The taxation act of Australia was introduced by Queensland in the year 1902. In order to help the Australian’s First World War Federal income tax was introduced in the year 1915. It is the most important system to collect revenue from the individual of the country. The financial year or the assessment year in Australia starts from 1st July.1: In the cited case Hilary by profession was the rock climber, agrees to sell her life details and pictures to the newspaper for ten thousand dollars. She has no experience of writing any stories in the past. To consider the fact of this case we should highlight the matter of Brent vs. FCT 1971. In this case, the wife of Biggs gave an interview to media, sold some of the pictures to them, and earned some cash on support of it. The money which she earned can be treated as a revenue income as per the act because the services were carried out by her for the organization. According to sec.26 (e) of Income Tax Act, any payment received on behalf of services rendered by an individual can be termed as an individual income. She did not draft the reports, which were occurred in the newspapers, the journalists built a report of her comments. She had given the ideas only. She received the amount by dedicating her seconds to the interviews. The news which she has was an asset for her and when she disclose the news to the media it no longer remain secret, therefore, she lost her capital asset and the amount which she earned from them is to be treated as income from capital nature. In the cited problem, Hillary received money by disposing her life incidents to the media. The answer differs if she does not dispose her story to them. However, if she signs an agreement to sell her story in the near future she is doing a work for the company and receives money for her work. According to the definition, it is income for her, and, hence she is liable to pay tax.
Assessable income of an individual includes the following:
ncome which were earned from the deals outside the ordinary course of business
Amount earned or received in the form of commission
Value received in the form of dividends on business investments
Amount which were earned outside Australia by an Australian resident
income earned by pre-received or accrued interest on business investments,
income earned from the payment of lease and hire charges
Profit earned by disposing capital assets.
In the given case, the amount earned by the person from his son somehow becomes a part of his total income, and, hence, to be treated as a taxable income. His son has cleared all the dues with an interest along with the principal amount within a period of 2 years by making only one receipt (cheque) for the payment, which includes the interest also. The act requires a person to maintain separate entries for interest and the principal amount so that taxation amount can be calculated more smoothly and accurately. The transaction will affect the total income of the guardians also. Therefore, the amount, which they acquired from their legal heir, has to be considered separately in their books.3: According to Australian Income Tax Act, capital gain taxis the part of income tax act which can be ascertained by deducting the value of an asset and the actual amount of an asset, which is received by an individual while disposing it. If the amount of capital loss exceeds during the year the excess value of an asset can be carried forward for next assessment years. Assets such as residential buildings, motor-car which is used for private purpose are exempted from CGT. There are various methods to obtain capital gains:
Discount method: the property which was possessed by an individual at least for a period of twelve months is eligible for it. As per the act, the slab rate of discount is 50% for individuals and 33.33%for the person who has superannuation funds. It can be calculated by deducting the cost base and capital loss from capital proceeds than the discount rate has to be deducted from the income.
Indexation method: the property which was held by a person before September 21, 1999 can be calculated on the basis of indexation method. It can be calculated by applying the indexation factor and by deducting the amount of cost from capital proceeds.
Other method: The assets which were acquired by an assessee at least for a period of six months are to be calculated by this method. It can be calculated by subtracting the cost base from capital proceeds.
Exempted income under this category are as below:
Any property held before pre CGT event i.e. before September 20, 1985,
The asset held by an assessee as his main residence,
Assets acquired for up to five hundred dollars which includes jewellery, stamps, etc., held for self
Cars and other small motor vehicles, which has a carrying capacity of less than one tonne and less than nine passengers.
Coverage for a damage which occurred on business premises or for personal damage.
Profit and loss earned by disposing of bonds and notes at a discount will fall under ordinary income tax.
Payments made under government policies.
In the given problem, Scott bought a piece of land during the year 1980 and constructed a building on it during the year 1986. The total amount of land after construction is one hundred fifty thousand dollars. The owner used the property for the purpose of hiring and renting. Afterwards, he sold the asset at an auction for eight hundred thousand dollars. He earned a capital gain of six hundred fifty thousand dollars by selling his property.
The person cannot claim for exemption under the head CGT because the property was used by him for renting purpose. Hence, the whole amount of the asset is chargeable under the head capital gains.
Again, if the person sold this asset to his daughter than he can claim exemption on this asset. As per Gift Tax Act of Australia, the whole value can be exempted from his income.
Again, if the caretaker of the asset was the company instead of individual and the company is associated with the renting and hiring business than the total income earned by capital gain can be set off under the head business from profit and gain. In the given case, the person is not eligible for exemption under the head capital gains. The tax rate will differ in each case. For individual the rate of tax lies in between 45% of his total income but for the company the effective rate is 30%.
Therefore, to conclude we can say that the income tax law of a country helps the nation to earn revenue income, which can be use for the benefits of an individual only. Therefore, it is the duty of each individual to pay the tax accordingly.
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Butler, D. (2016). Superanuation: $1.6 m balance cap examined-more tax on death benefits. Taxation in Australia, 51(1), 41.
Edmonds, M., Holle, C., & Hartanti, W. (2015). Alternative assets insights: Super funds-tax impediments to going global. Taxation in Australia, 49(7), 413.
.Harding, M. (2013). Taxation of Dividend, Interest, and Capital Gain Income.
Long, B., Campbell, J., & Kelshaw, C. (2016). The justice lens on taxation policy in Australia. St Mark's Review, (235), 94.
Morgan, A., Mortimer, C., & Pinto, D. (2014). A Practical Introduction to Australian Taxation Law.
Morse, S. C., & Deutsch, R. (2016). Tax Anti-Avoidance Law in Australia and the United States.
Palmer, T. (2013). UQ Library Guides: Taxation Law: Get started.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016).Australian Taxation Law 2016. Oxford University Press.
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