Determination Of Tax Liability Samples †MyAssignmenthelp.com

Question: Discuss about the Determination Of Tax Liability. Answer: The present scenario is associated with the issue of determining the status of residency for Jack Jones along with the determination of tax liability for the income derived in Australia. As evident from the current situation it is found that Jack holding a Canadian passport entered into Australia for work purpose. Jack additionally held the visa for Australia that allowed to work and visit in Australia. In order to understand the taxation situation it is necessary to work out the residential status to determine whether Jack was an Australian resident for taxation purpose. According to the Australian taxation office an individual entering in Australia for the purpose of work and living in a location and have taken steps of making Australia their home would be treated as the Australian resident for the purpose of taxation (Barkoczy, 2016). As defined under the Taxation ruling of TR 98/17, a person entering in Australia for the purpose of work and residing in Australia for more than six months having pre-arranged terms of employment contract would be considered as the resident of Australia (Saad, 2014). To understand the residential status of Jack Jones below listed are the three test that is performed; Residence according to the ordinary concepts Domicile test 183 days test Residency according to ordinary concepts: The principal assessment of ascertaining the status of residency for Jack is understanding the resides test. To effectively determine the residential status of Jack it is vital to take account of section 995-1 of the ITAA 1936 where an individual is considered to be an Australian resident (Woellner et al., 2016). From the current case study of Jack it assertion can be bought forward that he does not qualifies to be resident of Australia since he was not the resident of Australia under the ordinary concept of the work Resides. However, the period of physical presence is an important criteria in ascertaining the residential status (Robin, 2017). As held in the case of Miesegaes v. Commissioners of Inland Revenue (1957) person entering in Australia for the purpose of employment will be considered as the Australian resident given the stay is consistent for residing in Australia (Barkoczy et al., 2016). As evident from the current situation Jack will be considered as Australian resident because his physical presence and the length of stay has been long for more than half of the income year and reflects a degree of continuity which is consistent with residing in Australia. Domicile Test: The Taxation rulings of 2650 is associated with the determination of domicile an person residing in Australia for more than six months in the form of continuously or in breakdowns, they will be treated as Australian residents. As held in the case of Henderson v. Henderson (1965) the intention of an individual must be in the direction of making their home indeterminately (Tran-Nam, Walpole, 2016). Concerning the contemporary situation of Jack, an assertion can be bought forward that he has been occupant of Australian since he has been holding the work visa of Australia and has been living there since 2nd December 2012. Additionally, it was found that he went to work in Canada however after the period of nine months he decided to terminate the contract and return Australia to live for the rest of the income year. As held in the case of Federal Commissioner of Taxation v. Applegate (1979) the taxpayer having an Australian domicile was sent to establish branch office in New Hebrides however, the return of taxpayer to Australia would be treated as the Australian resident since the taxpayer had the permanent place of abode in Australia (James, 2016). In the present situation it can be stated that Jack will be treated as the Australian resident since he has been living in Australian an intended to make his place of residence indeterminately in Australia. 183 days test: The 183 days is considered to be another method of determining the residential status. The test is generally applied in those circumstances when the taxpayer has the physical presence in Australia for no less than one-half of the income year (Coleman Sadiq, 2013). Jack in the present context has been present in Australia for more than six months with clear intention of taking up the domicile in Australia. Therefore, in considering the above-defined test an assertion can be bought forward that Jack will be treated as the resident of Australia under the 183 days test. Computations of Assessable Income of Jack For the Year ended 30 June 2016 Particulars Reference Amount ($) Amount ($) Assessable Income Gross Salary Section 6-5 of the ITAA 1997 250000 Receipt of One off payment Section 6-5 of the ITAA 1997 100000 Australia Sourced Rental Income Section 6-5 of the ITAA 1997 30000 Receipt of Allowance Section 6-5 of the ITAA 1997 5000 Receipt of accommodation Section 6-5 of the ITAA 1997 7000 Receipt of Fees from Lawn Mowing Clients Section 6-5 of the ITAA 1997 2000 Total Assessable Income 394000 Allowable Deductions Membership fees Section 8-1 of the ITAA 1997 600 Allowable deductions as per income statement 10000 Tax Advice Fees Section 8-1 of the ITAA 1997 2000 Registration Fees Section 8-1 of the ITAA 1997 2000 Course fees for horticulture Section 8-1 of the ITAA 1997 1500 Total Allowable Deductions 16100 Total Taxable Income 377900 Tax on Taxable Income 143602 Medicare Levy 7558 Less: Foreign income tax offset 75000 Total Tax Payable 76160 As held in the case of FC of T v. Applegate (1979) residential status of Jack becomes the most vital part of imposing tax (Harris et al., 2013). The below stated are following assumptions of including and deductions the relevant transactions; Gross salary is regarded as the part of the assessable revenue of the taxpayer and it will be counted in the taxable return of the taxpayer under section 6-5 of the ITAA 1997. The one off payments and Australian source rental income are considered to be income in terms of the usual concepts and will be liable for tax under section 6-5 of the ITAA 1997 (Kenny et al., 2017). Jack will be able to claim allowable deductions in respect of section 6-5 of the ITAA 1997 in respect of membership fees and tax advice fees Jack will be able to claim allowable deductions for the expense incurred in horticulture under section 6-5 of the ITAA 1997. This is because the fees incurred is directly related to the income producing activities of the taxpayer (Kenny, 2013). References: Barkoczy, S. (2016). Foundations of Taxation Law 2016.OUP Catalogue. Barkoczy, S., Nethercott, L., Devos, K., Richardson, G. (2016).Foundations Student Tax Pack 3 2016. Oxford University Press Australia New Zealand. Coleman, C., Sadiq, K.Principles of taxation law (2013). Harris, J., Graw, S., Gilders, F., Kenny, P., Van der Waarden, N.(2013) Theory and law in the regulation of business. James, K. (2016). The Australian Taxation Office perspective on work-related travel expense deductions for academics.International Journal of Critical Accounting,8(5-6), 345-362. Kenny, P. (2013).Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths. Kenny, P., Blissenden, M., Villios, S.(2017) Australian tax. ROBIN, H. (2017).AUSTRALIAN TAXATION LAW 2017. OXFORD University Press. Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers view.Procedia-Social and Behavioral Sciences,109, 1069-1075. Tran-Nam, B., Walpole, M. (2016). Tax disputes, litigation costs and access to tax justice.eJournal of Tax Research,14(2), 319. Woellner, R. H., Barkoczy, S., Murphy, S., Evans, C., Pinto, D. (2016).Australian Taxation Law Select: Legislation and Commentary 2016. Oxford University Press.