Taxation assignment Essay Example

TAXATION ASSIGNMENT

Individual assignment

Taxation

Extent to which Isabelle is assessable

Personal taxation is to be applied in this case for the individual who is a resident of Australia. According to the Australian Income Tax Assessment Act 1997 states that assessable income is “that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident.” In this case, the tax will vary slightly from the individual who is a non-resident of Australia. The federal government of Australia is responsible for the determination of the taxation system and jurisdiction to be observed. The legislation contains a particular set of rules which are applied in the case where an individual is a resident.

According to Barkoczy, & Morabito, (2003), Isabelle in this situation is a citizen of United States of America but is currently in Australia for work. This will make her a resident in Australia. Thus, the taxation of a resident income and transactions is applied. It is done to avoid the risk of double taxation. Isabelle may be taxed in the United States and also in Australia. This has been solved by the government of Australia; it enters into a double tax agreement with the other countries to make sure that taxation is only done once on each entity or an individual.

Isabelle went for a month holiday in the Caribbean after being dismissed at the age of 49. This did not make her a non-resident of Australia since she never relocated back to the United States. The one-month holiday will be taken as a continuous stay in Australia since she went only went for a holiday. When she was back to the country, she acquired a small business, primary laboratories, which she later relocates the business to south Adelaide from north Adelaide. Isabelle also signed a lease agreement of 2 years for her residence in Adelaide. The income from the business will be taxed according to the taxation act of 1997. This will then be part of the assessable income of Isabelle.

The extent at which Isabelle is to be taxed is predetermined by the income that she receives while in Australia and any other source. Provided that the individual has been able to earn enough income that exceeds the tax-free threshold set by the Australian government. In this case, the taxable income will be the following:

  • Salary from general motors Detroit

  • Salary from general Motors Holden

  • Traveling allowance

  • Interest received from NAB bank account

  • Income from rented Detroit residence

  • Interest from Detroit Term Deposit Account

  • Income from primary blood laboratory

  • Income from unused leave remuneration

  • Genuine redundancy payment

The taxable income and tax payable in 2015/2016

The first taxable income for Isabelle is the salary. According to the Australia Tax Assessment Act 1997 section 36, the income of an individual who has spent more than six months as a resident of Australia is taxed (Barkoczy, & Morabito, 2003).

Isabelle has a salary from general Motors in Detroit and Holden

$ 10,000 + $ 25,000 = $ 35,000

Travel allowance is also taxed

Interest is also treated as income in the Australian taxation system.

Isabelle interest from NAB Bank Account is also taxed

Interest from Detroit Term Deposit Account

Rental income from any property overseas must be taxed according to the Australian taxation.

Rental income from Detroit residence is taxed.

Income from primary laboratories business is also taxed as part of the individual income.

A genuine redundancy payment is treated in a special way, unlike other payments. For the case of Isabelle, this is a genuine redundancy hence the calculation of the tax-free amount of genuine redundancy is as shown below.

Base amount + (service amount * years of service)

The base amount for 2015/2016 is $9,780

= $9,780 + ($ 4,891 * 2/12)

= $ 10,595

The taxable redundancy payment is $ 10,595

Unused annual leave will be taxed since it is a source of income to Isabelle

32% * $500 = $ 160

The tax withheld by General Motors Holden will be added to the total amount of taxes paid by the individual.

Salary PAYG $ 5,600

Genuine redundancy withholdings $ 1,840

The total taxable income for Isabelle is calculated from above is as shown below.

Total taxable income = $ 86,430

This amount exceeds the tax threshold. Hence, the following taxation will be applied. The individual taxation is done in a progressive way as opposed to those of companies.

Individual income taxation rates for financial year 2015/2016

$ 0 — $ 18,200

Nil tax payable

$ 18,201 — $ 37,000

19cents for each $1 over $18,200

$ 37,001 — $80,000

$3,572 + 32.5cents for each $1 over $37,000

$ 80,001 — $ 180,000

$17,547 + 37cents for each $1 over $80,000

$ 180,001 and over

$54,547 + 47cents for each $1 over $180,000

Tax on taxable income is

=$ 17,547 + {37/100 * $86,430 — $ 80,000)}

=$ 17,547 + $ 2,379

=$ 19,926

The tax payable for 2015/2016 financial year will be:

Tax on income + tax withheld

= $ 19,926 + ($ 5,600 + $ 1,840)

=$ 27,366

This is the amount that Isabelle will be subjected to pay in the end of the financial year ending 30th June, 2016.

Reference

Barkoczy, S. and Morabito, V., 2003. 2003 Core Tax Legislation and Study Guide. CCH Australia Ltd.

Barkoczy, S., Australian Tax Casebook, latest edition, CCH Australia.(b) Krever, R. Australian Taxation Law Cases.

Fisher, R.K., Hodgson, H. and Mortimer, C., 2013. Tax Questions and Answers 2013. Thomson Reuters (Professional) Australia Limited.

Tax, C.C.H., 2015. Australian Master Tax Guide 2015. CCH Australia.(b) Deutsch, RL, et al., Australian Tax Handbook.