

Calculation of partnership Income  

 Sales  

 $ 2,40,000.00 

 less: Allowable deduction as per section 8-1 of the ITAA 1997 

 Cost of Goods sold  

 $ 1,30,000.00 

 Salary paid to Alice  

 $     25,000.00 

 Superannuation to Alice  

 $       6,000.00 

 lease of Car ( 80% business use) 

 $       5,600.00 

 Other Deductible operating Expenses  

 $     14,000.00 

 Total Allowable deduction  

 $ 1,80,600.00 

 Net Partnership Income  

 $     59,400.00 

(b) Profit allocation-

Profit allocation 

 Particulars 

 Richard 

Tracle  

 Alice 

 Share of partnership Income 

 $     19,800.00 

 $ 19,800.00 

 $ 19,800.00 

Both the partners have equal share of profit. The benefit will also remain the same. The compensation that will be earned by Alice would be taxable.

References

Nair, S.R. and Eapen, L.M., 2017. Goods and Services Tax and Price Control Measures: Lessons for India from Australian Experience (No. 227).

Harris, E. and La Croix, S., 2020. Australia’s Forgotten Copper Mining Boom: Understanding How South Australia Avoided Dutch.

WANG, J., 2020. A Case Analysis for Tax Avoidance Provisions of Income Tax Acts and Case Laws of New Zealand and Australia. DEStech Transactions on Social Science, Education and Human Science, (icpcs).

Fernando, Y. and Chukai, C., 2018. Value co-creation, goods and service tax (GST) impacts on sustainable logistic performance. Research in Transportation Business & Management28, pp.92-102.

Giesecke, J.A. and Tran, N.H., 2018. The National and Regional Consequences of Australia's Goods and Services Tax. Economic Record94(306), pp.255-275.

Aquilina, J., 2019, November. Reforming and realigning Division 855 of the Income Tax Assessment Act 1997 to give better effect to its policy objectives. In Australian Tax Forum (Vol. 34, No. 1).

Sadiq, K. and Krever, R., 2020. Individual tax residence in Australia. Tax Notes International, pp.10-15.

Krever, R. and Sadiq, K., 2019. Non-residents and capital gains tax in Australia. Canadian Tax Journal67(1), pp.1-22.

Snyckers, M., 2019. What is a hedge fund and how is it taxed?: hedge funds. TAXtalk2019(76), pp.22-23.

Davis, G., Akroyd, P., Pearl, D. and Sainsbury, T., 2019. Recent personal income tax progressivity trends in Australia (No. 2019-05). Treasury Working Paper.

Barkoczy, S. and Wilkinson, T., 2019. Australia’s Formal Venture Capital Tax Incentive Programs. In Incentivising Angels (pp. 29-39). Springer, Singapore.

Nery, T., Sadler, R., White, B. and Polyakov, M., 2019. Predicting future plantation forest development in response to policy initiatives: A case study of the Warren River Catchment in Western Australia. Environmental Science & Policy92, pp.299-310.

Jogarajan, S., 2016. Regulating the regulator: Assessing the effectiveness of the ATO's external scrutiny arrangements. J. Austl. Tax'n18, p.23.

Farrell, J., 2016. Tax and Time Travel: Looking Back and Looking Forward-A Tax Administrator's Perspective. J. Australasian Tax Tchrs. Ass'n11, p.27

Owusu-Manu, D.G., Ghansah, F.A., Darko, A. and Asiedu, R.O., 2020. Service quality of insurance in complex project deals in the construction industry in Ghana. International Journal of Building Pathology and Adaptation.

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