Taxation law of Australia focuses to provide complete knowledge in simple and clear manner by providing easy ways of application of law to practical problems (Miller and Oats 2016). The main focus of the act is towards the federal taxation system, income tax, capital gain tax, fringe benefit, and so on(Woellner et al. 2016). It provides complete introduction of the policies, rules and procedures of the taxation rules of the country. Nowadays, more and more people are getting involved in reducing their tax. It is unclear to say the strategies; he uses which the person follows legally or illegally. The department needs to focus on the loopholes to gain the faith of citizens of the country and to improve the equity system of the country. It is leviable on three different categories of income like personal income, business income and income derived from capital gain. The financial year in Australia starts from 1 July every year. The tax rate for corporate is 30% whereas the rate for an individual ranges from 0%-45% after calculating the net total income for the financial year. According to the survey, which was held in the year 2013 it, was found that Australia has a low tax burden rate in comparison to the other nations with GDP @ 25.6%. Earlier the tax was imposed on the luxurious goods only but later on it was decided by the government that it would include all the income earned by an individual during the year.
It can be defined as an income, which can be taxed, in such a way so that an individual can earn enough to exceed his tax-free origin (Ato.gov.au 2016). In other words, it can be termed as income subjected to tax. It includes income from different heads:
Income from salary and wages,
Income from interest from bank accounts,
Income from Dividends and other income from investments.
The person should consider various other incomes also while calculating his assessable income. These includes:
Income earned from unusual agreements.
Income received from commission.
Income drawn from dividends and credits of business.
Income acquired outside Australia by Australian resident.
Income received from interest on investment.
Profit derived by a person from selling or disposing any capital asset like plant and machinery, land and building.
Subsidies received from running a business.
Income received from renting a property.
Income received from bad debt recovery.
In the given case, Stephanie Rogan has an advertising company. She started this company with the suggestion of Greater Union, who used her as a contractor for the company. Her husband Ronald was the company secretary and manager of the Rogan Advertising ltd. In the year, 2015 Greater Union offered Rogan Advertising an opportunity to make a series of advertisements in the Rio Olympic Games 2016. Stephanie has to stay in Brazil until the end of the Olympic Games. She left the country with her husband on June 26, 2015. They will lease their property until they return from Brazil. Stephanie receives a salary of eighty thousand dollars per annum from Rogan Advertising Ltd. Her husband also receives a salary of eighty thousand dollars per annum from the company. Both of them have a single share of the company. They received profit earned by the company in the form of false dividends. They received four hundred fifty dollars a week for leasing their house. Greater Union gives majority of their work. They have created one joint account in Australia where they receive their salaries and rent from their house. They have also created a joint account in Brazil to receive income until their stay in Brazil from the company. She received $24,000 from Monash University in her Australian bank account for delivering lectures to the management students of the University. According to Australian law, married couples are to be taxed separately. As per the act, any income or money, which a person receives from renting his house property or any other property, is liable to pay income tax. On the other hand, rental income includes advertising expenses, bank charges, borrowing expenses, depreciation charges, insurance charges, land tax, and so on(Ato.gov.au 2016).
As defined in the act, land tax is an annual tax, which is chargeable on properties paid by the owner. The section states that in order to assess the income in regard to the “lease granted before “20 September 1985 is assessable under section 26 AB of the income tax act 1997”. Exemptions can be claimed by the person if the property used by him is for residential purpose or land used for farms. As stated in the “Estate of Fuld (No. 3) 1968 p. 675 per Scarman J at pp 684-684 and Buswell v. I.R.C (1974) at 9.526” that is consistent about the person returning in Australia. In the given case, the place of residence of Stephanie was not mentioned only the country is mentioned. According to the tax, rules followed in New South Wales the owners of the house property are eligible to claim exemption for renting two rooms of their house property. In the given case, she decided to let out her house for a period of less than six months. Nothing more has been mentioned in the case i.e. whether the house has more than one room or not. Therefore, it is assumed that she has rented only two rooms. Hence, she can avail exemption from tax. However, the answer differs if she is the resident of Australian Territory. According to the rule, the person can claim exemption up to a certain basis of income.
Calculation of income based on New South Wales:
Up to 412,000, the eligible tax rate is AUD 100.
From 412,001- 2,519,000 the eligible tax rate is 1.6%on the excess value.
Over 2,519,001, the eligible tax rate is 2% on the overall value.
Income earned from renting a house property for the year 2015-2016 = $450*52 weeks = $23,400
Again, for the year 2016-2017 =$450*20 weeks= $9,000.
As the threshold limit does not exceed 412,000, she is liable to pay AUD 100 only for this income.
Again, calculation based on Victoria. According to the rule property valued up to AUD 250,000 are exempt from taxation (Ato.gov.au 2016). From the above calculation, it can be said that Stephanie can claim exemption because the total income earned is less than 250,000.
Again, based on Capital Territory the threshold limit for exemption is quite different.
Up to 75,000, the slab rate is 0.41% = [(23,400 + 9,000) * 0.41%] = $132.84
From 75,001-150,000 the rate is 0.48% = nil
From 150,001-275,000 the rate is 0.61% = nil
Over 275,001 the tax rate is 1.23% = nil
Calculation of assessable income of Stephanie, for the year 2015/16 and for the year 2016/17:
Assessable income for Stephanie for the year 2015-2016 = $80,000 only.
Assessable income for Roger (her husband) for the year 2015-2016 = $80,000 only
Assessable income for Stephanie for the year 2016-2017 are as:
[Note: assessable income before 1st July 2015 was not included in this calculation.]
Income from house property:
From 1st July 2015- 30th June 2016 (450*52) = $23,400
Less: exemption (23400*0.41%) =$ 95.94
From 1st July 2016- 30th November 2016 (450*20) = $ 9,000
Less: exemption (9000*0.41%) =$ 36.9
Gross total value (23400+9000) =$32,400
Total value (32,400-133) =$32,267
Income from salary:
From 1st July 2015-30th June 2016 =$80,000
From 1st July 2016-30th June 2017 = $80,000
Income from business and profession
By delivering lecture to the management students = $24,000
Income from capital gains = nil
Income from other sources = nil
Taxability of income for Stephanie for the year 2015-16
Up to $18,200 = nil
From 18,201-37,000 @19% =$3,572
From 37,001-80,000 @32.5% = $17,547
From 80,001-180,000 @37% = [(103,304-80,001)*37%+17547] =$26,169
Total assessable income for the year 2015-16 = $ 77,135
For the year 2016-17
Up to 18,200 = nil
From 18,201-37,000 @19% = $3,572
From 37,001-80,000 @32.5% = $17,547
From 80,001-180,000 @37% = [(112,963-80,001)*37%+17,547] = $29,742
Total assessable income for the year 2016-17 = $ 83,221
[Note: since no information regarding management lecture has been given in the problem it is assumed that the lectures were delivered in the assessment year 2016-17]
Calculation of assessable income of Roger
Income from salary
For the year 2015-16 = $80,000
For the year 2016-17. =$80,000
According to Australian law, a person can claim exemption under “Schedule 1 of the ITAA 1997” up to $18,200 from his total income (Ato.gov.au, 2016). It is assumed that the income from house property will be taxable in the hands of Stephanie. So taxable income of Roger for the year 2015-16 is
Up to 18,200 =nil
From 18,201-37,000 @19% =$ 3,572
From 37001-80000 @32.5%=3572+ 13974.675 = $17,547
Total income= [ $80,000-(17,547+3,572)] =$58,881
His income will remain same for both the years.
To conclude it can be said that the Australian taxation system was one of the most complex system of collecting revenue in the world. It has near about 125 different forms of taxes, which also includes commonwealth taxes. Different organizations have been set up to ensure the integrity of taxation system of the country. The country has six major states and two union territories, which includes 143 municipalities from urban region and 587 municipalities from rural areas. The local government of the country provide legal framework for the citizens of the country. There are different property tax rates for different states among the country.
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Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., Stark, W. and Wende, S., 2015. Understanding the economy-wide efficiency and incidence of major Australian taxes. Treasury WP, 1.
Davison, M., Monotti, A. and Wiseman, L., 2016. Australian intellectual property law. Cambridge University Press.
Long, B., Campbell, J. and Kelshaw, C., 2016. The justice lens on taxation policy in Australia. St Mark's Review, (235), p.94.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Morgan, A., Mortimer, C. and Pinto, D., 2014. A Practical Introduction to Australian Taxation Law.
Morse, S.C. and Deutsch, R., 2016. Tax Anti-Avoidance Law in Australia and the United States.
Norregaard, M.J., 2013. Taxing Immovable Property Revenue Potential and Implementation Challenges (No. 13-129). International Monetary Fund.
Nyst, C. and McAdam, R., 2014. Family law: Tax Office takes aim at separation property settlements: Draft ruling impacts private company transfers. Proctor, The, 34(4), p.24.
Sharkey, N. and Murray, I., 2015, July. The rule of law and leadership in substitution and in conflict: social psychological and legal perspectives on Chinese tax administration. In Australian Tax Forum (Vol. 30).
Snape, J. and De Souza, J., 2016. Environmental taxation law: policy, contexts and practice. Routledge.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016.Australian Taxation Law 2016. Oxford University Press.
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