Taxation Principles Report: Assessment of Daniel and Joyce's Taxation

This report delves into Australian taxation principles, focusing on the tax implications for two individuals, Daniel and Joyce. It begins by determining Daniel's residential status, assessing whether he's a resident or non-resident for tax purposes based on various tests like the domicile test, 183-day test, and superannuation test. The report then calculates Daniel's tax payable, considering his income from various sources, allowable deductions, and the applicable tax rates. A detailed income statement is provided, outlining revenue, deductions, and the final tax liability. Furthermore, the report discusses Daniel's tax consequences in the 2017/18 assessment year, taking into account his potential relocation and changes in income. The second part of the report analyzes the tax implications for Joyce, focusing on FBT or income tax, and calculating her FBT liability. It examines her income statement, including salary, bonuses, and various deductions, and calculates her net assessable income and tax payable. The report also offers advice to Escape Vacations regarding tax implications and liabilities, including recommendations for reducing tax burdens. The report uses various sections, laws, acts, and legislation to make the fair taxation in the country.

TAXATION PRINCIPLES

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
1. Residential status of Daniel as resident or non resident for tax purpose............................1
2. Calculation tax payable for Daniel.....................................................................................3
3. Discussion over Daniel's tax consequences in 2017/18.....................................................4
QUESTION 2...................................................................................................................................5
A.............................................................................................................................................5
1. Analysing the tax implication of FBT or Income tax....................................................5
2.Calculation FBT liability for Joyce................................................................................7
B.............................................................................................................................................7
1.Advising Escape Vacations over tax implication...........................................................7
2.Calculating tax liabilities for Escape Vacations.............................................................7
3.Advising Escape Vacations to reduce the tax liability...................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Taxation proceeds as to make fruitful legislation over income or revenue generated by
individual as well as corporations. Taxes are in force by ATO and federal register of legislation
which contains various sections, laws, acts as well as legislation to make the fair taxation in
country. In the present report, Daniel and Joyce are the two individuals who are earning through
Australian sources as well as they are also making payments of taxes over their income.
However, with the help of various deductions or exemptions they will be liable to claim several
incomes or expenses. There has been calculations for FBT and tax liabilities as well as allowable
reductions
QUESTION 1
1. Residential status of Daniel as resident or non resident for tax purpose
Daniel is a Malaysian resident and moved America for work purpose in the Mining
capital corporation (Vann, 2016). He than moved to Australia for working in franchisee of the
same organisation on 1st November 2016. As per the Australian legislation authorities, for being
a resident in Australia one has to pass the several tests such as:
Domicile test: Under this test an individual should have taken birth in Australia and must
have acquired the permanent residency (Miller and Oats, 2016). As per the scenario, Daniel is a
Malaysian resident and has the native home there so, I this case he is denoted as the non-resident
in Australia and would not be liable to make payment of taxes.
183 Days test: As per conditions contained it this test is that, an individual must have
stayed for more than or equal to 183 days in Australia. The persona must have completed 183
days in Australian territory may be in alteration or frequent visits within the assessable year
(Tran, 2015). Daniel will be eligible for making the tax payments as he has acquired joined
Australian company in 1st November 2016, which is taxable year of 1st July 2016 to 30th June
2017. He has passed the conditions implicated in this test and will be liable to make payments for
taxes.
Superannuation test: In this test, ATO1 has made the condition that if a person is
employed in Australia and has the superannuation benefits from Australian government will be
liable to pay tax (Pearce, 2014). Daniel has employment in American originated company's
1 Australian Taxation Office
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franchisee in Australia. This firm has made the annual payment of 250000 of salary with
superannuation benefits to him. In this case can claim deductions over superannuation but he is
also liable to make tax payments.
TR 98/17: As per this taxation ruling, an individual can acquired residential status in
Australia on the basis of several terms like:
 The individual should be migrant from Australia, as he has taken birth in the national
territory and living outside the country (Kreiser and et al., 2014).
 Students acquiring visa for studying in Australian university, schools or colleges.
 Teaching such as professor or lecturer like guest faculty in any educational institution
were also denoted as the Australian resident.
 Tourists or the temporary visitors in Australia, they are also known as the residents.
 A person is employed in any Australian company on the basis of contract will also be
denoted as the resident for tax purposes.
On the basis of above condition in TR 98/17, Daniel comes under condition of
employment in Australia. As per norms set by ATO he can be denoted as the Australian resident
and is liable to make payments of tax over his assessable income.
Section (6)2: This section is related with the conditions and various legislation over
assessable income of residents or visitors in Australia. It will be fruitful in understanding the
terms and conditions for acquiring the residential stratus in Australia. Daniel has been employed
in ans Australian firm as well as generating income from there, so he will be liable to make the
tax payments (Dumiter and et.al., 2016). He has generated income through Australian sources as
well as from his rented property at Malaysia which has deposition of payments in Australian
bank. Daniel; is also receiving the annual interests from both the banks and has income through
dividends or incentives, so he is liable to make payments for the taxes over his generated income.
As per above mentioned various terms, laws, sections or ruling awarded by ATO in
context with residential status of Daniel, he can be denoted as resident in some terms as well as
non resident. As per residential test he has fulfilled the conditions of two aspects such as 183
2 Income tax assessment act, 1936
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days test and superannuation. Where he has denoted as an Australian resident for making the tax
payments (Frecknall-Hughes, 2014). Taxation ruling for the residential status, Daniel has
acquired the last condition such as he has been employed in the Australian Company and having
revenue benefits from it. As in section 6 of ITAA36 he can be denoted as the resident in
Australia on the basis of receiving income or earning through Australian sources as well as from
other countries.
2. Calculation tax payable for Daniel
Income statement of Daniel
Particular AMOUNT deduction
Taxable amount
($)
Revenue generated (9.5% superannuation) 250000 23750 226250
Dividends BHP shares 5000
Rental income from Malaysia 24000
Dividends from mining capital 5200
bonus incentives 15000
total income 275450
less: Allowable deductions
interest from Malaysian bank 8000
interest from Australian bank 3000
deductions Work related expenses 2500
Allowances by Mining capital 20000
rent paid to Dalkeith property 40000
Total deductions 73500
Net income 201950
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Franking credits 2142
net assessable income 199808
less: tax (45%) 89913.6
54232
Taxable payments 144145.6
Interpretation: Present calculation is based on the assessable income generated by Daniel
through his employment at Australia as well as through dividends, rental income and bonus
through his company. Daniel has the annual income of $250000 with the superannuation scheme
which was facilitated by Mining capital corporation. The rate over superannuation is 9.5% so it
will be exempted from his taxable income and has the revenue for $226250. Further addition to
be made by Daniel as he has gains through dividends from shares as well as from Mining capital
for $5000 and $5200. He has surplus in income with rent received from Malaysian property, this
amount is fully taxable as it has the monthly revenue for 2000 and the allowable deduction over
rent is $1500, so this will be taxable. He was allowed exemption over several incomes and
expenses which is total of $73500, it will be deductible from the total income and brings the
assessable income of $199808. Thus, these amount of income fall in to the 45% of taxation slab
by adding $54232 the amount will be tax payable by him is $144145.6. He will not been
benefited with Medicare levy of 2% because he is not an Australian resident. The Medicare levy
is awarded by Australian government as give cure and medical benefits such as, heath and safety
as well as security to its citizens.
3. Discussion over Daniel's tax consequences in 2017/18
Daniel paid taxes in the assessment year 2016-2017, he has generated taxable payment
for $144145.6. It can be assumed that he will be earning the same income in 2017-18 amounted
at $250000 along with the superannuation paid by his employer. The super annunciation scheme
is facilitated by Australian legislative to citizens as to give them monetary benefits after
retirement. In June 2017 the mining company has the downturn and its planing to close all the
subsidiary companies to over come with the losses. Daniel is planning to move back to his native
country Malaysia along with his wife and son. They will leave Australia after September 2017,
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as if Daniel do not find any job in Perth. He will be obliged to make the payments for the taxes
over revenue generated by him during June to September. As per his previous income or tax
payment he falls into the highest tax payer slab which means that he has the good earning
capability, but he will not go to have revenue from employment unless he has revenue through
rental property in Malaysia
QUESTION 2
A.
1. Analysing the tax implication of FBT or Income tax
Joyce in an Australian resident and has been working in Escape Vacation as a marketing
manager. She has generated the income with superannuation benefits as well as incurred various
expenses. Following is the income tax assessment over her income:
Income statement of Joyce
Particular
AMOUN
T $ rate deduction
taxable
amount $
Salary (9.5%) 150000 9.50% 14250 135750
bonus incentives (loan payment) 12000 -12000
sale of car 35000
total income 158750
less: Allowable deductions
School fees of Zari 15000
School fees of Luke 15000
travelling expenses 40000
total allowable deductions 70000
add: taxable expenses
Virgin airlines 550 80.00% 440 110
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membership 750
fuel expenses 200 12 2400
servicing 300
Registration 750
insurance 700
Gym membership 288
mobile phone expenses 75
I pad 1100
loan at zero interest rate 22000 10.00% 2200 19800
Total taxable expenses 26273
Net income 115023
less: tax (37%) 115023 37.00% 42558.51 72464.49
ADD: 19822 92286.49
Taxable income 92286.49
ADD: MEDICARE LEVY 115023 2.00% 2300.46
ADD: budget deficit 115023 2.00% 2300.46
Assessable income 96887.41
Interpretation: Calculation for the income statements of Joyce on income generated by
her. She has been working as a marketing manager in the travel company named Escape
Vacation under which she has generated the annual salary for 150000 with 9.5% of
superannuation. The superannuation will be exempted from her income as these source is fully
exempted and has the revenue of 135750. Further she has to deduct the loan payments of 12000
and add the sale of car made by him of 35000. After this she is getting the profits of about
158750. From this we will deduct the school fee of Zari and of Luke which is 15000 each and
also the travelling allowances of 40000 remaining amount 70000. Then will add the taxable
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expenses like Virgin Airlines of 550 from which the deductible amount is 80% i.e. 110 and also
loan at zero interest rate from which total taxable income will be 10%of 22000 i.e. 19800. Then
the total taxable expense are 26273. Then net income of her will be 115023 form which we less
take out the tax of 37% which will be 72464.49. Then she will take the 37% above from the tax
slab of 19822 which equals to 92286.49. This 92286.49 would be the actual taxable income. In
this figure we will be adding medical levy and budget deficit which are 2% of net income each
I.e . 2% of 115023 this equals to 2300.46 each. So the net assessable income will be 92286.49
adding 2300.46 and 2300.46 equals to 96887.41. She is the resident in Australia so she will be
benefited with the Australian Government scheme of allowing the Medicare levy which in
context with giving the health and security to their citizens.
It will be fruitful for Joyce to prefer income tax legislations over the income she has
generated through her employments (Creighton, 2014). Here she will be benefited with the
deduction or exemptions levied over her income and expenditure made within assessable year.
However, she will be benefited with the implication of various tax rate which as lower down the
taxable return paid by her (FBT exemptions and concessions, 2017).
2.Calculation FBT liability for Joyce
Car cost Official use Personal use
Distance travelled 20000 5000
FBT statutory % 20.00% 20.00%
Taxable FBT value (20% x car cost) 7000 7000
deductions 3600 3600
Gross Taxable value 4000 1000
FBT liability (FBT amount- Deduction)*0.9 3060 12240
Total FBT liability 3060 12240
Interpretation: On the basis of above calculations Joyce will be benefited in claiming the
car FBT liability at the rate 20% over the consumption of car which is 20000 km used for the
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office purpose as well as 5000 km for personal use. After measuring the FBT taxes, the total
FBT liability over the office use and personal use of car such as 3060 and 12240 respectively.
B.
There has been calculations for the tax liability of Escape Vacation as the company is
being planning to make the holiday package for the 2500 at 30 employees including GST. Firm
has planned the budget which will be costs for 150000 for 60 employees. There has been
calculation over the tax liability of this organisation as well as advising them to reduce the tax
liabilities.
1.Advising Escape Vacations over tax implication
The company has planned the holiday package for 30 employees at $2500 which will be
$75000. They have estimated the budget for 60 employees which will be costed at $150000. The
taxes will be levied over cost of granting free holiday packages to its employees.
2.Calculating tax liabilities for Escape Vacations
Particulars Amount ($)
30 Employees * 2500 75000
60 Employees 150000
Total revenue 150000
Less: deductions (75000) 75000
Tax liability for Escape Vacations 75000
Interpretation: as per the above calculations the company has paid 2500 for 30
employees and their partner for holiday package. The cost of travelling will be expended to
150000 for 60 employees and their partners. It means the 75000 was paid by the employees and
the rest of the amount will be paid by company. So the firm will be liable to make payment over
taxation for remaining 75000.
3.Advising Escape Vacations to reduce the tax liability.
Escape Vacations can be beneficial in lowering down the tax liabilities as they can lower
down the cost of the holiday by reducing the number of employees and also increase the ratio of
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making payment for the travelling package. As the employees should make payments for their
travelling competitively more than the company.
CONCLUSION
As per present assessment report related with the various tax legislation over the income
or revenue generated by Joyce and Daniel as well as Escape Vacations. Several rates of taxes as
well as various deductions are to allowed to them which helps in reducing the taxable amount.
The taxable amount can be paid by Daniel over the income he has generated through his
employment in Mining Capital corporation at Australian branch for $144145.6. He was non
resident to Australia so he will not being benefited with the governmental rewards of Medicare
levy. On the other site, Joyce is an Australasian resident and has generated income through her
employment in Escape Vacation.
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