LAWS20060 Taxation Law of Australia

Case Study

Manpreet is an international student studying an accounting degree at CQU, Sydney. She commenced her studies in term 1, 2016. In the 2016/2017 financial year she worked part time as an office assistant at an Accountant’s office to gain work experience in her chosen career and made $45,000 from that job. Manpreet also received $20,000 from her parents to assist her with her living expenses, and a $10,000 distribution from a trust account set up in India by her grandmother of which she paid $1,000 in foreign tax. She spent $18,500 on her studies, $2,000 on a computer and printer for educational purposes, and $500 on a new mobile which was required for work purposes.

Calculate Manpreet’s net tax payable for the 2016/2017 financial year, making reference to the taxation formula, the reasons for including or excluding specific items, your calculations, and the applicable tax law (sections of legislation and/or case law).

In the given case, business analyst employed by the consultancy firms receives Web jet frequent flyer points from travels which they make relation to their business related work. The payment for this travels are being made by the consultancy firm. The employees are channelizing these business expenses through their personal cards and enjoying the benefits of card point’s wallpapers news without any tax liability. Australian tax authorities have shown their concern towards the misuse of these points. As per the case laws, if any points has been received my employee by making a business method expense, the employee will be eligible to pay fringe benefit tax in relation to these points. However, if there is a salary arrangement between the employee and the employee, that any reward points that has been earned by an employee in relation to business travel will form part of a salary, the same will be taxable in the hands of the employee. (Tax ruling 1999/6 flight rewards)

In the given case, the employees and the business analyst getting frequent flyer points for the business related travels, thus in this scenario the amount of flyer points that my dear reply or the business analyst will be treated as fringe benefits provided by employer to the employee and thus the employer is eligible to pay fringe benefit tax on this amount.

In the given case, the customer has damaged a crane which has been provided to him by a crane hire company. The customer paid claim to the company for the damaged caused by him. The amount so received by the company for the claim amount will be treated as income in the hands of the company. The Crane is an asset for the company thus the same will not be reflected in the income tax return. But being the same has been damaged and the company has received the claim in its respect, the same will be treated as income and thus will be taxable in the hands of the company.

Considering the provision discussed above, the amount of claim received by the company will be treated as taxable income and will be taxed in his hands. (ATO)

In the given case, a manager of a nightclub has received the free holiday package from a supplier. As per the provision of Australian tax laws, if any gift or benefit that has been received by an employee which is of a small amount in relation to his birthday or at a family event will not be taxable in the hands of the employee. On the other hand, if a large amount has been paid to an employee or to a contractor from the employer or from through an indirect source in relation to his employment will be treated as taxable income in the hands of the employee.

The holiday package received to the manager of the nightclub is in relation to his employment and thus will be taxable in the hands of the manager. (ATO)

In the given case, a caneo club has raised funds from its members for the purpose of purchasing caneo. However the fund that has been raised for the excess, thus the club decided to refund the excess amount that has been raised from its members. As per the provision Australian tax laws the Asset and liabilities amount will not be reflected in income tax return of a company or of an individual. The amount raised by the club from its members, is liability for the club and thus the same will not be reflected in income tax return for the club. Being the club has decided to return the excess amount, the club is reducing is liabilities and the same has nothing to do with the income generation activity of the club. There has been no inclusion or exclusion of income in relation to the above transaction that has been made by the club for refund of excess amount that has been raised from its members.

Considering the above provision, the return of excess amount has been raised by the club from its members will not direct any income tax liability neither in the hands of the club nor in the hands of its members, (ATO)

In the given case, a television station has paid a certain amount to Australian footballer after being named as the best footballer in the Australian Federation League. The amount that has been paid by the television station to the footballer is a reward for his success. As per the provision of Australian tax laws, the reward that has been received by the footballer is a cash prize award for its good performance in the Australian Federation League. The amount so paid by the television station is not a relation to its business. As per the provision of Australian tax laws, for an expense to be allowed as deduction in the books of a company it is important that the same should be spent in relation to the business activities. The amount that has been paid by the company to the Australian footballer is not a relation to any business activity thus the same will not be allowed as deduction for the television station. On the other hand, the cash price so receive by the footballer will be treated as income in the hands of the sportsman and will be taxed in his hands. (Tax ruling TR 1999/17)

In the given case, the businesses incurred expenditures in qualifying a business apprentice. A business apprentice is a person who has been train from is qualified and skilled person and ready to work for a certain period at low wages. The business apprentice that has been hired by the company for low wages will be working for the company and the amount that has been spent by the company on his salary and on getting him trained is in relation to the business.

Thus, the amount that has been spent by the company in relation of qualifying the business apprentice will be treated as an expense that has been made by the company in relation to its business. Thus, the amount so spend will be allowed as deduction for the company.

In the given case, certain amount has been spent by a person in doing an art course of Management in the hope of becoming an art director. For an expense to be allowed as deduction, it is important that the same has been spent in relation to the business. IN the given case, the amount that has been spent is in relation to acquire a sustainable position in the company. The amount has been spent to procure an art course of management which is a degree and the same is not in relation to any business.

Thus, the amount that has been spent by the person in doing an art course, with the hope of becoming an art director is not in relation to business and thus the same will not be allowed as deduction.

In the given case, the company has been spending considerable amount in makeup and dresses of the employees. As per the provision of Australian tax laws, if any amount has been spent by the company in relation to clothes of the employees which is important and specific to the occupation and business that the company is into with and will help in recognizing its employees and it is important for the safety and well being of the employees will be allowed as deduction. Any makeup that has been done to the Employees in relation to the recognition from the other people and which is important for the business will be allowed as deduction.

In the given case, the company has been making considerable expenditure in the makeup and dresses of the employees. These makeup and dresses has been done in relation to be business and which is specific to the business occupation will be allowed as deduction while calculating the income for the company. (ATO)

In the given case, an employee makes considerable expenditure in travelling between home and workplace. As per case law "Case C47 71 ATC 219; 17 CTBR (NS) Case 44" any expenditure incurred contract between home and workplace is not a relation to business and will not help in any income generation activity for the company. Thus, any amount that is being spent in this relation will not be allowed as deduction. The amount spent by the employee will be treated as private expenses. However if the person is working from home as well, and is travelling from his home to his workplace, then in that scenario the amount that has been spent on travelling will be allowed as deduction.

Overall in normal scenario, any expense that has been incurred by the employee in relation to travel from home to work place will not be allowed as deduction. (FC of T v. Collings 76 ATC 4254; (1976) 6 ATR 476 ( Collings' case)).

In the given case, any expense that has been incurred by an employee in relation to its travel from home to his work place will not be allowed as deduction as the same will be considered as personal expenses. On the other hand if any expense has been incurred by employee in travelling between one place to another workplace will be treated as a business travel and that will be allowed as deduction. The company can claim deduction only for those troubles that has been incurred by an employee in performing his business duties. If the amount has been spent partially in business travels and for personal Travels the company can claim deduction only for the expensive that has been incurred in relation to the business travels.

Overall, normal scenario if any expenses that have been incurred in relation to travel from one employee to employer will be treated as travels made for business purposes and thus the company can claim deductions for the expenses. (ATO)

In the given case, an international student Manpreet was pursuing an accounting degree at Sydney. During the year 2016, he started doing part time accounting work to gain experience. He earned $45,000 part time job. Bring the same here he received $20,000 from his parents from India and $10,000 as distribution income from trust created by his grandmother. He paid $1,000 as tax on the distribution income from the trust. He incurred expenditure on educational purposes and spent $500 on purchase of mobile phone used for his work.

Any international student pursuing education degree in Australia will be treated as an Australian citizen if he stays in the country for more than 6 months for taxation purposes. (Beattie G, 2016).

The amount received by Manpreet from his parents will not be treated as taxable income in his hands. On the other hand the distribution income that he has received from the trust worth $10,000 will be eligible for taxation. The amount Manpreet has received from carrying out part time accounting activities will be eligible for taxation as well. The amount Manpreet has spent on education purposes and for acquiring mobile phone will not be allowed as deduction.

The amount of foreign tax worth $1000 that has been paid by Manpreet on the distribution that has been received from the trust created by his grandmother will be considered at time of computing the tax liability for Manpreet. He can claim credit for the tax amount paid in advance.

The taxation rates applicable on Australian residents are as follows:

 Thus, in light to the provision of Australian tax laws, the taxability of Manpreet will be calculated as follows:

References

ATO.Gov.au, Tax ruling 1999/6- Taxing consumer loyalty program rewards, viewed on 28^th Aug 2017, retrieved from http://law.ato.gov.au/atolaw/view.htm?docid=PSR/GA20044/NAT/ATO/00001

ATO.Gov.au, Insurance payouts, viewed on 28^th Aug 2017, retrieved from https://www.ato.gov.au/Individuals/Dealing-with-disasters/Damaged-or-destroyed-property/Insurance-payouts/

ATO.Gov.au, Amounts not included as income, viewed on 28^th Aug 2017, retrieved from https://www.ato.gov.au/Individuals/Income-and-deductions/Income-you-must-declare/Amounts-not-included-as-income/

ATO.Gov.au, Tax ruling 1999/17- Income tax: sportspeople - receipts and other benefits obtained from involvement in sport, viewed on 28^th Aug 2017, retrieved from http://law.ato.gov.au/atolaw/view.htm?Docid=TXR/TR199917/NAT/ATO/00001

ATO.Gov.au, Tax ruling 95/22- Income tax: employee building workers - allowances, reimbursements, long service payments, redundancy trust payments and work-related deductions, viewed on 28^th Aug 2017, retrieved from  http://law.ato.gov.au/atolaw/view.htm?DocID=TXR/TR9522/NAT/ATO/00001

ATO.Gov.au, Travel between home and work and between workplaces, viewed on 28^th Aug 2017, retrieved from https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Vehicle-and-travel-expenses/Travel-between-home-and-work-and-between-workplaces/

ATO.Gov.au, Clothing, laundry and dry-cleaning expenses, viewed on 28^th Aug 2017, retrieved from https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Clothing,-laundry-and-dry-cleaning-expenses/

Beattie G, 2016, Do international students pay tax in Australia?, Viewed on 28^th Aug 2017, Retrieved from https://www.quora.com/Do-international-students-pay-tax-in-Australia