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Comprehensive discussion

Discuss about the Sections  of the ITAA 1936 and ITAA 1997 and income tax rulings issued by the Australian Taxation Office.

The Australian taxation office regulates and monitors the taxation system in the country. The taxation office determines whether an individual would be considered as the resident for the taxation purpose of not. To determine whether an individual is a resident for the tax purpose or not, it is important to understand the tax situation of the individual. The taxpayers have to pay the tax amount to the government, and it is used for the welfare of the citizens. The tax amount is calculated on the basis of the assessable income.  The tax residency test helps to determine the resident of Australia for the tax purpose (Burrell & McGinn, 2009). The case study analysis is based on the advising Peter Jones of his taxation residency status and calculation its assessable taxable income for the year ended.  

The tax situation of an individual need to be understood before determining whether it is a foreign or Australian resident for the tax purpose. The tax residency depends on whether an individual is coming from or going to any country (Coleman et al., 2013).

If you:

You are generally:

Temporarily leaving Australia and do not set up the permanent home in another country 

Considered a resident for tax purpose of Australia

An oversees student who has enrolled in the course for more than six months in at an institution in Australia 

Considered as resident of Australia for tax purpose

Visited in Australia, living and working in one location and taken steps to make home in Australia

Considered as resident of Australia for tax purpose

Visited in Australia and the individual for most of the time has traveled and worked in different locations all around Australia

Considered as the foreign resident for the tax purposes.

Traveled to Australia and resided their permanently

From the date of departure, it would be considered as the foreign resident for the tax purposes

If the foreign resident for the tax purpose should declare the tax return then income earned in the country Australia includes employment income, rental income, Australian annuities and pension and capital gains on the Australian assets (Deutsch, 2008). If an individual is an Australian resident for the tax purposes, then he or she has to declare all the income earned both internationally and in Australia on the Australian tax return.     


The primary test for the tax residency is known as the resident test. Thus, if an individual living in Australia than he or she would be considered as the Australian resident for the tax purpose and do not apply to the other tests of residency (Homburg, 2008). If an individual does not satisfy the test of residency, then he or she should be considered as the resident of Australia if the following statutory tests are satisfied:

  • The domicile test: If the domicile is in Australia then the individual would be a resident of Australia. Under the domicile act 1982, an Individual acquires the choice of domicile in Australia, if the individual intends to make her or his home indefinitely in the country. The test of domicile is explained in the Taxation Ruling IT 2650 (Krever, 2007).
  • 183-day test: If an individual present actually in Australia for more than a half the income year then he or she may be said as the constructive residence in the country and have no intention to purchase any residence. The commissioner determines and analyses the resident for tax purpose in the country (Robertson, 2008).
  • The superannuation test: The test ensures than the government employees working in the overseas would be treated as the resident of Australia.
  • Dual residency: It is also possible that a person can be the resident for tax purpose in two nations. In other words, it is said to be the dual residency and the fiscal authorities can apply to the complementary rules. It also states that the individual is no longer the resident in the past host nation or the country of origin. It does not mean necessarily that the individual in the resident in Australia.

Basically it is considered as the most stressed part that the key problem of tax residency is very much depend on the individual circumstances, most of the Australian who leave the county with the intention of living on the foreign land for two or more years and make a home in foreign land are considered as the Non Resident from the key date of leaving. In the given case the client Peter Jones is a British architect made a god name in the field of the repurposing industrial building for residential purposes. In the year 2017, Peter joined Smith construction in the month of July (Thomas, 2010). The company offered inducement payment of $100000 which was paid on 15th July 207. The employment contract of the Mr. Peter is for 12 months which can be extended as per the nee and demand of the company.

Application of compressive discussion


On 23rd September the company transferred Mr. Peter to Nez Zealand to guide a special project.  The project deadline was for nine months and returned to office in the month of 12 June 2018.Peter rented the house in London at a rate of $2000 AUD per month. On July 7th as per the statement of income and expenditure from the real estate agent indicated for the year 2018 30th June.

Reallocation allowance is off $5000 which helps cover the removal or storage of his householder impact on moving to the Australia. The company also pays Peter for monthly Telephone expense which is around $100 per month which on completion of one year stand around $1200. The Ozlotto lottery win leads to the extra income for Mr. Peter which is around $1 Million. Mr. Peter salary was $100,000 AUD. On the other hand, a key finding is that around 75% of his salary is earned while working in New Zealand (White, 2008).

Other expense and income for Mr. Peter includes the following,

$2500 in the registration fees for a conference on Australian designs which is considered to be offered by the industry specialist.

$1500 course fee for certificate in Australian design which is offered by the Australian Institute of architect

$50 to the magazine of Australian architecture

$1500 to the southern cricket club

$1500 to the hunter sports club    

Taxable income for Mr. Peter is considered to be the primary issues which are considered to be critical and is very much relying on the individual personal circumstances. However, it is not stressed to clarify the issues of the residency and the expats which are obtaining the suitable advice. A failure to determine and identify the issue, an individual, is considered as a resident of Australia for taxation purpose if he or she resided in the country for more than nine months i.e. 183 days. However, it is considered that the resident is differed from the normal sense as it is different from the domicile and nationality (Woellner, 2007). The situation as per the resident living in Australia, the Australia tax office (AT) aspect in term of residency is covered which throw light on the given question.  

In the given case study, Peter Jones is the British architect and made his name in the field of the repurposing the industrial buildings for the residential purposes. Smith constructions an Australian company approached Peter and employed Peter. Peter is the resident of England and arrived in Australia in order to take up the full-time employment as the designer with the organization. The contract of employment is 12 months. Peter has his own house in England, and a house was rented in Australia (White, 2009). If possible, Peter intends to live in Australia. Peter is transferred to the office in New Zeeland in order to assist in the special project. According to the Australian law, Peter would be considered as the foreign resident for tax purpose. Thus, he has to pay tax as per the Australian taxation law.  The rules and regulations need to be followed as per the law. To work in Australia, Peter has a visa that allows him to work there. An individual is coming to Australia for working purpose then it would have considered as foreign resident for the work purpose. The residency issue can be complicated and much dependent on the situation of the individual. An individual is the resident of Australia for the tax purpose if she or he resides in Australia. An individual has no intention to live permanently in the country and found to reside there, and the relative shortness and length of their stay in the country is not decisive. The taxation office shows regulate and monitors the tax rules and regulations. The residency test provides that whether an individual resides in Australia or not depending on the situation (Withers, 2007).               

The taxable income and their respective criteria are given in the below table which helps to provide a clear and precise idea about the individual income tax rate which helps to calculate the taxable income for Mr. Peter for the given the year 2018 (Woellner, 2013).

Taxable Income

Tax on this income

0 - $18200

0

$18201 - $37000

19 cent for $1 over $18200

$37,001 -$87,000

$3,573 plus 32.5c for each $1 over $37,000

$87,001 -$180,000

 $19,822 plus 37c for each $1 over $87 000

$180,001 and over

$52,2322 plus 45c for each $1 over $180,000

Source: https://www.ato.gov.au/rates/individual-income-tax-rates/

Salary = $100000 annually

Tax Year= 2017

Superannuation = 9.5 %

2016 - 2017

Weekly

Fortnightly

Monthly

Annually

Pay

$1,410.08

$2,820.15

$6,110.33

$73,368.00

Taxable Income

$1,923.08

$3,846.15

$8,333.33

$100,000.00

Superannuation *

[$182.69]

[$365.38]

[$791.67]

[$9,500.00]

Total Taxes

$513.00

$1,026.00

$2,223.00

$26,632.00

Income Tax

$474.54

$949.08

$2,056.33

$24,632.00

Medicare1

$38.46

$76.92

$166.67

$2,000.00

Conclusion 

The Australia Taxation law determines whether an individual would be considered as a resident of Australia for tax purpose or not. In the given case study, Peter has arrived in Australia for work then he should be considered as the foreign resident for the tax purpose. The government of any country regulates and monitors the rules and regulations as per the law. The citizen of the countries has to follow these rules and regulations (Woellner, 2005).  

References

Burrell, D., & McGinn, J. (2009). Cornerstone law series (1st ed.). [Adelaide]: Law Society of South Australia.

Coleman, C., Hart, G., Bondfield, B., McKerchar, M., McLaren, J., Sadiq, K., & Ting, A. (2013). Australian tax analysis. Pyrmont, N.S.W.: Thomson Reuters (Professional) Australia Limited.

Deutsch, R. (2008). Australian tax handbook. Pyrmont, N.S.W.: Thomson.

Homburg, J. (2008). Cornerstone law series (1st ed.). [Adelaide]: Law Society of South Australia.

Krever, R. (2007). Australian taxation law cases 2007. Pyrmont, N.S.W.: Lawbook.

Robertson, P. (2008). Australian master tax guide 2008. Sydney: CCH Australia.

Thomas, G. (2010). Cornerstone law series (1st ed.). [Adelaide]: Law Society of South Australia.

White, R. (2008). Cornerstone law series (1st ed.). [Adelaide]: Law Society of South Australia.

White, R. (2009). Cornerstone law series (1st ed.). [Adelaide]: Law Society of South Australia.

Withers, B. (2007). Cornerstone law series (1st ed.). [Adelaide]: Law Society of South Australia.

Woellner, R. (2005). Australian taxation law 2006. Sydney, N.S.W.: CCH Australia.

Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.

Woellner, R. (2007). 2007 Australian taxation law. North Ryde, N.S.W.: CCH Australia.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Sections Of ITAA 1936 And ITAA 1997 And Income Tax Rulings Issued By The Australian Taxation Office. Retrieved from https://myassignmenthelp.com/free-samples/the-australian-taxation-law.

"Sections Of ITAA 1936 And ITAA 1997 And Income Tax Rulings Issued By The Australian Taxation Office." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/the-australian-taxation-law.

My Assignment Help (2018) Sections Of ITAA 1936 And ITAA 1997 And Income Tax Rulings Issued By The Australian Taxation Office [Online]. Available from: https://myassignmenthelp.com/free-samples/the-australian-taxation-law
[Accessed 29 February 2024].

My Assignment Help. 'Sections Of ITAA 1936 And ITAA 1997 And Income Tax Rulings Issued By The Australian Taxation Office' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/the-australian-taxation-law> accessed 29 February 2024.

My Assignment Help. Sections Of ITAA 1936 And ITAA 1997 And Income Tax Rulings Issued By The Australian Taxation Office [Internet]. My Assignment Help. 2018 [cited 29 February 2024]. Available from: https://myassignmenthelp.com/free-samples/the-australian-taxation-law.

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