Taxation Law: Detailed Analysis of PAYG, Partnership & GST Aspects

This assignment provides a detailed analysis of various aspects of Australian taxation law. It begins by explaining the purpose of the Pay As You Go (PAYG) system, differentiating between PAYG withholding and installments, and discussing its impact on income tax payable. The assignment then examines a case study involving a partnership agreement, highlighting potential issues and relevant provisions related to remuneration and interest payments. Furthermore, it includes a computation of Goods and Services Tax (GST) on various transactions, such as course fees, sales of businesses, and research grants, identifying GST-free supplies and taxable supplies. The document also analyzes the residency status of an individual working abroad and the applicability of foreign income tax offsets. Finally, it touches upon the implications of fringe benefits tax related to employee reimbursements for business travel. This document, contributed by a student, is available on Desklib, a platform offering AI-based study tools and solved assignments.

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By student name
Professor
University
Date: 25 April 2018.
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1.
Introduction:
Pay as you go (PAYG) portions is a framework for influencing standard installments towards your normal
end of year pay to assess risk.
Purpose:
These courses of action cover installments from work and under the Prescribed Payments framework and
the Reportable Payments framework. The PAYG framework includes general installments made by
businesses and different payers, for instance superannuation reserves. It is utilized to gather by portions
salary charge, HEL Prepayments, Medicare and different installments. PAYG adds up to be withheld are
resolved in view of the Australian Taxation Office (ATO) PAYG schedules (Alexander, 2016).
PAYG WITHHOLDING AND INSTALMENTS- DIFFERENCES
PAYG withholding (PAYG WH) and PAYG Income Tax Installments (PAYG ITI) are the two kinds of
duty. To clarify the contrast between them essentially, PAYG WH identifies with representatives' (and
others') pay charge while PAYG ITI identifies with your own pay impose (or that of your organization). L
PAYG Withholding
PAYG WH is for the most part charge withheld from representatives' pay rates or wages BUT it can
likewise be withheld from providers who have not given their Australian Business Number (ABN) to you
or from temporary workers with whom you've gone into willful assertions to withhold sums from your
installments to them (Belton, 2017).
PAYG Income Tax Installments
PAYG ITI are installments ahead of time for individual as well as organization salary imposes and are
paid by entrepreneurs, financial specialists and sub-contractual workers who procure a specific measure
of wage. Paying PAYG ITI helps you to meet your salary assess commitments by enabling you to make
installments ahead of time quarterly as opposed to making one single amount installment at year's end i.e.
this helps with income.
IMPACT OF PAYG ON INCOME TAX PAYABLE:
PAYG portions expect you to pay incremental sums towards your normal end of year pay charge risk.
PAYG Installments will just apply in the event that you acquire business or venture wage.
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A private venture works out the assessable wage for the year finished 30 June 2014 is $100,000.Company
pay impose on this is $30,000The organization has paid quarterly PAYG Installment of $2,000 per
quarter. The aggregate PAYG Installments is $8,000.On this premise, the adjust of the salary charge
payable when the arrival is held up is $22,000.Depending on when the wage government form is stopped,
the independent company should make a get up to speed PAYG Installment in that quarter.
2.
Facts of the case:
Adam Dispenser,who deals with a pharmaceutical physicist business wishes to buy the business.Due to
absence of assets he takes help of fiancee who consents to the terms offered by him.Accordingly, they are
to obtain business as equivalent accomplices and offer benefits and misfortunes similarly. Container will
get the compensation for proceeding to deal with the business and his life partner will get the intrigue
loaned to the organization (Bae, 2017).
Applicable Provisions:
1. An accomplice should not be qualified for any compensation other than an offer of any benefits.
2. 53B Partnership understanding
(1) There must constantly be a composed organization understanding between the accomplices in a joined
constrained association.
(2) The interests of the accomplices in a consolidated constrained organization and their rights and
obligations in connection to the association are, liable to this Act, to be resolved as per the understanding.
(3) An association understanding additionally has impact as an agreement between the joined constrained
organization and each accomplice under which the association and every one of the accomplices consent
to watch and play out the assertion so far as it applies to them.
3. An 'association pay' isn't really a compensation, nor is it a cost of the organization, however rather is a
dissemination of organization benefits to the beneficiary accomplice. Along these lines, the installment of
an 'organization pay' to an accomplice, regardless of whether for individual administrations gave by the
accomplice, isn't considered as a permissible conclusion under segment 8-1 of the Income Tax
Assessment Act 1997 (the ITAA 1997)
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4. premium costs from an obtaining to support reimbursement of cash initially progressed by an
accomplice, and utilized as organization capital, will be assess deductible. This is canvassed in charge
administering TR 95/25
Analysis:
1. An accomplice might not be qualified for any compensation other than an offer of any benefits, though
Mr. Adam Dispenser is getting the same.
2. There is no composed Partnership Agreement made between Mr. Adam Dispenser and the Financee
(Boccia & Leonardi, 2016).
3.Verbal assertions are contracts despite the fact that they were not memorialized in a written work.
Accepting that the agreement is legitimate, the verbal assertion between two gatherings is binding .But if
there should arise an occurrence of any inconsistencies between the gatherings, the court may need to
figure another agreement. This may prompt certain intricacies.
4. Installment of Remuneration to Mr Adam Dispenser will pull in assess hands of firm.
5. Installment of Interest to the financee notwithstanding, will be deductible in the hands of the firm.
Conclusion:
Subsequently, it is fitting to draft a composed understanding so as to proceed with the settled upon terms
and claim the tax assessment benefits. Since installment of Remuneration well beyond the dispersed
benefits isn't a permissible use in the hands of firm,it will draw in assess risk to the firm.Hence,it is fitting
for Mr Adam Dispenser to stop getting the same.However, Interest payable is permitted as finding so the
financee can keep accepting the same.
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3.
COMPUTATION OF GST INCLUDED IN THE FOLLOWING:
PARTICULARS GST AMOUNT
(a) A residential course, offered by a regional university, leading to
a Diploma of Management. The course cost is $5000 comprising $3000 for
course fees and $2000 for accommodation and meals.
(NOTE 1)
COURSE FEE=NIL
ACCOMODATION &
MEALS= $181.82
(b) The sale for $33000, of a milk run.(NOTE 2) NIL
(c) Purchase for $5000, of a photocopier for use in an accounting
practice.
$454.55
($5000*1/11)
(d) Chiropractic fees of $110. (NOTE 3) NIL
(e) Payment of private health insurance premiums of $2000.
(NOTE 3)
NIL
(f) Family day care payments of $22/day in respect of three-year
old child, both parents of whom work. (NOTE 3)
NIL
(g) Goods worth $77000 sold to a manufacturer in Japan
(NOTE 3)
NIL
(h) Food valued at $4400 provided my meals on wheels to elderly
people. (NOTE 3)
NIL
(i) Supply of water valued at $660m by a local water supply
authority. (NOTE 3)
NIL
(j) A grant of $1m received by a university from a drug company to
be spent on cancer research and the university is required to report its finding
to the drug company six months before public release of the findings.(NOTE
$90909
($1000000*1/11)
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4)
NOTE 1: Any course directed by ANU (counting short courses) will be liable to GST except if they are
particularly characterized under the GST Act as a sans gst instruction course. Without GST training
courses include:
• Certain Adult and Community Education (ACE) course
• a Tertiary course (counting Masters or Doctoral Courses;)
• English Language Courses for abroad understudies;
• First Aid and Life Saving Courses (Clarke, 2013);
• A auxiliary course;
• A expert or exchange course
Hence a private course, offered by a territorial college, prompting a Diploma of Management is GST free
Education Course adding up to $3000
GST should be leviable on Accomodation and Meals adding up to $2000. In this manner
GST=1/11*$2000=$181.82
NOTE 2:Accepting the required conditions are satisfied, offer of sale of business as going concern adding
up to $33000 is GST free.
NOTE 3: Certain Supplies, for example, Chiropractic charges, Payment of private medical coverage
premiums of $2000, Family day mind installments of $22/day in regard of three-year old youngster, the
two guardians of whom work, Food esteemed at $4400 gave my dinners on wheels to elderly people,
Supply of water esteemed at $660m by a nearby water supply specialist. is GST Free. Similarly, Offer of
Goods to a maker in Japan is additionally not leviable to GST (Choy, 2018)
NOTE 4:Money spent on a Cancer Research is GST Free however the college is required to give a report
of discoveries, an assessable administration is provided for a thought and consequently GST of $90,909
(i.e. 1/11 x $1,000,000) is payable.
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4 ) Facts of the case:
Bob, a technician from NSW left australia amid first june of the present pay year with the end goal of
work in Saudi Arabia. He went to cyprus to sign the agreement of employment.One of the arrangements
in the agreement expressed that the work was to be done from saudi arabia and the installment was
likewise to be made there itself.No saudi assessment was payable yet since he had marked an agreement
in cyprus , a pay duty of 5% was payable to that nation (Visinescu, Jones, & Sidorova, 2017).
Applicabiity:
Subsection 6(1) of the Act defines a "resident" and "resident of Australia" for the purposes ofthe Act. By
that definition, the primary consideration in determining residency status is whether aperson "resides" in
Australia within the ordinary meaning of that word.. So far as the definition is pertinent to Australians
incidentally living abroad, it incorporates as a "Resident" a person :
(a)whose habitation is in Australia, except if the Commissioner is fulfilled that the individual's lasting
spot of house outside Australia; or
(b)who is a qualified representative for the reasons for the Superannuation Act 1976 or is the companion
or a youngster under 16 years old of such a man (Gooley, 2016).
In the event that person is really present in Australia for the greater part the wage year, regardless of
whether ceaselessly or discontinuously, might be said to have a helpful habitation in Australia except if it
can be set up that:
• normal place of habitation outside Australia
• have no aim to take up living arrangement in Australia.
Analysis:
In this way in the present year, since Bob has remained in australia for a time of over 183 days ie, from
first July to 31st May he should be considered as an inhabitant of australia. Further, from the following
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year since he has wanted to labor for nine months in Saudi Arabia he might hold the status of a non
inhabitant.
Since Bob has assessable wage from abroad, he should pronounce it in his Australian pay government
form. As he has paid remote duty in another nation, he might be qualified for an Australian outside pay
charge counterbalance, which gives help from twofold tax collection.
To be qualified for an outside wage assess balance:
• he must have really paid, or be regarded to have paid, a measure of remote salary charge
• the pay or pick up on which he paid remote pay charge must be incorporated into his assessable
wage for Australian salary impose purposes (Saeidi, 2012).
Conclusion:
Hence for the present year Bob might be considered as an occupant of Australia. For the following year
he might be considered as Non Resident gave every one of the conditions are satisfied.
5.
Facts of the case:
B Tighte is a business who as opposed to giving her salesmen engine vehicles repays them on a "per
kilometer" reason for business travel. A companion has disclosed to her this is a cost installment
incidental advantage.
Applicability:
A representative's entitlement to utilize an auto for private purposes constitutes an auto incidental
advantage under the Fringe Benefits Tax Assessment Act 1986 (FBTAA). Where a representative is
qualified for utilize an engine vehicle other than an auto, this offers ascend to a lingering advantage under
that Act.
The rates to be connected where the cents per kilometer premise is utilized for the Fringe Benefit Tax
(FBT) year initiating on 1 April 2018 are:
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Motor capacity Rate per kilometer
0 - 2500cc : 54 cents
More than 2500cc : 65 cents
Motorcycles : 16 cents
Under the cents per kilometer strategy:
• claim upto greatest of 5,000 business kilometers for every car
• no requirement of composed confirmation to demonstrate kilometers voyaged, however
estimations as to working of business kilometers might be inquired.
• no isolate guarantee for deterioration of the car's esteem can be made.
In this way to utilize the cents per kilometer technique, assert depends on a set rate for every business
kilometer travelled.To work out claim, multiply:
• the add up to business kilometers you voyaged
• the number of cents per kilometer (Sithole, Chandler, Abeysekera, & Paas, 2017).
This consider brings with account all vehicle running costs.
Analysis:
The cost brought about on Reimbursement on per kilometers premise is qualified for Fringe Benefits in
the hands of B Tighte upto 5000 business kilometers for every auto in light of the appropriate rates said
above. Anyway she won't be qualified to guarantee any devaluation towards that car.
Conclusion:
Accordingly the dispute of B Tighte's companion that B Tighte is qualified for Fringe Benefit on
Reimbursements made in per kilometers premise is Correct.
6. COMPUTATION OF THE INCOME OF THE TRUST:-
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Net income from trading activities $60,000
Interest income $20,000
Rent Income $50,000
Gross total Income $1,30,000
Less: Expenses
Interest pai Interest Paid on money borrowed to Invest $35,000
Expenses incurred in earning rent income $15,000
Net Income $80,000
Salary income of Neville(Major) $5000
Interest income of Dianne from govt bonds(Minor) $1000
Net Total Income of trust $86,000
Notes
1. Income of the trust domain to which a minor recipient, who is an endorsed individual, is by and by
entitled, is qualified salary but to the degree that the pay can be named excepted pay for the recipient.
Qualified pay is liable to higher assessment rates, in addition to the Medicare demand in the hands of
both the trustee and the recipient. The recipient will get a credit for the assessment paid by the trustee.
7. COMPUTATION OF TAXABLE VALUE OF FRINGE BENEFITS IN THE HANDS OF
EMPLOYER :--
PARTICULARS AMOUNT OF
FRINGE
BENEFIT
(a) A retailer who purchases a microwave oven$350 and sells it under a staff
discount scheme to an employee $400 when the usual selling price to the public is $600.
$50
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(NOTE 1)
(b) A furniture manufacturer who sells furniture to an employee for $1200
when the usual selling price is $1800.(NOTE 2)
$150
(c) An employee who uses an employee welding equipment extensively over a
two month period when the loss of hiring equipment would have been $1000 and the
employer’s out of pocket expenses were $150.(NOTE 3)
NOTE 1:
The assessable esteem is 75% of the most minimal offering value you charge people in general:
• in the normal course of business
• at or about the time you give the advantage
• lessened by any worker commitment
Hence estimation of (75% of 600) – 400 = $ 50
NOTE 2:
Value of Perquisite is($1800-$1200) $600 chargeable at rate of 25%, hence estimation of FBT is 25% of
$ 600 = $150
NOTE 3:
Deduction as for Depreciation on Welding Equipment isn't accessible if the gear is provided by the
employer.
8. Computation of Taxable Income of Arthur and Martha:-
Particulars
Australian
source
Non Australian
Source Total
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Assessable income 50000 10000 60000
Deductions:
Purchases (s.8-1) 8000 2400 10400
Rates (s.8-1) 350 0 350
Business insurance (s.8-1) 1210 0 1210
Other expenses (s.8-1) 40 600 640
Ex-Australia import duties 0 240 240
Improvements to premises (Div 43)
$2,000 x 2.5% x 6/12 25 0 25
Total 9625 3240 12865
Income of partnership
Australian Source 40375 40375
Non Australian Source 6760 6760
Total net income of partnership 47135
Arthur’s assessable income 20187.5 3380 23567.5
(assuming he is a resident)
Martha’s assessable income 20187.5 0 20187.5
(assuming she is a non resident)
If Martha's daughter aged 14 is also a partner,
Arthur’s assessable income
$47,135 x 1/3 15,711.67
Martha’s assessable income
$40,375 x 1/3 13,458.33
Martha’s daughter (minor) assessable income
$47,135 x 1/3 15,711.67
Note 1: Statement to be specified:
Presence of a Partnership relies upon certainties, for example, :
- whether isolate bank account is opened
- whether property is gained in accomplice's name
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- whether clients, providers, and so on know that they are managing an organization containing X,Y,Z
-Whether accomplices go about as specialists for each other
- Whether accomplices are sharing benefits and misfortunes
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References
Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-
431.
Bae, S. (2017). The Association Between Corporate Tax Avoidance And Audit Efforts: Evidence From
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Boccia, F., & Leonardi, R. (2016). The Challenge of the Digital Economy: Markets, Taxation and
Appropriate Economic Models. Springer.
Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview
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Clarke, J. (2013). Australian Contract Law. Retrieved August 8th, 2016, from Australiancontractlaw.com.
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Visinescu, L., Jones, M., & Sidorova, A. (2017). Improving Decision Quality: The Role of Business
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