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...

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...