Taxation Half Yearly Confirmation Firm

Question: Discuss about the Taxation for Half Yearly Confirmation Firm. Answer: 1. Status of Juliette: Juliette had formed a contract with a theatre company primarily of America to offer her service in Australia on 1st February 2015 with the objective of looking around the country and went for a trip in bus for a period of two months. However, she had to return to England on 28th February 2015. It must be noted that she returned to Australia on 1st May 2015 with the intentions to stay there a period of two months in accordance with the contract. Hence, she had also taken up a flat on lease and bought a number of furniture for her daily living. In August, 2015 she brought a house in Australia for dwelling and got married with an Australian resident on 1st September 2015 (PATEL, 2016). She once again returned to England on 15th October 2015 and returned to Australia on 15th April 2016 to live in Australia for a definite period. Juliette had also received payments from her employees based on half-yearly commencing from 15th July, 2015 (PATEL, 2016). Residential test: As stated under the rulings provided by tax TR 98/17: Income tax: The residential status of the individual entering in Australia, a person who is not a resident of Australia has to pass through below stated residential test for the purpose tax. The Residential Test The Domicile Test The 183 Day Test The Superannuation Test Determining the residential status of Juliette for the taxable year 2014-15: In order to determine the residential status of the Juliette for the year 2014-15 the following activities has been examined below to derive the outcomes of the test conducted. The results are as follows; In the year 2014-15 when Juliette visited Australia she had the initial intentions of roaming about the country It is evident that her mother who lived in England was closest to her and Juliette did not had other family contact in Australia When Juliette visited in the financial year of 2014-15, she hardly had any business relations as she was contracted to commence a business proceedings from 15th March 2015 (Chang, 2016). At the time of her visit in Australia she did not had any fixed place of living in Australia at that period. As it was evident from the case study that Juliette was visiting different places in the country, she hardly paid any attention to follow a routine life during that period. Domicile test: It should be known that Juliette was born in England and she is a British By choice, Juliette did not had any intentions of staying in Australia at that period of time By operation of law, she did not had any emotional attachment with the country (Chang, 2016) The 183 Test: Juliette original residence is in England She originally stated in Australia for a period of twenty eight days only through the year Superannuation Test: Juliette employers are American; therefore, she is not liable for any kind of superannuation scheme. In addition to this, she did not have any earnings from Australia at that period. Hence, in accordance with the rules mentioned above, it is understood that Juliette would not be taken into the considerations for the financial year 2014-15 (Arthur, 2016). Residential status of Juliette for 2015-16: A test is performed below to determine the residential status of Juliette for the financial year of 2015-16, which are as follows; The residential test: In the taxation year of 2014-15, Juliette has made up her intentions to stay in Australia for a period of two years initially and after getting married, she has expressed her desire to stay in Australia for the rest of her life (Arthur, 2016). Juliette regarded her mother to be one of the closest family member died this year. After the death of her mother, Juliette closest family member is her Husband, who by birth is an Australian and dwells in Australia. It is evident that during her visit in the financial year of 2014-15 she had business relations in Australia Juliette also bought up a flat in lease to live for a period of two years in Australia and in the later stages of this case study she bought up a residential home to stay there permanently (Walsh, 2013) During her stay in Australia in the year 2015-16 she maintained a routine life. Domicile test: By birth Juliette is a resident of England By choice Juliette intended to stay in Australia permanently By operation of law, she is an resident of Australia 183 Days Test: She originally stayed in England, but in the current year she had bought a house in Australia The number of days she resided in Australia is calculated below Period No. of Days in Australia No. of Days in England 1st July'15 - 15th October'15 107 0 16th October'15 - 14th April'16 0 181 15th April'16 - 30th June'16 76 0 TOTAL No. of DAYS 183 181 Superannuation test: Juliette employers are the resident of America therefore, it must be noted that she did not fall under the superannuation scheme It is therefore important to denote that it is no where mentioned in the case study that she and her husband are part of the superannuation scheme From the above-mentioned test, it is evident that Juliette has qualified herself under majority of the test where as only superannuation test is excluded where she did not qualify. Thus, in accordance with the Subsection 6 (1) of the Income Tax Assessment act 1936, Juliette can be considered for the taxation purpose as she is a resident of Australia for the year ended 2015-16 (Morse, 2013). 2: Tax payee : Mr. George Statement of Taxable Income from Rental Property:- For the period ending on 30th June,2016 Particulars Amount ($) Amount ($) Assessable Income: Rent from Property 13900 Total Income from Rental Property 13900 Deductible Expenses: Commission to Agent 695 General Repairs Maintenance 6000 Repainting of Front Fence 2500 Fixing of broken front door 1000 Capital Work Deduction : Replacing of Damaged Roofs 15000 15000 Deduction Rate 2.5% p.a. Deduction for Capital Work 219 Depreciation on Assets 1019 Total Deductible Expenses 11433 Net Income from Rental Property 2467 Workings: 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 2.b The computation of rental incomes of George for the taxation purpose is based on the below stated assumptions and taxation rules: George is assumed as an resident of Australia for determination of tax in the financial year of 2015-16 George had inherited the property and he has been making the use of the property for generating incomes beyond the period of two years. Therefore, it is assumed that George cannot claim for exemption. The rental income is yielded from the property, which is situated in Australia hence it will be regarded as taxable income. The commission agents are paid for yielding the rental proceeds from the property. Therefore, in accordance with the section 8.1 of ITAA 1997, it will be regarded as deductible expenditure from the rental income (Burkhauser et al., 2015). The general repairs are usually assumed for wear and tear and other damages incurred for letting out the property. Therefore, it should be noted that maintenance work has been made to preserve the property for letting out. Based on these assumptions general repairs and maintenance expenditure are recorded as deductible expenses Replacement of damaged roof is considered as an substantial enhancement of the property hence it is regarded as capital expenditure. Therefore, the expenditure of 2.5% of the total expenditure has been concluded in the deductible expenditure. Perhaps George can take the advantage of such deduction for upcoming 40 years in accordance with the section 40 (I) of ITAA 1997 (Durham et al., 2014). Purchasing new furniture and fittings cannot be considered for repairs and maintenance expenditure in accordance with the section 26 of ITAA 1997. The new furniture bought by George is considered as assets and it is considered for deduction on the depreciation of those assets bought from the rental income under the current financial year. Repainting of fence and fixing of doors are considered as expenditure, which is occurred for preserving the property for rental basis, and it will be treated as deductible expenditure under Section 40 (G) of ITAA 1997 (Morse, 2013). It must be assumed that all the assets except for the new furniture and fittings bought on or after 1st July 2004. It must be noted that George employs prime cost method of depreciation and the assets are depreciated at 100% as stated under Sect 40 (B) of ITAA 1997. After the computation, the sum total of rental income is $139600 and sum of deductible expenses stood $11433. 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