OtherPapers.com - Other Term Papers and Free Essays
Search

Income Tax Tutorial Review

Essay by   •  October 25, 2017  •  Coursework  •  27,578 Words (111 Pages)  •  993 Views

Essay Preview: Income Tax Tutorial Review

Report this essay
Page 1 of 111

Tute 1 

Question 1

  1. Individual
  • s995-1: a natural person and thus an individual. Can be an adult or a minor
  • Taxpayer entity under s 4-1
  • s9-1 has a list of entities which must pay tax
  • No separate common law interpretation
  • If an individual is carrying on a business, does it mean it becomes a company? No, it could be a sole trader or sole proprietorship.
  1. Company
  • Under ITAA1997 - S995-1: a body corporate or any other unincorporated body or association of persons but does not include a partnership or non-entity joint ventures.
  • Corporations act – anything which is registered under the corporations act.
  • Tax definition is broader – includes more than the corporations act does
  • A company is a taxpaying entity; s 4-1 Item 3.
  • S995-1”Company” Excludes partnerships and joint ventures.
  1. Partnership
  • S 995-1: an association of persons other than a company carrying on a business as partners or in receipt of ordinary income or statutory income jointly or a limited partnership.
  • Tax definition is broad definition, whereas the partnership act is narrower.
  • “the relation which subsists between persons carrying on a business in common with a view to profit”: s 1 –Partnership Act 1891 (SA)
  • S4-1 not a taxpaying entity. Also, not a taxpaying entity in s9-1.
  • However corporate limited partnerships are listed.
  1. Trust
  • Entity or person holding property for the benefit of someone else (beneficiary)
  • No definition in the Tax Act – derives its meaning through law
  • Definition under common law – a trustee has an equitable right to hold property for the right of someone else
  • Not a taxpaying entity – assessed to trustee, and in some cases the beneficiary
  1. Small business entity
  • s 995-1: refers to s 328-110
  • an entity that carries on business in an income year and has an aggregated turnover for that year, or the previous year, of less than $2 million (excluding GST)
  • Entities which have turnover of $2m or less are small business entities.
  • no common law definition
  • not specifically defined as a taxpaying entity however it encompasses individuals, partnerships, companies and trusts provided they don’t earn over $2 million (so yes)

Question 2 – legislation interpretation

  • legal professional privilege – any correspondence which is about advice or in relation to litigation between a lawyer and a client is protected.
  • s 264(1) – the commissioner may by notice in writing require any person, whether a taxpayer or not, to furnish him with any information he may require
  • very broad: “any person”
  • gives the commissioner a lot of power
  • 3 main rules of statutory interpretation
  • Literal rule – words are to be given their ordinary and natural meaning: Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920)
  • Intention of parliament was to include everyone
  • ATO would argue that Allan needs to give them information upon request whether or not it’s covered by legal professional privilege or not, and if he doesn’t, he will have a penalty
  • Don’t care about the consequence (less than 7 days to do so) with this approach
  • Golden rule –  court takes into account the consequences of a particular interpretation of the provision to the individual or taxpayer which may be concerned: Grey v Pearson (1857)
  • If absurdity or inconsistency results, Court will modify meaning or read in words to the meaning to overcome this
  • Perhaps the court may add in “in a reasonable time”
  • Mischief rule – Heydon’s case (1584)
  • Only applies if there is an ambiguity
  • Is there ambiguity here?  Arguments for yes and no
  • If there is ambiguity – the court will consider the underlying purpose for passing this act. Look to extrinsic materials (second reading speech, Hansard, explanatory memorandum) – why was this section introduced?
  • Infer the purpose was to give the commissioner power

Is Allan obliged to disclose the documents?

  • ATO will argue the literal interpretation – that is, Allan needs to hand them over
  • ATO will argue the doctrine of professional privilege won’t apply – no insertion of it into the section
  • Allan will argue – legislation is presumed not to alter common law doctrine
  • Conclude that the section is subject to common law doctrines. This means that Allan will only need to hand in those documents not covered by legal professional privilege.
  • FCT v Citibank and Baker v Campbell – s 264 is subject to legal professional privilege

Question 3 – research and anti-avoidance

  • Trying to advise her there may be a scheme available where she may be able to get away with not paying tax – part 4A (anti-avoidance)
  • Ways in which you can obtain an answer to whether you have good advice or not:
  • A textbook on the interpretation of tax law – note up cases**
  • ATO releases taxation rulings – look to these. It may have an interpretation which is binding on the commissioner. IT Ruling 21/21
  • Speak to a tax lawyer or accountant
  • Read part 4A of the Act
  • Case law
  • Extrinsic material – Hansard, explanatory memoranda
  • Tax pronouncements – not so binding, give a general gist of what the section means
  • Tax commentaries
  • Journal articles – may target the use of anti-avoidance provisions here

Is the information provided by the accountant correct?

  • Taxable income = assessable income – deductions
  • AI = salary + interest = 206 000 (180 000 + 26 000)
  • D = 0
  • Taxable income = 206 000
  • Basic Income Tax Liability = taxable income x tax rate
  • when use table, she pays $66 250 (pays almost ¼ in tax)
  • Actual income tax liability = basic income tax liability – tax offsets + credits
  • = $66 250

  • AFTER THE TRUST
  • Taxable income
  • Assessable income = 180K
  • D = 0
  • TI = 180 000
  • Basic Income Tax Liability
  • = $54 550
  • Actual income tax liability
  • $54 550
  • 26 000  trust
  • 10 000 – 3 children
  • 3333 x 45% = 1500
  • If earn less than 30 000 – get a 1500 tax offset (reduces the tax dollar by dollar)
  • Tax is therefore nil
  • $16 000  spouse
  • He was eligible for a tax free threshold  of 6000 (don’t pay tax on the first 6000 you earn)
  • (16 000 – 6000 tax free threshold) x tax rate = 1500 tax
  • Taxpayer earned less than 30 000 – applicable for low income tax offset
  • Nil
  • Tax is $54 550 – great saving in tax

Tute No. 2 Jurisdiction to Tax - Residency

Problem Methodology

  1. Tax entity
  1. Identify Type
  2. Tax treatment – see step 7.
  1. Jurisdiction to Tax
  1. Residence
  2. Source
  1. Assessable Income
  1. Statutory Income
  2. Ordinary Income

Question 1

Alice – Australia resident, total salary = $85000 y/e 30 June 2011. PAYG Instalments. Expenses incurred =$2000, Dependent spouse rebate $2286. Alice is a natural person and is therefore an individual; s4-1 – individuals and companies and some other entities must pay income tax. S9-1 → individual is in item 1 of s9-1.

...

...

Download as:   txt (144.6 Kb)   pdf (1 Mb)   docx (668.9 Kb)  
Continue for 110 more pages »
Only available on OtherPapers.com
Citation Generator

(2017, 10). Income Tax Tutorial Review. OtherPapers.com. Retrieved 10, 2017, from https://www.otherpapers.com/essay/Income-Tax-Tutorial-Review/62176.html

"Income Tax Tutorial Review" OtherPapers.com. 10 2017. 2017. 10 2017 <https://www.otherpapers.com/essay/Income-Tax-Tutorial-Review/62176.html>.

"Income Tax Tutorial Review." OtherPapers.com. OtherPapers.com, 10 2017. Web. 10 2017. <https://www.otherpapers.com/essay/Income-Tax-Tutorial-Review/62176.html>.

"Income Tax Tutorial Review." OtherPapers.com. 10, 2017. Accessed 10, 2017. https://www.otherpapers.com/essay/Income-Tax-Tutorial-Review/62176.html.