Tax Practice Assignment

This document provides a written letter of advice on Australian residency for tax purposes. It also includes a calculation of the net income of a partnership and distribution statement for each partner. The document discusses the residency test and factors considered for determining residency in Australia. It also provides a table with the calculation of net income and individual income for each partner. The deductible expenses for the partnership are mentioned as well.

Tax Practice Assignment
Tax Practice Assignment
Student Name
Institute Name
Date
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Tax Practice Assignment
Table of Contents
PART A: Written Letter of Advice..............................................................................................................2
PART B: Calculate the net income of the partnership and the distribution statement for each of the
partners for the year ended 30 June 2018....................................................................................................5
References...................................................................................................................................................7
PART A: Written Letter of Advice
To,
Jack Johnson
Classic Towers, Road No 2417,
Manama, Bahrain
Sub: Advice on Australian Residency
Dar Mr. Johnson,
This is to inform you regarding your residential status in Australia for the year ending 30 June
2018. Analysis of the facts of your case, it can be seen you have changed multiple jobs within the
last two years and have also been visiting other countries for authorities work and is also visiting
Australia frequently for the personal reason (Joseph, 2019). The determination of your residential
status will be made according to your stay in the year 2018 in Australia even if you have
provided the information of your stay details since the year 2018 (Government, , 2019).
According to the provisions of Australian Tax Authorities, there some factors which must be
referred for the analysis and determination of residence in Australia (Joseph, 2019). The
residency test is referred as the main test for the determination of residency of an individual for
income tax purposes in Australia (QuillGroup.com, 2016). It emphasizes on different factors to
ascertain whether you are resident of the Australia for the year ending 30 June 2018 for the tax
purposes in Australia. The test considers all the factors associated with your residency including
business ties, family, bank accounts, social arrangement etc(Government, , 2019).. In case a
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Tax Practice Assignment
person who fails to fulfill the criteria as provided under residency test prescribed by Australian
Tax Authorities, he/she will not be referred as the resident of Australia for income tax calculation
purposes (QuillGroup.com, 2016).
The Australian tax law provides some residential test for the determination of residential status
of an individual for a particular financial year, the details of the same are provided below:
(Government, 2019).
Domicile Test: The domicile test signifies that a person who is born in India and also has a
permanent residential house will be termed as a resident of Australia for tax purposes.
(Government, 2019) It does not matter even if the person is residing outside Australia for
business purposes but the individual must not have the plan to settle abroad far from Australia in
future (Joseph, 2019). As the name suggest domicile means the location where the house of a
individual is established. It is basically related to origin and choice of the individual
(QuillGroup.com, 2016).
The 183-day test: The aforesaid test signifies that if a person stays at Australia for at least 183
days or above that then he will be known as a resident Australian for calculation of tax rules.
(QuillGroup.com, 2016). It does not have any impact on the residential status whether it is
continuous stay or in parts. The main criteria are it has to be 183 days minimum and more than
that (Government, 2019). It does not matter even if the person is residing outside Australia for
business purposes but the individual must not have the plan to settle abroad far from Australia in
future (Joseph, 2019).
The superannuation test: The aforesaid test is applicable for the employees of Australian
Government who are hired the government of Australia to work abroad for the Australian
Government. These employees generally come under CSS and PSS Scheme for whom this test is
applicable (Government, 2019). PSSAP members are not included in this test of residential
status by Australian Government (Government, 2019).
According to the details provided by you, it states that you are a Australian National having been
born in Australia on 11 September 1964 and also an Australian citizen and who holds an passport
of Australia as well as a British passport. Considering the facts, it is clear that with the
application of domicile test you are an Australian Resident for Tax purposes (Government,
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Tax Practice Assignment
2019). The reason for the test 183 days will be applicable which signifies that if a person stays at
Australia for at least 183 days or above that then he will be known as a resident Australian for
calculation of tax rules. (QuillGroup.com, 2016). It does not have any impact on the residential
status whether it is continuous stay or in parts. The main criteria are it has to be 183 days
minimum and more than that (Government, 2019). It does not matter even if the person is
residing outside Australia for business purposes but the individual must not have the plan to
settle abroad far from Australia in future (Joseph, 2019).
Further, in your case it can be seen that you have been travelling a lot and changed your job very
often as you have worked in Middle East countries, Australia and now Bahrain (Joseph, 2019).
By the end of the year 2018 your marriage broke down but your family is still residing in your
house located at Australia and they never moved back to Baharian (QuillGroup.com, 2016). The
details also show that you have been visiting Australia two times in the financial year once in
November 2017 and another in April 2018 to see your family (Government, 2019). Even if you
have the intention to permanently shift from Australia, you do have a permanent house in
Australia where your family is residing (QuillGroup.com, 2016).
Hence, considering all the details provided by you, that you are a Australian National who was
born in Australia and also an citizen of Australian and who holds an passport of Australia as well
as a British passport (Joseph, 2019). It is clear that with the application of domicile test you are a
Australian Resident for Tax purposes (Government, 2019). Even if you have the intention to
permanently shift from Australia, you do have a permanent house in Australia where your family
is residing (QuillGroup.com, 2016).
However, whatever income you have generated during the financial year will be taxed under the
heading foreign income as according to the provision of Australian Tax Authorities (Joseph,
2019), the income which is generated outside Australia will be taxed under the heading of
foreign income (Government, 2019).
.
In case of any query and clarification feel free to contact us. We will be glad to help you.
Looking forward to hear from you
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Tax Practice Assignment
Thanking You.
With Regards,
John Smith
Tax Consultant
Note: According to the provisions of Australian Tax Authorities, there some factors which must
be referred for the analysis and determination of residence in Australia (Joseph, 2019). The
residency test is referred as the important test for the determination of residency of an individual
for income tax purposes in Australia (QuillGroup.com, 2016). It emphasizes on different factors
to ascertain whether you are resident of the Australia for the year ending 30 June 2018 for the tax
purposes in Australia. The test considers all the factors associated with your residency including
business ties, family, bank accounts, social arrangement etc(Government, , 2019).. In case a
person who fails to fulfill the criteria as provided under residency test prescribed by Australian
Tax Authorities, he/she will not be referred as the resident of Australia for the calculation of
income tax purposes (QuillGroup.com, 2016).
PART B: Calculate the net income of the partnership and the distribution statement for
each of the partners for the year ended 30 June 2018.
A table containing the calculation of net income of the partnership firm is as follows;
(Professionals, 2019)
Fees 350,000
Add: Bank loan
Add: Loan from Judy
55,000
45,000
Add: Interest on drawings - Jared 500
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Tax Practice Assignment
Add: Interest on drawings – Judy 750
Total Receipts 451, 250
Rent of the training 35,500
Add: Cost of ingredients used in
Barista classes
6,600
Add: Salary of part-time teachers 125,000
Add: Salary of Jared 35,000
Add: Salary of Judy 60,000
Add: Superannuation
contributions for part-time
teachers
11,876
Add: Bank loan repayments –
principal
2,800
Add: Bank loan repayments –
interest
1,500
Add: Interest on capital - Jared 1,000
Add: Interest on capital – Judy 1,000
Total Expenses 279,825
Net Income (Total Receipts-
Total Expenses)
170,974
The partners share the profits equally thus, the each partners share of the income will be
170974/2 = 85487.
However, they have received for their services which will be also added in their individual
income which can be distributed as follows;
Salary of Jared 35,000
Add: Share of Partnership income 85,487
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Tax Practice Assignment
Total Income of Jared 120,487
Add: Salary of Judy 60,000
Add: Share of Partnership income 85487
Total Income of Judy 145,478
It is to be noted that all the work related expenses and receipts including the motor vehicle for
business will be referred in calculation. The following are some of the deductible expenses
(Government, Partnership, 2018);
Fees and Interest on investment loans (Professionals, 2019)
Donations for charity (Professionals, 2019)
Fees Charged for last year income tax (Professionals, 2019)
Insurance for income protection (Professionals, 2019)
Accident Insurance and Sickness (Joseph, 2019)
Contributions paid for Superannuation as a part of Guarantee Superannuation (Professionals,
2019)
References
Government, A. (2018, September 13). Partnership. Retrieved from
https://www.business.gov.au/planning/business-structures-and-types/business-structures/
partnership
Government, A. (2019, February 26). Work out your residency status for tax purposes. Retrieved
from https://www.ato.gov.au/Individuals/international-tax-for-individuals/work-out-your-tax-
residency/
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Tax Practice Assignment
Joseph, J. (2019). Tax return for foreign residents Are you an Australian resident or a foreign
resident for tax purposes? . Retrieved from https://www.finder.com.au/australian-resident-for-
tax-purposes
Professionals, T. P. (2019). Partnership Tax. Retrieved from https://www.itp.com.au/tax-
returns/partnership-tax/
QuillGroup.com. (2016, September 9). Australian resident for tax purposes, explained. Retrieved
from https://www.quillgroup.com.au/blog/australian-resident-for-tax-purposes-explained/
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