LAW5230 Taxation Law, University of Southern Queensland, Australia
Part A The James Family
Provide advice to Jenny and John as to whether they would be considered Australian residents for taxation purposes at any time during the 2019 income tax year. Based on your conclusion, advise them regarding the assessability of each of the types of income they have received (either separately or jointly). You should state and apply any relevant residency, source of income, derivation, general income rules and cite relevant legislation, case law and rulings in answering approaching this question.
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This is an analysis of a theoretical laws and regulation in connection with the given case, the paper draws a balance between the rules and regulation given by the Australian government and how the same has to applied in real life situations and applying them to reach definite results and answers. It explains the concept like any relevant residency, source of income, derivation, general income rules.
It is essential to understand the following points to ensure that the estimation is done in correct and a systematic manner.
- Jenny is coming to Australia from United States of America for 18 Months contracts with the Australian Bank and will travel on 1 Dec 2018.
- John her husband will come along with her and will take up a local job as a causal labour in Austrlia which be is only source of income
- They don’t have any kids.
- The company will provide them with a furnished during the contractual period.
- Transactions done between 1st July 2018 to 30June 2019 are as follows: -
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a) Jenny earns total salary earned in Los Angeles as on date equals to $130,000 for the given financial year.
b) John earns total salary earned in Los Angeles as on date equals to $41,000for the given financial year.
c) Joint Dividend Income from Unites States of America = $5,000AUD in October 2018 and $6,000AUD in March 2019.
d) Joint Dividend Income from Austrlia = $5,000AUD
e) Jointly purchased a Land in NSW for = $ 2,00,000 and the allied fee = $ 8000.
f) Jointly soldthe Land in NSW for = $ 2,30,000 signed on 25 June 2019 and Closed by August 2019.
g) John purchased a commercial property in Brisbane and put it on rent in advance in the bank account, therefore James receives a rental income of $ 1,04,000 as a prepaid rent income.
You are required to prepare a written research assignment that addresses one of the provided topics below. The purpose of the task is for you to demonstrate high level critical reflection and analytical reasoning skills in the context of the application of Australian taxation law and taxation law policy.
2. Division 7A (treatment of private company loans)
3. International Tax Avoidance
4. A policy of reducing small business taxation
5. Another tax technical or tax policy topic
Australian Tax Analysis
To analyse the taxability grounds following aspects are reflected and analyized: -
Concept of Residency for an EXPATCS are stated as follows,
The income is taxable in Australia if theyare exacting clear that they are liable for task in case when there are eligible as on date to be a resident of the country. The same is computed by applying three main test and fulfilment of nay one will lead toSuccess rate in Residential test.These tests are expressed way Residency Test, Domicile Test and the 183-day test and the last one is the superannuation. It is evident that James have sold their house in Los Angeles and have taken two here one on commercial basis and the other for residential. On the more the employees arestaying over 183 days in the given financial period and therefore James though being a non-resident will definitely file a return in Australia and pay taxes and the same is expressed in the taxation ruling TR 98/17 (ATO, 2019).Further,lodging tax return is compulsory as the income received in the crucial aspect is that the couple though has an intention to go back have bought a permeating place here and therefore clearlycomes in the ambit of residents. Hence, any income received in Australia are taxable however, income received from sources outside Australia, are also taxable and eligible to Lodge a Tax Return.
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Concept for an Expacts on sources of income,
According to the law stated the James are considered as Resident as they passes the residency, test in connection to the source of income it is evident that the income received by the James Jointly are of two sources, one being the employment income which is salary of the couple and the other being the rent income , further, the company also as capital gain on investment , the couple manages to have dividend income in Austrlia as well(ATO, 2019). Thus, any income source earned by the Expacts pertaining to the national boundaries of Australia is liable to pay the tax and lodge an income tax return.
Concept for an Expacts on derivation,
This defines the time element of few income and expense whose transactions are ongoing in the financial year, however such transaction actually closes after the financial year has been closed(ATO, 2019). The important point is when was such income booked in the books of account or when was the actual transmission was made, irrespective when was the payment done. In Case James two main transactionaccrued one the prepaid rent received and the other being the sale of land, from both the transactions it is evident that the action was taken in the given financial year and therefore will be lodged in the current financial year itself.
Concept for angeneral income rules,
The main different is that a resident is liable to pay tax and lodge a return for all income recived from worldwide where as an non resident sticks to the country boundaries. The other most crucial aspect is that the must have a Tax File Number under which the returns are filled. Further, Medicare levy is payable only by residents and temporary residents from countries, on the more the tax slabs are also different and bifurcated as per the residency companies to ensure that appropriate tax rate is computed.
Lodging Tax Return
In the given condition and analysis, it is advisable that the James must Lodge there tax return in combine as this will help them attain much better deduction and allowance which other wise are not available(ATO, 2019). On the more such format of taxation is widely used in the United States of America. Hence, computation and analysis as well as preparation will be easier. The individual also owned the property jointly , a combined return is a much better option.
Thus, this analysis sums up the basic Australian tax law in terms with income and analysis the difference in terms with the few basic concepts which being the residency factor, derivation of income factor and how such process helps in defying as to which law and rules needs to applied and undertaken.
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