Comprehensive Taxation Report - FNSACC512 Module - University

This report provides a comprehensive overview of Australian taxation, addressing various aspects relevant to tax professionals and individuals. It begins by examining the conflict of interest, responsibilities of tax agents, and the Code of Professional Conduct. The report then delves into Australian taxation law, including tax documentation rules and key areas such as residence, source of income, assessable income, deductions, tax rebates, and tax accounting. It also covers capital gains tax (CGT), fringe benefits tax (FBT), and employee termination payments (ETP) rules. Furthermore, the report explains the Goods and Services Tax (GST) and its application. The assignment includes a scenario, short answer questions, and details on client consultation, tax portals, and ATO resources, providing a thorough understanding of tax-related processes and obligations.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Report.........................................................................................................................................3
Answer to question 1:.................................................................................................................3
Answer to question 2:.................................................................................................................5
Answer to question 3:.................................................................................................................9
Answer to question 4:...............................................................................................................10
Answer to question 5:...............................................................................................................10
Answer to question 6:...............................................................................................................11
Answer to question 7:...............................................................................................................12
Answer to question 8:...............................................................................................................13
Scenario 1 Task 1:....................................................................................................................14
Short Answer Questions...........................................................................................................15
Answer to question 1:...............................................................................................................15
Answer to question 2:...............................................................................................................16
Answer to question 3:...............................................................................................................16
Answer to question 4:...............................................................................................................16
Answer to question 5:...............................................................................................................17
Answer to question 6:...............................................................................................................17
Answer to question 7:...............................................................................................................17
Answer to question 8:...............................................................................................................18
Answer to question 9:...............................................................................................................18

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Answer to question 10:.............................................................................................................18
Answer to question 11:.............................................................................................................19
Answer to question 12:.............................................................................................................19
Answer to question 13:.............................................................................................................19
References:...............................................................................................................................20

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Report
Answer to question 1:
Answer A:
Conflict of Interest:
The conflict of interest happens when a person has their own interest or they have the
duty towards another person which is conflicts with the duty that is owed towards the client.
A conflict of interest might be considered as the actual or the probable conflict. Also, it can
also originate prior to the acceptance of the registered tax agent to engage or during any point
of time of engagement (Barkoczy 2016). As the registered tax agent they are under obligation
of managing the actual or the potential conflict of interest. An original conflict of interest
happens only when it is found that the registered tax agent has multiple interest and fail to
objectively and impartially act in one interest. A probable conflict of interest happens when
the registered tax agent has the multiple interest and one interest may significantly create an
impact on the motivation of acting for another interest.
Responsibilities of tax agents:
The Code of Professional Conduct (CODE) controls the personal and professional
conduct as the registered tax agent.
Honesty and integrity:
a. The tax agent is required to act honestly and with integrity
b. The agent is required to adhere with the laws relating to taxation in respect of their
personal affairs.
c. The agents are under obligation of keeping account of the client in regard to their
money and other property.

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Independence:
The tax agent is also required to act lawfully in the best interest of the client. The tax
agent should also have the necessary arrangement for managing the conflicts of interest
which may happen in respect of the activities that is undertaken by them in capacity of the
registered tax agent.
Confidentiality:
Unless the tax agent has the lawful duty of doing so, they should not disclose any kind
of information that is associated with the affairs of clients to the third party without any kind
of client’s permission.
Competence:
The tax agent is also required to assure that the tax agent service they provide or
which is provided on behalf of the client should be competent (Freudenberg et al. 2017). The
taxpayer should maintain the knowledge and skills that are relevant to the tax agent service
which they provide. The tax agent should also take the reasonable care to make sure that the
taxation laws is implemented correctly in the situations to which the tax agent provide advice
to clients.
Other responsibilities:
Other responsibilities include the taxpayer must not knowingly obstruct the correct
administration of the tax laws. The tax agent should provide the client with the advice that
involves the rights and obligations under the tax laws which is required to be maintained by
board.

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Answer to question 2:
Answer A:
The Australian taxation law is associated to the tax documentations. The tax
documentations rules are as follows;
a. Tax agent service act 2009
b. Tax agents service regulations act 2010
The above given acts helps the tax agent service to carry out their activities on the
basis of the correct standard of the professionalism and perform their work of documentation
in the correct manner (Sadiq 2019). To be the tax agent an individual is required to have the
qualification in the Australian Taxation Law that is approved by the board. According to the
instruction of the board the applicants that have finished up with their course within the
Australian Taxation Law they are under obligation of clearing the territorial level subject.
The key areas of the Australian Taxation Law that is covered are as follows;
a. The Australian Tax Law must include the brief explanation relating to the legal
environments where the principles operate. It also includes the effective fundamental
systems, constitutional considerations and the separation of powers.
b. One of the key aspects that must be covered is the residence and source, basic
elements associated to the international taxation, tax deductions, rebates and tax
accounting.
c. It should also include the matters associated to goods and service tax.
d. There should always be the aspects associated to the taxation of superannuation law
e. The operational details must also include the documentation, collection of taxation,
assessment, rulings, audit and penalties.

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f. The rules also address the specific and anti-tax avoidance as well.
Answer to B:
Residence and source and tax related elements of international tax:
Residence is regarded as the important element of the taxation. With regard to “sec 6-
5 (2), ITAA 97”, for an Australian dweller the chargeable earnings include the ordinary
earnings that is earned from every sources. In the same way, “sec 6-10 (4)” explains that the
taxable earnings of dweller in Australia comprises of the statutory earnings from every
sources. With regard to the foreign dweller “sec 6-5 (3)(a)” includes the taxable income
based on the ordinary earnings from the Australian sources (Morgan, Mortimer and Pinto
2018). While “sec 6-10 (5)(a)” comprises of the statutory earnings from the Australian
sources within the taxable earnings of the foreign resident. While an Australian dweller
defined within “sec 995-1, ITAA 97” includes the person that are Australian dweller within
the purpose of “ITAA 1936”.
As it has been discussed above, a person that are non-resident of Australia will be
treated as taxable on the earnings that are sourced in Australia under “ss 6-5 (3)(a)”. While
for the non-dweller taxpayer, the sources of income would usually ascertain whether
Australia will impose its authority to tax. Despite the fact, a resident of Australia will be
required to pay tax from every sources (Morgan and Castelyn 2018). There are also some of
exemptions, such as the income tax offsets and special rules for getting exemption from the
foreign tax which may be available for income that are sourced in overseas. Consequently, to

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ascertain the income source for the resident taxpayer it becomes important for the operation
of numerous specific provisions.
Assessable Income:
The assessable income is considered as the subject of tax since it is added into the
taxable earnings. The ordinary is viewed as income in agreement with the ordinary
conceptions and it is treated taxable under “sec 6-5, ITAA 97”. The gains commonly need the
characterisation of courts to ascertain if the gain has the character of income. The assessable
is commonly categorized within three wide areas. Namely the;
a. Income from personal employment and services
b. Income from business
c. Income from property
The central issue to the application of the Australian income tax laws involves the
characterisation of gain as the ordinary earnings or capital.
Deductions, including general, specific and decline in value:
The main provision which is applicable on the taxpayers is deduction for the
expenditure based on the general deduction provision. Accordingly, “sec 8-1, ITAA 1997”
has the applicability of applying in to any taxpayer (Murray et al. 2018). A taxpayer is
permitted to get the deduction from the assessable earnings a loss or expenditure up to the
extent that is occurred at the time of generating the assessable earnings.
Specific deductions happen when the specific provision given in the income tax laws
allows the taxpayer with the deduction. The provision of specific deduction does not allow
the deduction under the “sec 8-1 or sec 8-5”. They operate under themselves to permit
deductions.

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Decline in Value:
A depreciating asset is regarded as those type of asset that has the limited effective
life and the asset is reasonably anticipated to decline in value on the basis of its time and
usage. If the depreciating asset is utilized for 100% for the production of income, then the div
would be identical as the depreciation (Main 2019). If the asset is not used 100% for the
generation of earnings, then the depreciation is required to be lowered on the basis of the
percentage of private usage.
Tax rebates and offsets:
Tax offsets are also at times considered as rebate and they are not as same as the tax
deductions. The offsets directly lower the amount of tax that a taxpayer is required to pay.
Every dollar of tax offsets lowers the taxable earnings by each dollar irrespective of their
chargeable earnings. A refund on the taxes arises when the liability on tax is lower than the
tax that is paid by a person is referred as the income tax rebate. The taxpayers usually get the
refund on the income tax if they made the payment relating to tax more than the amount
owed to them.
Tax accounting:
Tax accounting can be defined as the rules that are used in the generation of the tax
assets and liabilities in the accounting records of the business or individuals. Tax accounting
usually involves the procedure of allocating the income and deductions to a specific year.
Income test definition including reportable superannuation and FBT:
The income test is used in working out the eligibility for the number of tax offsets and
the benefits that may comprise of the amount of tax one has to pay. A taxpayer must assure
that they complete all the items that is applicable to them in the income test in selecting their

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tax return. While the reportable superannuation contributions are regarded as the total of any
personal tax deductible super contribution that one is required to make along with the
reportable contributions that is made by the employer on behalf of the employee (Miller and
Oats 2016). On the other hand, “section 136 (1)” defines the fringe benefit as the benefit
given during any point of time in the tax year, to the employee or the associate of the
employee by an employer or by the associate of employee in regard to the employee’s
employment.
Answer C:
CGT:
The basic feature of the CGT is that it is applied on the assets that are purchased
following the 20/9/1985. The provision of CGT is applicable on the actual or the realised
gains. The capital gains are taxable as the statutory earnings under “sec 6-10” and includes in
the assessable income based on the “sec 102-5 (1)”. The capital gains are taxed based on the
individual marginal rate.
FBT:
The liability of the FBT is generally payable by the employer on the basis of the
grossed up value of the fringe benefit. The employer is required to lodge the yearly FBT
return with ATO by 21st May (James 2016). FBT is usually self-assessed, usually because of
the quarterly basis and the FBT is usually incurred by the employer at the end of the relevant
FBT year.
ETP Rules:
An employee termination is regarded as one of the lump sum payment. This is usually
regarded as the life benefit ETP when it is paid to the employee. ETP commonly comprises

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of the gratuities and the severance pay but does not amounts to payment that are accrued for
annual leave or the tax free portion of the genuine redundancy payments.
Answer to question 3:
GST is regarded as the transaction based tax. It is a consumption tax and the taxes are
imposed on the supply of goods and services that are made in Australia and on goods which
is imported in Australia. GST is commonly paid on the value added to an assessable supply.
The elements of the transactions generally include the supplier that provides the supply of the
subject matter and the receiver that receives the supply and pays the price in the form of
consideration. The liability of GST happens when the assessable supply or the taxable
importation is made under sec 9-40, GST Act.
Answer to question 4:
The main responsibility of the ATO is the administration of the Australian taxation
law. The nature as well as the scope of different forms of taxation ruling generally differs
from the each other even though the underlying objectives remains the same.
For the purpose of administration, the ATO divides the public ruling in three main
categories which includes the following;
a. Income tax
b. Fringe benefit tax
c. GST public rulings
The administration of the public and private ruling in the ATO is executed very
separately and the administrative procedure which supports them are markedly different.

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Answer to question 5:
The general anti-avoidance rules are applicable if the dominant purpose of the tax
arrangement is get the tax benefit. in majority of the cases, a salary that is received by an
individual is equivalent to the gross amount that is received by the business for their services
less the permissible deductions (Jones and Rhoades-Catanach 2015). If the remuneration is
lower than the market value, then the arrangement of the GAAR market might attract. The
measures relating to tax is adopted by the individuals or the company with the objective of
lowering the burden of income tax.
The general anti-avoidance rules allow the tax officials to deny certain kinds of
transactions or the arrangement that lacks the commercial substance or consideration other
than taking an undue advantage of tax benefit. Beside the general anti-avoidance rules there
is also the specific anti-avoidance rules also exists. The Specific anti-avoidance rules are
regarded as the set of rules that mainly target the specific arrangements of tax avoidance with
very restricted scope of application which usually does not provide any grant of discretion to
tax authorities.
Answer to question 6:
As the registered tax agent, they will be required to gather all the necessary primary
data or information so that they can start preparing the individual tax yearly return. There are
also wide range of information relating to the personal income tax of a client which needs to
be included while filing tax return. These are as follows;
Residency: Whether the taxpayer was present in Australia for the entire year apart from the
overseas holidays or short duration business trips.
Salaries and wages: This includes whether the client has reported any receipt of salary or
wages.