Taxation Law: Case Study on Australian Taxation for Non-Residents

This document provides a comprehensive analysis of a taxation law case study involving a UK citizen, Sue, who worked in Australia for four months. The case study examines Sue's tax obligations, considering her residency status and income earned in Australia and the UK. It includes detailed tax calculations for both resident and non-resident scenarios, incorporating salary, deductions, and interest income. The solution also explores the tax implications for Sally, who sells items on eBay, determining whether her activities constitute a business subject to taxation. The analysis considers factors such as the nature of the items sold, the volume of sales, and the intention behind the sales, providing a clear conclusion on Sally's tax liability. The document uses Australian Taxation Office guidelines and other references to support its analysis and calculations.

TAXATION LAW
TAXATION LAW
NAME OF STUDENT
NAME OF UNIVERSITY

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1.a
Sue worked in Australia for four months as per the contract with BHP from 1st August 2018
to 30th November 2019. These are four months or around 120 days. Since she has resided in
Australia for less than 183 days (Australian Taxation Office,2018), she is classified as a
foreign resident for tax purposes. Foreign residents will only be taxed for incomes earned in
Australia. Sue, then will only be taxed on her salary of 120,000 AUD. The fringe benefit tax
of free housing will be paid by the employer.
b.
Tax calculations for Sue as a non-resident.
According to (Australian Taxation Office,2018), as a non-resident, only income earned in
Australia is taxable as per rates published
Salary in Australia 120 000,00
Salary deductions (3,200,00)
Taxable salary 116 800,00
Taxation schedule Tax
First 90 000@ 32,5c 29 250,00
Next 26 800@ 37c 9 916,00
Total Tax payable 39 166,00
Since Sue has already paid PAYG of 34,500 ,she still has a tax bill of 4,666.00
c
Tax calculations for Sue as a resident.
This will mean we have to include the income she has earned in UK. We will have to covert
the Euros to AUD at 1,59.
Income earned in UK
Income in UK
Amount in
EUR
Amount in
AUD
Interest on London bank
account 1 500,00 2 385,00
Salary earned in London 30 000,00 47 700,00
Total 31 500,00 50 085,00
Taxation table

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Taxable income
Salary earned Australia 120 000,00
Salary earned in UK 47 700,00
Interest earned in UK 2 385,00
Total income 170 085,00
Less ;deductions 3 200,00
Taxable income 166 885,00
Taxation
Band Taxation schedule Tax
18 200,00 First 18 2000 is charged at nil -
18 800,00
between 18201-37000 tax charged at
19c 3 572,00
53,000,00
between 37001-90000 tax charged at
32,5c 17 225,00
76 885,00
between 90001-170085 tax charged at
37c 28,447,85
Tax Payable 49,244,45
Medicare levy @2% of Taxable
income(166 885) 3 337,70
Total tax payable. 52,582,15
Since Sue has already paid PAYG of 34,500 ,she still has a tax bill of 18 082,15
2.
The conclusion is that Sally is not liable for business taxation because her business does not
fall in the category of making a profit from her venture.
Sally does the sales more as a hobby than a business. This is informed by that she is selling
unwanted items and that she did not buy the items with an intention of reselling them.
The amounts realised from the sales is way below UAD 12000 (Anon,2018). This amount is
not significant from the threshold set by the taxman on selling on e-bay. She sols AUD4200
of sale during the year.
The fact that setting an e-bay account was free means then that she is doing this as a hobby. If
she paid for the account, then we can conclude that indeed her intentions are not to be in
business.
Sally sold her items below cost price even if they were second hand. There is a possibility
that some items could fetch a higher price than they were bought for. This means that her
intention was not turn a profit.
She is selling items that are not normally sold in conventional stores. These would be new
items that have a ready market.

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Sally’s intention is more of a clear out of unwanted items rather than making a sale. She does
not do this on full time basis as she cannot make regular sales on the items.
Personal items may be like clothes and assorted house hold goods which may not fetch
significant prices as individual items.

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References.
Australia - Taxes on personal income. Australia - Taxes on personal income. Available
at: http://taxsummaries.pwc.com/ID/Australia-Individual-Taxes-on-personal-income
[Accessed April 24, 2019].
Australian Taxation Office, 2018. Individual income tax rates. Australian Taxation Office.
Available at: https://www.ato.gov.au/Rates/Individual-income-tax-rates
[Accessed April 24, 2019].
Australian Taxation Office, 2018. Residency - the resides test. Australian Taxation Office.
Available at: https://www.ato.gov.au/individuals/international-tax-for-individuals/in-
detail/residency/residency---the-resides-test/ [Accessed April 24, 2019].
Current Australian Income Tax Rates - Resident and Non-Resident. Exfin. Available at:
https://www.exfin.com/australian-tax-rates [Accessed April 24, 2019].
Do you have to pay tax on eBay sales? The ATO is watching. Hartigan Law | Tax Lawyer.
Available at: https://hartiganlaw.com.au/tax-audits-objections/do-i-have-to-pay-tax-on-
ebay-
sales/
SuperGuide, 2019. Income tax: Australian tax brackets and rates (2018/2019 and previous
years). SuperGuide. Available at: https://www.superguide.com.au/boost-your-
superannuation/income-tax-rates [Accessed April 24, 2019].