Discuss about the Taxation for Public Economics Legislation .
As per the case study that has been provided, it can be said that Juliette had already made an agreement with a theatre company of America. The motive of Juliette behind making this particular contract with the specified theatre company of America was to give her service for two years in Australia, commencing from March 15th in the year 2015 till March 15th in the year 2017. It has been found that Juliette had visited the country Australia for the very first time on 1st of February in the year 2015 with a plan to stare about the nation and also to go for a trip by bus for two months. Nevertheless, as per the case study, Juliette had a plan to go again to England on February 28th in the year 2015.
However, it has been found that Juliette again came back to the particular country on May 1st in the year 2015. It has been noted that the intention of Juliette was to settle for long two years in Australia according to the contract. Thus, Juliette took lease and also bought furniture with the aim to lead her regular livelihood. In the month of August in the year 2015, Juliette bought a house for the purpose of living in Australia and she was married to a male resident of Australia on 1st of September in the year 2015.
Moreover, Juliette returned to England on 15th October in the year 2015 and again come back to Australia on April 15th in the year 2016 with the aim to live in Australia for her life time.
Juliette had received expenses from the company semi yearly that started from 15th of July in the year 2015.
It has been found that under the section of “Taxation Ruling TR 98/ 17: Income Tax”: The residency category of an individual who are the non-residents of Australia and who also enters Australia, have to wear out the ensuing mentioned residential examinations for the purpose of taxation (Laidlaw et al., 2014). The residential tests for the purpose of taxation are as follows:
183 Day Examination
The Reside Test
The Superannuation Test
The Domicile Test (“Work out your tax residency | Australian Taxation Office”, 2016).
In order to get the residential position of Juliette on behalf of the year 2014-2015, some actions of Juliette have been scrutinized below under the already highlighted residential examinations. The results of the residential tests are as follows:
The Domicile Test
By operation of law, Juliette was not attached to Australia (Trakman, 2015).
By choice, Juliette did not tend to stay or live in the particular country in the specified period of time (“Residency – the domicile test | Australian Taxation Office”, 2016).
Lastly, by birth, Juliette was a British.
The Reside Test
It has been found that during the time period of duty year 2014-2015, Juliette intended to roam round the country Australia.
The mother of Juliette, who was the closest member of her family, stayed in England, in addition to this she does not has any tie-up regarding family in Australia (Barkoczy, 2016).
During the vacation in the fiscal duration 2014-2015, Juliette does not has any type of tie-up regarding business, as the agreement of Juliette was about to begin from 15th of March in the year 2015 (“Residency – the resides test | Australian Taxation Office”, 2016).
It has been found that Juliette does not have a fixed place for staying in Australia in this particular period.
As Juliette was travelling to various places within the particular nation, she does not follow any particular daily routine life at this time period.
183 Days Test
Juliette was a real resident of England.
It has been found that Juliette has lived in the country for only 28 days in this particular period of time (“Residency – the 183 day test | Australian Taxation Office”, 2016).
Superannuation Test
It has been found that the employers of Juliette were American. Thus, it can be said that Juliette was not under the scheme of superannuation.
In addition to this, Juliette did not receive any payment from the specified country at this specified period of time (Butler, 2013).
Therefore, it can be said from the outcome of the highlighted examinations that Juliette might not be measured as a resident of Australia for the particular fiscal time period 2014-2015.
The residential tests have been conducted once more in order to identify the residential position of Juliette in favor of the fiscal time period 2015-2016. The effects of the residential tests are as follows:
The Domicile Test
By operation law, Juliette got married to a male resident of Australia (Woellner et al., 2016).
By choice, Juliette tends to live in Australia for life long
By birth, Juliette is an individual from Britain.
The Reside Test
It has been found that during the time period of 2014-2015, Juliette intended to live in the country for long two years primarily and after the wedding of Juliette, she planned to live in Australia forever.
The mother of Juliette, who was the closest member of her family passed away in the particular time period. Thus, the husband became the closest member of her family after her mother’s death and her husband is a male resident of Australia (by birth Australian) and also lives in Australia (Auerbach et al., 2013).
During the vacation in the fiscal time period 2014-2015, Juliette had a tie-up regarding business in Australia.
In addition to these, Juliette took a house for staying in Australia for two years. She took the house in lease and afterward, she bought a house for staying in Australia permanently.
During the stay of Juliette in Australia during the taxation period 2015-2016, she maintained a scheduled living.
183 Days Test
Juliette is an actual resident of England, however, in this particular year; she purchased a house in Australia with the aim to stay in Australia forever (Long, Campbell & Kelshaw, 2016).
The calculation of total numbers of days when Juliette resided in Australia are as follows:
|
Period |
No. of Days in Australia |
No. of Days in England |
|
July 1st 2015 – October 15th October 2015 |
107 |
0 |
|
October 16th 20’15 – April 14th 2016 |
0 |
181 |
|
April 15th 2016 – June 30th 2016 |
76 |
0 |
|
TOTAL No. of DAYS |
183 |
181 |
Superannuation Test
It has been found that the employers of Juliette were American, thus, she was not considered under the scheme of superannuation.
It has been noted that it was not mentioned that if Juliette and husband were component of scheme of superannuation or not (Ingles & Stewart, 2015).
Therefore, it can be said that Juliette had passed most of the examinations except the test of superannuation. Thus, as per the section 6, subsection (1) of ITA (Income Tax Assessment Act) of the year 1936, Juliette can be accepted as a resident of Australia for the purpose of taxation in the time period 2015-2016 (Tanzi, 2014).
|
Taxpayee : Mr.George |
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|
Statement of Taxable Income from Rental Property:- |
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For the period ending on 30th June,2016 |
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|
Particulars |
Amount |
Amount |
|
Assessable Income: |
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|
Property rent |
13900 |
|
|
Total Income from Rental Property |
|
13900 |
|
Deductible Expenses: |
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|
Agent Commission |
695 |
|
|
Maintenance and Repairs |
6000 |
|
|
Front Fence Repainting |
2500 |
|
|
Fixing of front door |
1000 |
|
|
Deduction of Capital Work : |
||
|
Replacement of Damaged Roofs |
15000 |
|
|
Rate of Deduction |
2.5% p.a. |
|
|
Capital Work Deduction |
219 |
|
|
Assets Depreciation |
1019 |
|
|
Total Expenses of Deduction |
|
11433 |
|
Net Income from Rental Property |
|
2467 |
|
Calculation of Depreciation:- |
|||||
|
Items |
Cost |
Effective Life |
Depreciation Rate p.a. |
Useful Days |
Depreciation |
|
Hot Water Service |
2000 |
12 |
100% |
365 |
167 |
|
Carpets |
3500 |
10 |
100% |
365 |
350 |
|
Existing Furniture & Fittings |
5000 |
13.33 |
100% |
365 |
375 |
|
New Furniture & Fittings |
1200 |
13.33 |
100% |
213 |
53 |
|
Stove |
900 |
12 |
100% |
365 |
75 |
|
Total Depreciation |
|
|
|
|
1019 |
The proceeds derived from rent for George intended for the purpose of taxation is mainly calculated on the basis of subsequent assumptions along with the rules of taxation:
As per the case study, George is considered as a resident of Australia for the purpose of taxation in the fiscal time period 2015-2016.
It has been found that George had innate property. It has also been found that following inheriting it, he utilized the same property for producing income over two years (“Inheriting a dwelling | Australian Taxation Office”, 2016). Thus, George was not able to claim any exemption on the rental earnings.
The rental earnings are developed from that property, which is located in the country Australia (“Investment income | Australian Taxation Office”, 2016). Thus, it might be counted as the fully taxable earnings.
The agent commission is rewarded for developing the rental earnings from the particular property. Thus, as per Section 8.1 of ITAA for the year 1997, this might be measured as a deductable amount or expense from the proceeds derived from rent (“Rental property expenses | Australian Taxation Office”, 2016).
The common repairs are supposed to be ended for tear and wear and further compensations. It have been occurred for renting out the specified property (“Rental properties – claiming repairs and maintenance expenses | Australian Taxation Office”, 2016). The upholding has been prepared to maintain the particular assets in a situation of providing rent. Based on these assumptions, the general expenses of maintenance and repairs are considered as a deductable expense.
It has been found that replacement of the broken roof is a considerable development of the said property. Thus, it ought to be counted as the capital expenditure. Therefore, for this expense, it has been found that 2.5 % of whole amount of expenditure has been involved in the deductable expenses (“Rental properties – claiming capital works deductions | Australian Taxation Office”, 2016). Thus, George is able to enjoy such deductions for upcoming 40 years according to the Section 40, under sub-section (I) of ITAA for the year 1997.
As per Section 26 of ITAA 1997, the procurement of new fittings and furniture are not considered as the repair and maintenance expenses. The new fittings and furniture are counted as property, whereas, George is allowed to reduce the total amount of depreciation on these possessions from the proceeds derived from rent in the present year (Creedy & Gemmell, 2015).
Additionally, the repairing of fences and the fixing of broken doors are the expenditures that are occurred with the aim to keep the assets in a condition of providing rent and therefore, it is treated as a deductible expenditure according to the Section 40 (G) of ITAA of the year 1997.
It has been presumed that all the properties rather than the new fittings and furniture are bought after or on July 1st in the year 2004. Thus, as George trails the method of prime-cost for the depreciation, the total possessions are deflated at 100 % (“Rental property expenses | Australian Taxation Office”, 2016). This also involves the new possessions according to the Section 40 (B) of ITAA of the year 1997.
Therefore, after the calculation of the total proceeds derived from rent of an amount of $13900. On the other hand, the total deductable amount of $11433 according to the mentioned assumptions along with the rules of taxation, the net measurable earnings of George for the fiscal time period is equivalent to an amount of $2467.
References
Auerbach, A. J., Chetty, R., Feldstein, M., & Saez, E. (Eds.). (2013).Handbook of public economics (Vol. 5). Newnes.
Barkoczy, S. (2016). Core tax legislation and study guide. OUP Catalogue.
Butler, D. (2013). Superanuation: Excess contributions tax. Taxation in Australia, 47(7), 450.
Creedy, J., & Gemmell, N. (2015). TAXATION AND THE USER COST OF CAPITAL. Journal of Economic Surveys.
Ingles, D., & Stewart, M. (2015). Superannuation tax concessions and the age pension: a principled approach to savings taxation. Tax and Transfer Policy Institute-Working Paper, 7.
Inheriting a dwelling | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Gifts,-inheritances-and-deceased-estates/Inheriting-a-dwelling/
Investment income | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/individuals/income-and-deductions/income-you-must-declare/investment-income/#Rent1
Laidlaw, M. A. S., Zahran, S., Pingitore, N., Clague, J., Devlin, G., & Taylor, M. P. (2014). Identification of lead sources in residential environments: Sydney Australia. Environmental Pollution, 184, 238-246.
Long, B., Campbell, J., & Kelshaw, C. (2016). The justice lens on taxation policy in Australia. St Mark’s Review, (235), 94.
Rental properties – claiming capital works deductions | Australian Taxation Office. (2016).Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties—claiming-capital-works-deductions/
Rental properties – claiming repairs and maintenance expenses | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties—claiming-repairs-and-maintenance-expenses/
Rental property expenses | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/individuals/income-and-deductions/in-detail/investments,-including-rental-properties/rental-property-expenses/
Rental property expenses | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/individuals/income-and-deductions/in-detail/investments,-including-rental-properties/rental-property-expenses/?page=3#Deduction_for_decline_in_value_of_depreciating_assets
Residency – the 183 day test | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Residency/Residency—the-183-day-test/
Residency – the domicile test | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Residency/Residency—the-domicile-test/
Residency – the resides test | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/residency/residency—the-resides-test/
Tanzi, V. (2014). Inflation, indexation and interest income taxation. PSL Quarterly Review, 29(116).
Trakman, L. (2015). Domicile of choice in English law: an Achilles heel?.Journal of Private International Law, 11(2), 317-343.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016).Australian Taxation Law 2016. Oxford University Press.
Work out your tax residency | Australian Taxation Office. (2016). Ato.gov.au. Retrieved 11 August 2016, from https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/#ExampleAustralianResident
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