Taxation Law Report: Assessing Tax Liabilities for Jack Jones's Income

This report examines the tax implications for Jack Jones, a Canadian resident working in Australia. It addresses the determination of his residency status based on the 183-day test and visa duration, referencing relevant legislation and case law. The report then calculates his taxable income, considering income from both Australian and American sources, along with allowable deductions such as club fees, registration fees, and relocation allowances. The analysis includes an income statement outlining the calculation of assessable income, tax liabilities, and the application of Medicare and deficit levies, concluding with a final taxable income figure. The report references various sections of the Income Tax Assessment Acts and other relevant tax rulings and legislation to support its findings, offering a comprehensive overview of Jack Jones's tax obligations.

TAXATION LAW

TABLE OF CONTENTS
TAXATION LAW...........................................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1 DEFINING RESIDENTIAL STATUS OF JACK JONES.................................................1
2 MEASURING TAXABLE INCOME OF JACK JONES...................................................2
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Law imposed over citizens in a country for the proper execution of nation's operational
strategies and functions. Australian Taxation Office has introduced several acts and laws which
will improve taxation and legal functioning to a great extent. The present report is based on case
situation of Jack Jones who visited Australia along with his wife and son for work purpose.
During his visa period he has travelled several times and stayed several places. In this, he
discussion is going to be made over his residency in Australia as a tax payer and the income he
has generated will be taxable or not. Report will shed light on the deductions, exemption or
allowances, cases and tax rulings associated with the case of Jack Jones.
MAIN BODY
1 DEFINING RESIDENTIAL STATUS OF JACK JONES
Issue:
 Jack Jones is a Canadian resident visited Australia for work purpose.
 Period of visa allowed to him starts from 2nd December 2012 ends on 30th June 2016.
 He worked till 1st August 2015 and return to Canada. After working 9 months in Canada he breaches the contract with Samsak company and
returns to Australia and stayed till completion of visa period on 30th June.
Rules:
 section 6(1)1
 TR 98/17
 183 days test Federal Commission of Taxation v. Miller (1946)
Application:
Jack Jones visited Australia for the work purpose and he has occupied Visa for more than
3 years. He has been stayed here for 33 months from 2nd December 2012 to 1st August 2015. Jack
completed the period of 183 days staying in Australia so he will be known as Australian resident
only for tax purpose as per Section 6(1). On the basis of such aspect, he is obliged to make tax
payments for the income generated from Australian sources. Along with this, as per taxation
ruling 98/17, Jack is recognized as a resident and he falls under the category of person acquired
1 Income Tax Assessment Act 1936
1

visa for work purpose (Harris, 2013). This case has similarity with the case of FCT v. Miller
(1946) which describes the ordinary meaning of resides in Australia.
Conclusion:
As per the above listed rules, laws and cases Jack visited Australia but he stayed there for
more than 183 days. In addition to this, Jack travelled and completed the period of visa for
staying in Australia (Wilkins, 2014). The conclusion can be made over this is that he would be
known as the residence of Australia for the purpose of tax payments.
2 MEASURING TAXABLE INCOME OF JACK JONES
Issues:
 Jack Jones has generated income from America which were deposited in the Australian
bank without any tax payable buy him in America.
 Generated income through rent for which a sum of amount belongs to next month of
upcoming financial year.
 Assessment of allowable deduction of total income and expenditure.
 He has club membership in Canada and awarded with the tickets for London.
 He has appointed a tax consultant and make payments to him as well as he pay lawn
mover.
 Paid for registration fees in Australian company as well as occupied in a course of
“Certificate In Horticulture” and also paid fee for it.
Rules:
 Section 6(5 & 10)2
 Section 8(1-10)3
 Section 25(A)4
 South Australia v. Commonwealth act. TR 98/1
Application:
2 Income tax assessment Act, 1997
3 Income ta assessment act, 1997
4 Income tax assessment act 1936
2

On the basis of case situation, Jack is assumed as an Australian citizen and he has
generated income through various sources. He was employed for some time in Australia and
some time in America. He has gathered income through Australian sources as well as outside the
country. While he was working in America he had earned revenue and deposited the same in his
Australian bank account (Cao and et.al., 2015). In accordance with such aspect it will be taxable
under section 6(5) and 6(10). Income or expenses can be classified as ordinary or statutory
sources. He will be awarded with the deductions on some assets under section 8 (1- 10). Thus,
Jack is obliged to make payment of tax to government authority in against to the revenue
generated by him and the same will be assessable under section 25(A). This case is similar to
case of South Australia v. Commonwealth act. As per TR 98/1 of ATO there has been whole
process of making deductions, exemptions and calculation of assessable income of Jack
(Australian Taxation Law Library, 2017).
Income statement of Jack (June 2016)
PARTICULARS
AMOUNT
$
DEDUCTIO
N
AMOUNT
$
salary from America 250000 75000 175000
Revenue through rent 30000 3000 27000
allowable deduction of income -10000
Total income 192000
Less: Allowable deductible expenses
Club fees 600
registration fees deductible 2000
Total deductible expenses 2600
Add: Taxable expenses
tickets and accommodation 7000 1000 6000
3

relocation allowances 5000
tax advisor 2000
Course fee 1500
lawn moving fees 2000
Total taxable expenses 10500
Total Taxable income 199900
less: tax (45%) + 54547 144502
Assessable income 55398
ADD: Medicare Levy 2% 3840
ADD: Deficit Levy 2% 3840
Total income 63078
Interpretation:
As per the above calculation of Jack Jones's collection of income and the several
expenses he has made during these period. There have been various deductions awarded to him
as per laws and regulations set by ATO. He has gained $250,000 from Samsak from American
company where he did not make any payment for taxes. On his American income there has been
tax of $75000 which should be deducted while calculating the assessable income of him. Income
generated from rental property accounts for $30000 in which $3000 related to the next year's
financial year for the month of July (Australian Taxation Law: Legislation, 2017). Here the
calculation is done for the assessment year till June 2016, so the amount of $3000 will be
deducted from the income from rental property (O’Connell and et.al., 2016). There has been
allowable deduction over the income and expenditure of $10000 which will be deducted from the
income generated by Jack and would not be included in his assessable income.
There has been deductions over the expenses done by him like club feed registration fees
which will be exempted under section 8(1-10) of ITAA 1997. Taxable expenses will be added to
the assessable income calculations such as tickets and accommodation. This will come under
4

category of gifts and grants, so there will be $1000 of limit deduction allowed on this transaction
he has to include $6000 to taxable amount. Relocation amount has been paid by his employer of
America in context which his moving charges from Australia to America. This will be taxable as
well as fees paid to tax advisor of the course he has done for Certificate in Horticulture will also
be chargeable.
After the calculations of his total income there will be reduction of taxes on the rates of
45% because he came under the category of income slab of more than $180000. He will be
benefited with the Medicare levy of 2% as he has been denoted as an Australian resident. ATO
has made the rule to charge 2% of Medicare levy over the taxable income of its citizen in favour
of giving theme them the health and security care. After these there will be charged 2% of
Deficit Levy and which will bring the Taxable income of Jack Jones around $63078.
Conclusion:
As per the above case it can be concluded that there has been various expenses of income
gained by Jack Jones from American as well as Australian sources. Out of it some transactions
will be taxable and deductible. As per the norms and rules set by ATO of Federal Registrar of
Legislation. There have been fixed limits or categories for the deduction of any income and
expenses. Further, it can be said that there has been several deductions and which has brought the
taxable amount is being paid by him over the assessable income he has generated is around
$63078.
CONCLUSION
Conclusion can be made as per the above cases that Jack Jones was considered as
American resident and he has moved in Australia for the work purpose and has gain income by
working in Australian company. After spending more than 2 years in Australia he moved again
to America for work purpose and work for 9 months. The generated income moved to his
Australian bank which will be taxable before removing the taxes of American which he did not
make. Further it can be said as per rules set by ATO and Federal legislation in giving proper
taxation to its citizens. As per various acts and laws there has been benefits of deduction and
allowances that will help in lower down the taxation rates and has brought the final amount that
will be tax payable by him. Thus, there has been discussion made over the various taxation laws
and ruling which will be brought by Australian taxation officers.
5

REFERENCES
Books and Journals
Cao, L. and et.al., 2015. Understanding the economy-wide efficiency and incidence of major
Australian taxes. Treasury WP. 1.
Harris, P., 2013. Corporate tax law: Structure, policy and practice. Cambridge University Press.
O’Connell, B. and et.al., 2016. Does calibration reduce variability in the assessment of
accounting learning outcomes?. Assessment & Evaluation in Higher Education. 41(3).
pp.331-349.
Wilkins, R., 2014. Evaluating the Evidence on Income Inequality in Australia in the 2000s.
Economic Record. 90(288). pp.63-89.
Online
Australian Taxation Law: Legislation. 2017. [Online]. [Available through]
:<http://unimelb.libguides.com/australian_taxation_law/legislation>. [Accessed on 26th
September. 2017].
Australian Taxation Law Library. 2017. [Online]. [Available through]
:<http://www.austlii.edu.au/au/special/tax/>. [Accessed on 26th September. 2017].
6