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Part A – 25 Marks The following separate transactions require your advice as indicated:Kate is a teacher who was born in Australia and up to 12 August 2017 she worked in Toowoomba. Having resigned...

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Part A – 25 Marks The following separate transactions require your advice as indicated:Kate is a teacher who was born in Australia and up to 12 August 2017 she worked in Toowoomba. Having resigned from her job in Toowoomba, Kate travelled to Fiji on 13 August 2017 to join her husband Jack who has been working at a university in Fiji. Jack and Kate have three children, and from 13 August 2017, the family has been living in a rented house provided by Jack’s university employer. Jack has a 3-year contract with the university in Fiji which expires in June 2020 at which time they intend to return home. During the year ended 30 June 2017 Kate earned $14,000 in rent from renting out their home in Toowoomba (her share) and interest income of $500 from an investment in an Australian bank. She worked part-time as a teacher in Fiji and earned AUD 19,000 during the year ended 30 June 2018. Provide advice to Kate as to whether she is a resident of Australia for the year ended 30 June 2018 and based on your conclusion advise Kate of the amount that she should include in her assessable income in Australia for the year ended 30 June 2018.Bernie carries on a delivery business where he employs four staff. Bernie provided $5,000 worth of delivery services to Paul (one of his customers), but Paul indicated that he did not have any money to pay Bernie. Instead of paying Bernie cash Paul allowed Bernie to use one of his residential rental properties to live in with his family for six months during the year ended 30 June 2018. The market value of the rental property was $6,000 for the 6 month period. Provide advice to Bernie as to whether he needs to include any amount in his assessable income as a result of being provided with free accommodation.Melanie carried on a cleaning business and earned $500,000 in income during the year ended 30 June 2018. Her biggest customer Brown Pty Ltd (Brown) accounted for 95% of her work and paid her $475,000 in fees for the year ended 30 June 2018. Brown has just indicated to Melanie that it will be cancelling their cleaning contract and will pay her compensation of $200,000 for cancelling the contract. Melanie considers that because Brown is paying her this amount she will have to close her business because she will have insufficient work to keep her business in operation. Provide advice to Melanie as to whether the $200,000 would be ordinary income.NOTE: For all scenarios above, provide advice as requested, indicating an amount that would be included as assessable income for the year ended 30 June 2018. You must support your discussion concerning any relevant authorities. Please refer to the marking criteria for further details on requirements.Part B – 75 Marks (3,000 words)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. You must undertake academic research which demonstrates the following:  An in-depth your understanding of how the specific tax law applies,  The policy context of the law and if relevant how other jurisdictions deal with similar issues,  Critical reflection as to whether the law achieves its stated purpose, aligns with principles of good tax policy or could be improved/amended. These critical reflections should be supported by the research you have undertaken as well as your own independent thought.Topic is:
CGT Small Business Concessions – discuss and critically evaluate the Small Business CGT Concession regimen Australia. You should include a discussion of the overall policy objectives and your evaluation of whether regime currently meets these objectives or whether further amendments are necessary.
Answered Same Day Apr 04, 2020

Solution

Abr Writing answered on Apr 22 2020
138 Votes
SECTION 1
ADVICE INDICATING THE AMOUNT ASSESSABLE INCOME FOR THE YEAR ENDED 30 JUNE 2018.
Kate
This is a case of Kate who is a teacher by training and has opted to join his husband who is working in Fiji. Both are expected to remain in Fiji until the end of an employment contract for his husband. While in Fiji Kate has an income in Australia from the rent income and bank interests. She also takes a part-time teaching job in Fiji.
According to Australian law office(ATO) anyone living and working overseas with another person they still remain Australian resident for Australian tax purposes. Kate is already and remains an Australian resident overseas. Therefore, according to ATO, she has the obligation to lodge and file Australian tax return. This is in order to declare all income earned both in Australia and out of Australia. Australian Tax Office gives a provision for people to lodge tax return online from the wherever country they are. As Kate is living in Fiji is required to lodge tax returns and declare her income to the Australian government. The tax law requires all the residents to declare their income even if it was not earned in the country. No income that should be exempted to all Australian residents for tax purposes. Therefore, Kate is an Australian resident for the tax purposes according to these laws provided by ATO. The Australian Immigration laws operate differently from the laws of tax. An individual remains to be a resident of Australia even when they are not living in Australia. This is unlike the Immigration laws which shows that a person is not a resident of Australia when they leave the country (Lanis, 2017).
Therefore, Kate should include all the income she obtained from all sources both in Fiji and Australia. This includes the $19,000 she earned as a teacher in Fiji, $14,000 she obtained in rent from renting out their home in Toowoomba, and an income of $500 from aninvestment in an Australian bank. All these are assessable income that Kate is liable to declare and lodge when file returns in Australia.
Bernie
Bernie is business person who runs a delivery business. After offering the service to Paul he was not paid his full amount in cash. Instead Paul allowed Bernie to use his facility for six month that is valued at $6000 which is higher by $1000 the amount owed by Bernie to Paul. This is the a
angement both had to settle for the debt that was between them after offering the services.
To determine the Bernie’s accessible income an understanding of the Australian Tax Office is important to see different definitions and understanding for the assessable income. First of all, assessable income is the amount of income that can be taxed by the Australian Tax Office. This is the amount that when taxed it exceeds the tax threshold of the amount. Assessable income includes all the wages, salary and every payment that is made for any kind of services. This is according to the Australia Tax Office. This also includes all other income and allowances for things such as clothing, housing, cars and interest rates (West, 2017).
According to Australia Tax office the amount that Bernie saved as a result of living in Paul's premises is counted as assessable income. Not only the $5000 but also the extra $1000 that was made as a profit due to the agreement that was between Bernie’s and Paul. All this income should be treated as assessable income for the business that Bernie runs. The assessable income is for the business and for the Bernie as an individual. When calculating the assessable income for a business entity all gross proceeds and earning that include the ordinary course of the operations of the business are considered. In business assessable income is not only the profit. All the income that is in the business is treated as assessable income. All the payments in the business whether daily or not daily income. All sources of incomes are included in the assessable income of the company for the tax purposes. All income should be made clear and disclosed when calculating the assessable income. The payment that Bernie received was a payment that was outside the business activities. This kind of payment is counted as assessable income. The value of the income is considered when calculating the assessable income of an individual or a business entity (Muller, 2015).
Melanie
Melanie runs a cleaning serve company. One client accounts for 95% of his total income. At this point this client wants to terminate the contract and pay Melanie a compensation of $ 200,000 as a commission for the contract termination. After this client has left the business Melanie therefore plans to close the business due to lack of customers who can sustain the business further.
To understand and determine where Melanie needs to include the 200,000 to the ordinary income it’s important to understand the Australia Tax Office prospect of the ordinary income for the tax purposes. According to the Australia Tax office payments that are of ordinary income are taxed differently from the assessable income. There is an individual's rate of marginal tax that is applied. According to Australia Tax Office ordinary income is income that is characterized or seen as other than a long-term gain of capital. This includes the income that is given in bonuses, tips, salaries, commissions and wages. For a business entity the ordinary income includes all income in interest, dividends and other income such as termination of a contract fees (Long, 2016).
Melanie's income of 200,000 is an ordinary income for the business. In this case it is advantageous for the company in terms of tax benefits. This is because the tax benefits of this income are lowered or falls under the lower rate of fall under the threshold of tax free category. The payment of the tax is also done when the income is received. This helps in minimizing the cases of double taxation.
SECTION 2
QUESTION 4:TAX AVOIDANCE
Tax avoidance is illegal and most organizations have been taking this advantage to reduce the amount of tax that they pay to the government. Tax avoidance is now being practiced by individuals and also organizations. Small and big companies always work on finding ways to reduce their tax burdens. This has become a major challenge to the Australian Tax Office. The multinational corporations are now joining this trend of avoiding tax. Tax avoidance in simple terms can be said to be the act of individuals or companies entering into transactions that have no significance for the economic purposes of a country with an aim of reducing their taxes. Under part IVA of the Australian Income Tax Assessment Act, this is illegal. Although there are different laws and interpretations that can be used by an organization that avoids tax to cover their motives and steps. Corporations in Australia and out of Australia have been practicing this act. The amount of money that governments lose yearly to multi-national companies on the tax avoidance is too high. This is the money the governments could use to finance their budgets. Despite the efforts by the Tax controllers to ensure that individuals and organizations pay taxes, the trends continue to increase day after day. As technology and innovation grow companies also find new and better ways to avoid taxes and declare file lower tax income returns every time they are doing their obligation submissions (Ollivaud, 2015).
The Organization for Economic Co-operation and Development is an Australian corporation (OECD) has conducted a research to find out the different method that is used by multinationals to evade tax in their daily operations. In the study, OECD was able to understand and find out different ways that multinational corporations use to lower their tax burdens. In a government that is...
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