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Australia Taxation Law - Answer 1
Sven and Abigail began a business of acquiring valuable artworks and antiques selling online by creating a website as SGartsandantiques.com , on December 2019
Income for the year = $50000
Salary
Seven = $15000
Abigail = $12000
Interest Expenses
Abigail = $6000
It is a partnership farm
Income or loss will shared equally by the partners, Sven has received a Fully Franked dividend of $14000
Wages (Prior to December 2019)
Sven- $43000
Abigail – $35000
- Assessable income of the partnership firm is :-
Net Income from Activity = $50000
Less:
Salary paid to partner $27000
Interest Paid to Partner $6000
Total Income from Partnership $17000, Which is pursuant to Division 90 of
ITAA97 , which will be divided between Sven and Abigail
Note: Depreciation is not considered due to non avaibliliy of any value , plus it must have been calculated while calculating the total income
- Sven’s Assessable income
Income from Wages (prior to formation of partnership = $43000
Dividend Income (Fully Franked ) = (14000/70*100) = $20000
(Assuming the tax rate to be 30%)
Salary from the current partnership $ 15000
Profit income from partnership $8500
Total Assessable Income $86500
- Abigail’s Assessable income
Income from Wages (prior to formation of partnership = $35000
Interest Income = $6000
Salary from the current partnership $ 12000
Profit income from partnership $8500
Total Assessable Income $61500
Australia Taxation Law - Answer 2
Alan is currently an employee for North Melbourne football club, who is working in a marketing department, and also perusing his studies as a bachelor of marketing, but as per the information provided after the completion of the course his position will not change in the organization and will only increase his pay. The club has given Alan a support of $1000 per Semester, and also a study leave of one day per fortnight.
1) Alan is not entitled to any deduction under s 8(1) of ITAA 97, as this is his personal income and is not mandatory to earn his current assessable income, so all this expense on Textbook and consumable will not be treated under deduction
2) Tuition of Alan will be deducted from his personal assessable income as part of deduction benefit and amount of $1000 /semester provided by club will be added in his assessable income as perks as part of additional benefit.
3) Travel Expenses of Alan
Prior to Covid situation as he was travelling from his study place to workplace, and this expenses if paid by the company will be part of the employee benefit and is tax deductible also as it was necessary to spend , but if the number of KM travelled from home to workplace is less than KM travelled by him from Study place to workplace . Then one which has lesser number of KM will be considered for the tax deduction purpose under section 8(1)
4) Online completion of the studies will not have any major tax treatment as it is as per ordinary income earned less deduction as allowed above no other tax exemption will be provided
Australia Taxation Law - Answer 3
As per ITAA36:s995- Which deals with the Definition of Australian Residents
‘Foreign resident’ is a person who is not a resident of Australia for the purposes of ITAA36:s 995-1
But as per the section 6 -5 of the ITAA97 or has earned it outside the territory of the Australia will be assessed under ITAA97
In this case Anu who left Australia but working for Australian company , will first have to undergo the residency test to be categorised for the purpose of tax resident which is
Australian tax resident if the individual satisfies one or more of three statutory residency tests in subsection 6(1) of the ITAA 1936:
- The person’s domicile is in Australia (unless their permanent place of abode is outside of Australia);
- The person is actually in Australia for more than half of the financial year (unless their usual place of abode is outside Australia and they do not intend to take up residence in Australia); or
- The person is (or is the spouse or child under 16 of) a contributing member of a superannuation fund for Commonwealth government officers.
1) As it is given in the question that Anu left the Country early in the year which mean she has not stayed in Australia for the number of days required to be resident so she is not a resident of Australia for this tax year
Source of employment income for Anu = Income received during the year from her Australian Employer.
b) Yes, her income will be the part of taxable income though she is not a resident of Australia. Because income earned from foreign sources in Hongkong is also taxable as per Hongkong Tax Law
c) In case she pass the residency test of Australia and is treated as Australian Resident then also her income will be assessable under Australian Income tax or ITAA97 as received from the Australian Employer.
Australia Taxation Law - Answer 4
Nancy who is sole practitioner, with 5 employees and two of which are family members. Basis of accounting is Cash basis
Total billing of the period = $550000 (for the work completed this year)
Amount Received = $380000 (out of this $30000 relates to previous tax year)
- Cash basis Vs Accrual Basis
Under cash basis of accounting, revenue is recorded at the time cash is received and expense is recorded when cash is paid.
Under accrual basis of accounting, revenue is recorded at the time it is earned and expense is recorded a time it is incurred whether received /paid is irrelevant.
So it better for Nancy to maintain her books of accounts to Accrual basis so that actual revenue of the company can be known and actually profitability will also be find out. Because there are electricity bill , Speeding fine which were related to this financial year but because not paid so not considered which will show the wrong profitability of the period.
- Ordinary income for the tax year of Nancy under section 6(5)
Total billing amount for the work completed = $550000
3) Electricity Bill of $2000 which is pertaining to current tax though not paid is very much eligible for the tax deduction pursuant to Section 8 (1) ITAA97
Renewable fee of $120 though has invoice date of current year but seems that it is related to next financial year so it will not be deducted under section 8(1) of ITAA97, even it would have been paid but of course here it is neither booked nor paid
4) Section 26-5 of the ITAA 1997 specifically makes penalties or fines imposed as a result of breaches of an Australian law non-deductible. Examples of non-deductible penalties and fines include: Speeding fines incurred on work related travel.
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