• Internal Code :
  • Subject Code : HI6028
  • University : Holmes Institute
  • Subject Name : Taxation Law

Week 1

Different Functions of Taxation

Taxes are described as contributions by donors to budget and extra-budget funds in set sums within a normal and specified time period.

The tax purpose is an abstraction of its essence, the tax feature outlines its social goals of value-based allocation and income redistribution. Any step taken by the taxing machinery is an indication of the essence or group of such internal features, indices or economy.

Taxation have five basic functions including, fiscal, regulating, redistributor, controlling and promoting function for whole country.

Fiscal one, is the main function of taxation within the country. For the purpose of formation of budget within the country taxation have basic role in preparation and providing powerful source of funds. Stat and national programs are based on fiscal policies of the countries(Kouparitsas, Prihardini, & Beames, 2016).

Distribution of social income and its redistribution through allocation is the second most important function of taxation. Based on specialized and centralized instrument of allocation tax income targets to reach at lower level of country.

Regulatory function consists of creating active part in economic set up by stimulating (developing socio-economic indicators), dissimulating (inhabits socio-economic process by conscious aggregation of burden of taxation), and regeneration (replication) by taxing through utilizing natural resource, primary resources, roads, minerals, in order to create the exploitation of resources(Shamsabadi, Min, & Chung, 2016).

Control of juridical and natural personals activities related to financial economics could be handles through controlling function. Controlling function of taxation, focus on the controlling of income sources and directions of spending upon national level.

For certain population of the country incentive function works on special arrangements of taxation, for those who are social participants like achievers in wars, through this function nation contributes towards social facet.

Simply taxation have responsibility of circulating money from upper class to middle class and lower middle class of the country to keep the balancing within the country, taxation system always tried to upgrade lower areas of the country.

Week 2

Residential Test for Australian Tax Office

There are several specific assessments used by ATO to determine whether a person is an Australian tax citizen. This criterion includes:

The resides test: It is the most significant measure of tax citizenship. This test a range of criteria to decide whether you live in Australia and are also tax-resident. This test takes account of whether you are present in Australia, whether you are establishing a bank account, your family and business relationships, and your social arrangements and lifestyles as an account (these conditions are fulfilled by Amandeep’s family).

If the 'residence' test is not passed, one of the following testing must be completed to be regarded as a resident for taxation purposes(Thuronyi & Brooks, 2016):

Domicile test: You would be counted as an Australian tax citizen if your residency (your primary home) is in Australia.

Test for 183 days: You must be in Australia with a minimum income of half a year, whether continuously or with ruptures, to complete this test (Mr. Amandeep lived most of the time in New Zealand but he is an employee of Australian company and received pay from Sydney office). His family live in Sydney, even he has bank account in same city.

Superannuation test. This check guarantees that Australian government workers in Australian jobs who are serving in foreign countries are counted as Australian tax residents (Amandeep lays under this condition).Even having Indian passport dividend received from Hindustan Uniliver would be taxedin Australia (ATO Rules)along his holiday package is taxable under ATO rules.

Temporary residence: You become legally resident because you receive a provisional visa and you or your partner is not an Australian national under the 1991 Social Security Act (i.e. not an Australian citizen or permanent resident). And only while you are a temporary citizen in Australia can you report your salary and any wages you obtain from overseas employment or services (Amandeep does not fell under temporary residence, even he has family and kids in Australia).

Taxpayers with conditional visas are nationals, much of your international income does not derive in Australia and you do not mention it in your tax return in Australia.

You simply define Australia's income plus any money you receive from work outside Australia during your temporary residency. A permanent residence has to pay taxes on all source of his/her earnings within the country or outside the country.

Week 3

Tax Treatment of This Payment for Gary

Repair and maintenance could be fully claimed and deducted those were incurred in same year. But under the case of recovering this amount from tenant, this recovery amount may be included in revenue and then deducted actual expenses from deductions as business expense or repairing expenses. Spending full amount recovered from tenant would be clearer to treat on income side and then expense out as it is, according to the rules defined by Australian Tax Office (ATO).

Condition must be fulfilled to claim this type of benefits as expenses directly related to damages or wear and tear as a result of property renting, renting that property for ongoing basis, remaining available for rent even closed for short while in search of suitable tenant(Braithwaite & Reinhart, 2019).

Australian Tax Office (ATO) recommends tax deductions off setting against the cost of rental property might not always be claimed in same tax year. Under some cases, it could not be claimed until the sale of property.

Expenses for repair are completely deductible under ATO rules but expense for business expenses are capital expenses which could be divided upon several years on the basis of benefit of business assets. Normally two types of repair and maintenance are deductible, including revenue expenditure within the year and capital expenditure over several years of capital source’s life.

Week 4

Assessability And/or Deductibility

Legal expenses on false advertising: Legal expense incurred on case false advertising are not deductible as tax claim at all. False advertising mean that business have any illegal activity and it have to face legal circumstances on his misleading or false act. Business strongly prevent these types of actions in any case all over the world(Dootson & Suzor, 2015).

Purchasing a fridge and expending on shop front: Generally, this is capital expenditure, and capital expenditures are not to treat whole amount in single tax year. Its treatment reflects over time on the basis of deprivation or decline in value of asset(Murphy, 2019).

Business might be able to claim for deductions on expenses related to work, for the purpose of earning income as a result of sale. Under this case, money must be spent, it must be directly related to the earning and it must have recording evidence like purchase receipt. Under this case business spent $1500 for marketing purpose are tax deductible expense.

City of Sydney fine: Fine imposed on breach of Australian law is non-deductible (Sec 26-5, ITAA 1997). Fines related to spreading fines on travel related to work, failing lodge tax return, false and misleading statement to ATO and paid penalties, parking fines, fine for breaching work safe laws, any type of business law related to misleading, breaching environmental or health laws

Week 5

Prime Cost and Diminishing Value Methods

Prime cost method (PCM):

Asset’s cost * (Days held / 365) * Depreciation rate (100/ effective life of asset)

Purchasing cost for CNC machine: $110000

PCM = 110000 * (92/365) * 14.29%

Cost for current year under PMC = $3962.04 (chargeable value till 31 Dec.)

Cost for whole year= 110000 * 365/365 * 14.29% = $15719

Cost of Holden car: $63000

Cost to charge for current year till 31 Dec. (PCM) = 63000 * (240/365) * 20%

= $8284.93

Chargeable cost for whole year = $12600

Calculations for Diminishing Balance Method (DBM) CNC Machine:

=Base value * (Days held/ 365) * (200% / effective life)

= 110000 * (92 /365) * (200% / 7)

= $7921.32

Cost for whole year = $31428.57

Calculation for DBM for Holden car:

= 63000 * (240 / 365) * (200/5)

= $16569

Chargeable Cost for whole year = $25200

Value for depreciation or chargeable value for expense is higher is diminishing balance method as compare to straight line method, because rate of depreciation is higher at initial stage under diminishing balance method.

References

Braithwaite, V., & Reinhart, M. (2019). The Taxpayers' Charter: Does the Australian Tax Office comply and who benefits? : Centre for Tax System Integrity (CTSI), Research School of Social Sciences ….

Dootson, P., & Suzor, N. (2015). The game of clones and the Australia tax: divergent views about copyright business models and the willingness of Australian consumers to infringe. UNSWLJ, 38, 206.

Kouparitsas, M., Prihardini, D., & Beames, A. (2016). Analysis of the long term effects of a company tax cut (1925220990). Retrieved from

Murphy, K. (2019). Moving towards a more effective model of regulatory enforcement in the Australian Taxation Office: Centre for Tax System Integrity (CTSI), Research School of Social Sciences ….

Shamsabadi, H. A., Min, B.-S., & Chung, R. (2016). Corporate governance and dividend strategy: lessons from Australia. International Journal of Managerial Finance.

Thuronyi, V., & Brooks, K. (2016). Comparative tax law: Kluwer Law International BV.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Taxation Law Assignment Help

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