The Australian Taxation Law Research Essay

Interests acquired from financial institutions like banks are reportedly taxable in Australia, according to the Australian Tax Office. (Woellner et al, 2011). This is required for wealth declaration and taxation reasons. When an Australian resident creates a bank account in a child’s name, the same standards would be applied.

(b). In this scenario, Jack will not be subject to an Australian income tax. The Australian Tax Office’s regulations call for the taxation of worldwide revenue, so he must disclose all of his foreign sources of income. According to the following categories, foreign sources of revenue are either taxed or exempt in Australia: foreign pensions and annuities

are assessable except pensions on World War 2, foreign employment income except for members of disciplined forces, foreign investment income except non-portfolio dividends, foreign business income except foreign branch profits and lastly, capital gains on overseas assets foreign branch gains.

(a). Taxable Income = Assessable Income – Allowable Deductions

= ($ 120,000 + 15,000 + $ 4,000) – ($ 4,000 + $ 4,000 + $ 15,000)

= $ 116,000

This is because, Ryan’s assessable income was obtained from his annual salary and income from investment. The only allowable deductions were interests earned on investment, expenses on repairing an investment property and amount spent on self-education. Otherwise expenses on food, travel and car were considered as private.

(b). The basic tax liability for Ryan would be determined as a percentage of his income, using the Australian’s standard taxation table. This is usually charged between 0 to 45% of the total taxable income.

Yes. Michael is still a citizen of Australia. By travelling outside the country, it does not mean that he has lost his citizenship. Furthermore, Michael has not clearly stated on renouncing his citizenship. It is also possible for Michael to apply for a dual citizenship while in his current country of residence. It is not stated whether Michael has been missing the Australia’s special days and events meant for affirming citizenship. Therefore, his intent to marry an Indonesian girl, settling in Bali or giving out his house cannot be used to disqualify his valid Australian citizenship or possibility of dual citizenship.

Closing stock $ 15 million

In 2016/2017 trading period, income = sales – purchases

= $ 150, 000,000 - $ 60,000,000

= $ 90,000

Total Assessable income = $ 15,000,000 + $ 90,000,000

= $ 105,000

With a closing stock of $ 10,000,000 the company has alternatives of selling the stock at $ 7, 000, 0000 or replacing it $ 20,000,000. Therefore, the business can dispose its stock at $ 7,000,000 by incurring $ 3,000,000 on expense as opposed to its replacement value which would cost the company a double amount.

New assessable income would then be $ 105,000 - $ 3,000,000

= $ 102,000

(a). Andy’s claim was based on a health insurance policy agreement that provided for cover against any illness that could distract him from undertaking his normal duties. Since Parkinson’s disease is accompanied by trembling and brain malfunction, Andy could not perform his duties and risked losing a job.

(b) Yes. The claim is assessable. This is because it is an income received as a lump sum of his accumulated insurance savings. Furthermore, the Australian Tax Office does not provide for exemptions on inclusion of insurance claims during calculation of tax returns (Woellner et al, 2011). The only exempted insurance payment is the amount given at surrender of policy but not benefits paid on maturity.

(c). No. This is because, as a surgeon Andy relies on his hands to perform surgical operations. The loss of his hands would therefore make it impossible to continue with his profession. Therefore, insurance benefits obtained would be still regarded as assessable income.

(a). Yes. This is because purchase of land is considered as an investment (Sørensen & Johnson, 2010). Even though Sorano limited had not started constructions, reselling the land to another buyer would signify a transaction thus rendering the profit to be taxed.

(b). Yes. Since Sorano limited had withheld the land to an appreciated value of $ 5 million. The amount of wealth declared as at the time of sale would not reflect the $ 2 million for which it was initially acquired, but the final capital gains of $ 3 million. Like any other form of investment, withholding and conserving the land for a longer period would be of the same impact as constructing a rental property on it. Therefore, the amount would be subjected to taxation.

(c). Yes. This is because, any amount resulting from the sale of a business’ capital would be considered as capital gains (Sørensen & Johnson, 2010). Usually, these amounts are subjected to taxation under the Australian Tax Office regulations. By selling the parcel of land to Bert limited, Sorano limited would gain $ 0.5 million in return. This would be considered as the resulting capital gain that is included in the company’s assessable income.

References

Sørensen, P. B., & Johnson, S. M. (2010). Taxing capital income: options for reform in Australia. In Melbourne Institute, Australia’s Future Tax and Transfer Policy Conference (pp. 179-235).

Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2011). Australian Taxation Law Select: legislation and commentary. CCH Australia.