Taxation Law Is The Practice Of Levying Essay

Question:

Discuss About The Taxation Law Is The Practice Of Levying?

Answer:

Introduction

Taxation law is the practice of levying and imposing taxes on any type of income comes under the income tax law of any country. It is not only directly levied on the income of any individual, entity or group of individuals, but it is also levied indirectly on the goods and services whether may be imported or produced within the domestic boundary. In this study, it has been aimed to explain the taxation system of Australia with the help of two different case scenarios, where in the first scenario tax liability of an individual will be determined and in the second scenario assessable income of an individual will be explained.

In this case reference, it has been found that Robyn transfer her half of the salary in the Australian bank accounting and rest in the Indian bank account. She worked as a lecturer with Victoria university in the college of business and on 14 January 2017, she had shown her interest in lectureship in Calcutta university after Jason Holm. Since she predicted that the role of coordinator in Calcutta university is long and she then decided to stay in this position as along as she wishes. Thus, Victoria University owned a flat to her for her residence in Calcutta till her role as a coordinator[1]. However, she rented her own flat for the period of 12 months, which was mortgaged in Melbourne to earn extra income and that income is directly transferred to her Australian bank account.

With reference to the issue, the valid and argumentative question arises here, whether Robyn be taxed on any part of her income either on the account of earnings as coordinator in Calcutta University or as a lecturer in Victoria University for the taxation year 2016-2017.

According to the Australian taxation law, an individual is considered to be an Australian resident for tax purpose. However, the same law attracts in India as well, but in India, foreign resident must live in the country for 9 out of 10 years preceding to be eligible for tax purpose. On the contrary, in Australia, an individual must fulfill the following condition to be considered as resident individual for tax purpose[2].

An individual must have a permanent abode of residence in the country without having permanent house outside of Australia

An individual must have lived in Australia more than half of the financial year consecutively or partly and have no such intention to live permanently outside of Australia

In addition to these, he or she must pass the superannuation test, where they have to ensure that they are working permanently in Australia or if working outside of Australia, must be treated as Australian employee. For example, employees working for Australian High Commission in other countries[3]


The researcher, has found several connections between the case reference and the taxation rule of both the countries. Robyn Rainer is an employee of Victoria University which is operating in Australia, who was gainfully employed over there, but working as a coordinator of the Calcutta University. In addition, she also has a permanent house in Australia, situated in Melbourne, in fact she is an Australian citizen by birth. Therefore, she must be considered as the ordinary resident of Australia for filing tax return. Thus, all her income including the earnings from Victoria University and earnings from renting here mortgage flat will be taxed under Australian taxation system. According to Morano et al. (2016) [4]an individual if goes overseas and remains resident of Australia can file return online from foreign country, where he or she must declare all the income earned in Australia as well as overseas. Thus, in this case, Robyn can file her tax return from overseas, where she must declare her income earned in India or any exemptions claimed on any income in India. However, Sokol et al. (2017) [5]made a contradict, but valid statement, where she had considered her mortgaged house as a permanent abode in Melbourne and rented it for extra income. She actually cannot consider it as her permanent abode since it is under mortgage, also she cannot use it for her rental income. Therefore, her rental earnings should not be considered as the valid income for filing tax return. Complimenting to this context, it is said that Robyn cannot even claim for any further deduction on this kind of earnings.

According to the mutual agreement between India and Australia for the purpose of avoiding double taxation and preventing fiscal evasion with respect to taxes levied on income, Robyn should be taxed if she does not belong to the contracting state, namely the Territory of Norfolk Island, the Coral Sea Island Territory, etc[6]. In addition to these, if an Australian resident is living in India and paying rent for a house situated solely in India and does not have permanent house in Australia, can claim deduction, if he or she further rent it and stays in house provided by the Australian government. However, in this case, Robyn has been provided with official abode of living in Calcutta by the Australian Government and she is neither paying for rent nor she has rented her place of living in India. In fact, the rent she is earning from Australian abode will be taxed in Australia only and has nothing to do with DTAA[7].

Thus, based on the analysis of the whole scenario, it can be concluded that the income earned in India as a coordinator, 50% of it is transferred to Indian bank account and rest will be transferred to Australian bank account. Therefore, income transferred to both the countries will be taxed in accordance with the taxation system of both the countries. Although, she did not pass the residential test in India for tax purpose, her earned income in India should not be considered for tax purpose. However, her earnings in Australia from Victoria University including her rental income in Melbourne should be considered for tax purpose in Australia. In contrast, unless she is staying in India for 9 out of 10 years preceding to be eligible for tax purpose, shoe will not be taxed in India[8].

In this case reference, it has been found that Paul works as a golf instructor and run his own business, where he offers a series of 12 lessons, also give single lesson. He charges his clients twice, first by giving golf lesson to them and secondly by the way of advance payment for the period of 12 lesson. Apart from these, he has an agreement with Eastwood Golf Club to provide instructions to the members of the club along with those who have not yet played golf and wanted to take lessons before playing golf. Here in this case as well, Paul charge them for the single lesson basis. Along with these, he also had number of clients who would like to pay for the series of 12 lessons in advance[9].


As respects the 12 lessons, Paul began classes toward the start of March and initiated another class every 3 month from that point, beginning the most recent 12-week time span toward the start of September. At 31 June 2017 Paul, had gotten $6,000 from the giving of private lesson and $28,800 from the giving of the arrangement of 12-week lessons. Paul confined the quantity of understudies who he took into his 12-week course to 20 for each course and charged $40 per lesson[10].

In February 2017 Paul, inadvertently harmed David's golf buggy. Paul consented to repair the carriage for David. The main way Paul could stand to pay for this was to have two of the general population he would offer lessons to throughout the following 12 weeks (starting in March) pay for the repairs as opposed to pay their charges to Paul. Out of the excellence service provided to her, Paul got a $10,000 installment from Doreen in June. Paul had shown Doreen golf around 5 years prior. Doreen as of late won a noteworthy golf competition winning $60,000. To demonstrate her thankfulness to Paul for his superb showing she had given him the $10,000.

According to the Australian taxation office, income under head personal services income, business income and commissions or compensation payments will be considered as assessable income for the tax purpose. If an individual earns more than 50% of the amount received for the contract work (especially from individual skills or expertise) from the business[11]. On the other hand, if the individual earns any kind of commissions or compensation on the part of any business activities will be considered as assessable income for tax purpose[12].

Thus, based on the analysis of the taxation law and the case reference, it can be said that Paul does run his own business and has a contract with other business, which gives him another way of earning besides his own earnings from his services[13]. As it can be seen that at 31 June 2017 Paul had gotten $6,000 from the giving of private lesson and $28,800 from the giving of the arrangement of 12-week lessons. In addition to these, out of the excellence service provided to her, Paul got a $10,000 installment from Doreen in June. Paul had shown Doreen golf around 5 years prior, which is further considered as compensation payments.

Therefore, the assessable income of Paul for the taxation year 2016/2017 is determined below.

Assessable income

Note

AUD

Gross total income

1

35,600

Compensation payments

10,000

Total assessable income

45,600

Working note:

  • Income from giving private lesson at 31 June 2017 = $ 6,000

Income from the giving of series of 12-week lessons = $ 28,800

Income from 20 limited courses ($ 40 per course) = $ 800 ($40 * 20 course)

Gross total income of Paul = $ 35,600

In this case, if Paul would have got the compensation out of kind, it would not come under assessable income[14]. Moreover, the change in the course fee of $ 40 per course limited to 20 courses would not have been considered as assessable income if it was received before the actual receipt of fees of series of 12-week lessons[15].

Thus, based on the evaluation of the case reference, it can be concluded that Paul has wisely adjusted his earnings. Receipt of unexpected income of $ 10,000 from Doreen in June helped him repairing David’s golf buggy, which he earlier asked his students to pay for rather than paying fees. In addition to these, change in the course fee structure helped him more to increase his income[16]. Moreover, Paul’s income from the agreement with Eastwood Golf Club to provide instructions to the members of the club along with those who have not yet played golf and wanted to take lessons before playing golf had put additional impact on his total income.

Conclusion

Efforts have been made to explain the taxation system of Australia with the help of two different case scenarios. Based on the evaluation of first scenario, it can be concluded that the income earned in India as a coordinator, 50% of it is transferred to Indian bank account and rest will be transferred to Australian bank account. Therefore, income transferred to both the countries will be taxed in accordance with the taxation system of both the countries. Moreover, her earnings in Australia from Victoria University including her rental income in Melbourne should be considered for tax purpose in Australia. However, based on the evaluation of the second case scenario, it can be concluded that Paul has wisely adjusted his earnings. Receipt of unexpected income of $ 10,000 from Doreen in June helped him repairing David’s golf buggy, which he earlier asked his students to pay for rather than paying fees. In addition to these, change in the course fee structure helped him more to increase his income.

References

Butler, D. (2016). Superannuation: Transferring foreign super fund amounts to an Australian resident. Taxation in Australia, 50(8), p.481.

Chandel, S.S., Sharma, A. and Marwaha, B.M. (2016). Review of energy efficiency initiatives and regulations for residential buildings in India. Renewable and Sustainable Energy Reviews, 54, pp.1443-1458.

Dunne, J., Mason, J. and Patto, J. (2014). 2013 cases show high ATO success rate. Taxation in Australia, 48(8), p.429.

Edmonds, M., Holle, C. and Hartanti, W.(2015). Alternative assets insights: Super funds-tax impediments to going global. Taxation in Australia, 49(7), p.413.

Kawasaki, K. (2015). The relative significance of EPAs in Asia-Pacific. Journal of Asian Economics, 39, pp.19-30.

Levy, D., Dong, Z. and Young, J. (2016). Unintended consequences: the use of property tax valuations as guide prices in Wellington, New Zealand. Housing Studies, 31(5), pp.578-597.

Long, B., Campbell, J. and Kelshaw, C., 2016. The justice lens on taxation policy in Australia. St Mark's Review, (235), p.94.

Mok, H.F., Barker, S.F. and Hamilton, A.J. (2014). A probabilistic quantitative microbial risk assessment model of norovirus disease burden from wastewater irrigation of vegetables in Shepparton, Australia. water research, 54, pp.347-362.

Morano, P., Morano, P., Tajani, F. and Tajani, F. (2016). Bare ownership of residential properties: insights on two segments of the Italian market. International Journal of Housing Markets and Analysis, 9(3), pp.376-399.

Rosenbloom, H.D., Noked, N. and Helal, M.S. (2014). The Unruly World of Tax: A Proposal for an International Tax Cooperation Forum. Fla. Tax Rev., 15, pp.57-737.

Sokol, J., Davila, C.C. and Reinhart, C.F. (2017). Validation of a Bayesian-based method for defining residential archetypes in urban building energy models. Energy and Buildings, 134, pp.11-24.

Somers, R. and Eynaud, A. (2015). A matter of trusts: The ATO's proposed treatment of unpaid present entitlements: Part 1. Taxation in Australia, 50(2), p.90.

Stoeckl, N., Esparon, M., Farr, M., Delisle, A. and Stanley, O. (2014). The great asymmetric divide: An empirical investigation of the link between indigenous and non?indigenous economic systems in Northern Australia. Papers in Regional Science, 93(4), pp.783-801.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. OUP Catalogue.

[1] Dunne, J., Mason, J. and Patto, J. (2014). 2013 cases show high ATO success rate. Taxation in Australia, 48(8), p.429.

[2] Levy, D., Dong, Z. and Young, J., 2016. Unintended consequences: the use of property tax valuations as guide prices in Wellington, New Zealand. Housing Studies, 31(5), pp.578-597.

[3] Mok, H.F., Barker, S.F. and Hamilton, A.J. (2014). A probabilistic quantitative microbial risk assessment model of norovirus disease burden from wastewater irrigation of vegetables in Shepparton, Australia. water research, 54, pp.347-362.

[4] Morano, P., Morano, P., Tajani, F. and Tajani, F. (2016). Bare ownership of residential properties: insights on two segments of the Italian market. International Journal of Housing Markets and Analysis, 9(3), pp.376-399.

[5] Sokol, J., Davila, C.C. and Reinhart, C.F. (2017). Validation of a Bayesian-based method for defining residential archetypes in urban building energy models. Energy and Buildings, 134, pp.11-24.

[6] Kawasaki, K., 2015. The relative significance of EPAs in Asia-Pacific. Journal of Asian Economics, 39, pp.19-30.

[7] Rosenbloom, H.D., Noked, N. and Helal, M.S. (2014). The Unruly World of Tax: A Proposal for an International Tax Cooperation Forum. Fla. Tax Rev., 15, pp.57-737.

[8] Chandel, S.S., Sharma, A. and Marwaha, B.M. (2016). Review of energy efficiency initiatives and regulations for residential buildings in India. Renewable and Sustainable Energy Reviews, 54, pp.1443-1458.

[9] Edmonds, M., Holle, C. and Hartanti, W., 2015. Alternative assets insights: Super funds-tax impediments to going global. Taxation in Australia, 49(7), p.413.

[10] Somers, R. and Eynaud, A., 2015. A matter of trusts: The ATO's proposed treatment of unpaid present entitlements: Part 1. Taxation in Australia, 50(2), p.90.

[11] Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. OUP Catalogue.

[12] Long, B., Campbell, J. and Kelshaw, C., 2016. The justice lens on taxation policy in Australia. St Mark's Review, (235), p.94.

[13] Butler, D., 2016. Superannuation: Transferring foreign super fund amounts to an Australian resident. Taxation in Australia, 50(8), p.481.

[14] Cao, R., Chapple, L.J. and Sadiq, K., 2014. Taxation determinations as de facto regulation: private equity exits in Australia. Australian Tax Review, 43(2), pp.118-141.

[15] Wilkins, R., 2014. Evaluating the Evidence on Income Inequality in Australia in the 2000s. Economic Record, 90(288), pp.63-89.

[16] Stoeckl, N., Esparon, M., Farr, M., Delisle, A. and Stanley, O., 2014. The great asymmetric divide: An empirical investigation of the link between indigenous and non?indigenous economic systems in Northern Australia. Papers in Regional Science, 93(4), pp.783-801.

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