Discuss about the Australian Taxation Law and Cases.
An assessable income is the amount of money that is supposes to undergo taxation, provided that the income earned surpasses an individual’s tax free threshold (Australia 2011). The subject income can be inform of the following; salary and wages, dividends, income from bank accounts and other income from other income investment.
Main Core of the answer to the first part of the question
In giving advice to Stephanie, Ronald and Rogan advertising on the assessable income that they own for the tax year 2015/16, it is vital to first determine the amount of income that is entailed to every player. For the tax year in context, Stephanie is mentioned to have accumulated the following income; a salary of $ 80,000 annually from her advertising company known as Rogan Advertising. Rogan Advertising Company is a Propriety Limited Company that was set up by Stephanie courtesy of the suggestion of Greater Union who intended to make use of her contracting services and offer her works and projects that were viewed by Greater Union as being of smaller nature.
Stephanie is also entitled to the distribution of unfranked dividend on the income of Rogan Advertising Company. On the side of Ronald, for the same year, he is also supposed to be given similar income to that of Stephanie annually from Rogan Advertising Company. He is equally assured of the company’s dividend since he is a shareholder holding an equivalent share as Stephanie of 1. The two individuals who have been documented as couples are also assured of a joint earning of $ 450 on their leased house while in Brazil. All these money for the year in question is to be paid or deposited in their Australian joint bank account. Finally, for the tax year 2015/16, Rogan Advertisement Company’s income is dependent on the money made in its advertising services like the one offered to them by Greater Union for the year on discussion .
According to the Income Tax Assessment Act of 1936, there are provisions and guidelines that are provided to govern the assessable income. The provision outlines that the income is liable for individual calculation. With this withstanding, I would go ahead to advice both Stephanie and Ronald to maintain their joint account in order to reduce their taxation rate. Should they maintain their own individual bank account, the taxation rate would be higher as opposed to if they share the account in order to reduce the assessable income value on them.
The second advice that I would to give Stephanie and Ronald on their assessable income according to the constitutional provisions of the Corporate Act that guides the aspect of assessable income is for them to treat the income that they are earning from their leased house as a domestic or a private asset. Some scholars usually refer to such treatments as treatments of a second limb. The main reason why I would advise them to do that is for them to exempt the amount of money that they will be earning from the leased house from taxation.
In the calculation of assessable income, there is usually the inclusion of taxation. For example; the workable formula that is used in calculation is; assessable income= taxable income + allowable deductions. Therefore taxable income plays a major role in the calculation in context. One’s an asset is treated as a domestic or private one, its nature changes. Remember, both Stephanie and Ronald never planned to pay a visit to Brazil until when their company was offered by Greater Union Advertising Propriety Limited the opportunity to make a series of advertisements in the lead up to the 2016 Olympic Games that was going to be held in Brazil. It is with this argument that I feel the $ 450 a week paid for the house rent is to be excluded from their assessable income and treated as a private bonus.
On the part of Rogan Advertising Company, I would advice that its assessable income be calculated for the year as a small propriety limited company. This will give a consideration to it and the assessable income that will be attached to it will be less compared to other propriety limited company in accordance with Income Tax Assessment Act of 2001.
Advice to Stephanie, Ronald and Rogan Advertising Company of their assessable income for the tax year 2016/17
Just like part one of this task where we analyzed the advice I would offer to the same people for the tax year of 2015/16, we will look at the individual earnings for every individual or player. For that particular tax year, Stephanie is mentioned to be in Brazil and while in Brazil, she is offered a lecture job in Monash University where she would deliver a number of lectures over a period of between 2 to 6 weeks periods at the Federal University Rio, in Rio de Janeiro. This lecture is mainly to be given to the students who are pursuing a management degree program provided by the university in question.
The amount of money she earns from the lecture is mentioned as $ 24,000 which is supposed to be deposited back in her Australian bank account. Even though she is in Brazil, she is still entitled to the $ 80,000 annual pay from Rogan Advertising Company. Ronald who on this particular tax year was also in Brazil is also entitled to the annual $ 80,000 from Rogan Advertising Company. Being that this money is received annually; the two individuals are likely to access the money in the subsequent years. That is why it has to be included in the calculation of assessable income for the income year in question. Since the house of both Stephanie is also still leased for the tax year in context, they are also entitled to the $ 450 paid for their house per week and the money is deposited in their joint Australian account (Cunningham, Thompston & Rogders 2007). Finally, the Assessable income of Rogan Advertising Company for the tax year in discussion is pegged to the amount of money that is paid for the advertising services it is offering to Greater Union Propriety Limited Company.
With the explained details, what is clear is that the sources of assessable income in the tax year 2016/17 are the same for Ronald and Rogan Advertising Company as that of the 2015/16 tax year. It is only in the case of Stephanie where there is an additional source of income, which is the money she is earning from the lecture services she is going to offer in Monash University in Rio de Janeiro in Brazil.
The advice that I would give with regards to the assessable income of both Stephanie and Ronald is in line with the Australian tax law. The Australian tax law has got provisions that cover taxation of a worldwide view. Being that Stephanie was earning from the lecture which she was giving in Monash University in Brazil and the tax paid to her account, the Australian tax authority is at liberty to apply Australian law to include all her incomes in Australia and calculate her assessable income. My advice would be for Stephanie again to refer to the Income Tax Assessment Act of 1936 and treat her earnings from Monash University as a second limb. Once the money earned in Brazil is treated as a domestic or private earning, what will be liable for assessable calculation are her annual earnings from the Rogan Advertising Company. This advice will enable the calculation of her assessable income to be based only on the already mentioned $ 80,000 as annual salary and the unfranked dividend offered by the company.
Nevertheless, the calculation of Ronald’s assessable income would remain constant except in the case of the amount of money earned per week from the leased house. With reference to the Income Tax Assessment Act of 1997, the earning received by Ronald are likely to be captured in his the subject income calculation. The other advice that I may offer to both Stephanie and Ronald to maintain their joint bank account because this will act in their favor as far as the incomein question is in context.
Apart from the already discussed advice, I would also offer an advice to them with regards to the $ 450 paid for their leased house. Just as mentioned in the previous paragraphs in the first part of the question, the two couples can apply the same view they gave to the money paid for the 2015/16 tax year. 2016/17 tax year found them still in Brazil, a journey that was not in their daily plan but because of the nature of their operations. It is possible for them to treat their leased house as a private asset or a domestic one. This will exempt it from taxation and therefore will not be included in the calculation of assessable income but rather as bonus. Remember as discussed previously, the formula for calculating assessable income= taxable income + deductions. For them to avoid this, then they have to mention the house a second limb.
In conclusion the calculation of assessable income is a very wide area that includes inclusion of taxes and deductions provided the total earnings of the individual surpass the tax free threshold. The advice given to Stephanie, Ronald and Rogan Limited Company will therefore ensure that the calculation is done in the favor of the parties in context.
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