Assessable Income and Deductible Outgoings in Australia

Over the years, nations have been supporting themselves on the platform of imposing an income tax on its citizens to increase its revenue. This is because the government cannot function without funds. Thus, to ensure that there are enough funds to operate the nation’s activities, they typically collect taxes from their citizens. The term income tax can be defined as a tax imposed on a taxpayer that varies depending on an individual’s income or profits, (Buenker, 2018). It has been a major concern to many governmental institutions such as the Australian government on the rise of collaborative innovations/economy and the phenomena of the ‘micropreneurship’ and related concepts. This has resulted to the notion of its negative impact to the global market on the serious risk it often raises in relation to public safety, worker’s rights, accessibility, and tax (such a tourism and hotel taxes), (Ault & Arnold, 2010).  Therefore from the Australian government ideological perspective saw these concepts through analytical research that they usually exists in a regulatory grey area or in outright contravention of existing laws despite the fact that these services have proven popular and beneficial to many consumers.

Expenses divide by the gross salary (45,000 + 5,865) ^ 50,000= 1.0% income tax payable by Jane Herman. Through the deductions experienced by Jane due to the her jobs and employment cannot be compared to the amount she receives through purchasing of shares, investment property, the Accounting professional job she has in the State of New South Wales. Jane Herman does not depend on the gross salary she receives from Milton Hotels in Sydney. Thus, all the benefits/amounts she received from her earnings with respect to employment are added in a assessable income such as performance bonus of $25,000, and clothing allowance from Milton Hotels of $4,500. According to the Australian Taxation Law states that the beneficiary tax offset is available if you receive certain Australian Government allowances and payments. You pay no tax for the year if you only receive any of the qualifying benefits and allowances, and have no other taxable income. Thus, Jane Herman is exempted from paying tax of benefits and allowances received during that year.

Jane Herman has received a lot of benefits from her property which totals to $13000 as the rental income and the related outgoings on the property is approximately $2200. As an Australian Citizen, she is entitled to pay her income tax every month, (Oats, 2012). Therefore, this shows that she is also entitled to income tax purposes and they have to lodge an Australian tax return, (Johnson, S. and Breunig, R., 2016). According to the Australian Taxation Office all benefits received by an individual should be included in the assessable income. The term assessable income can be defined as gross income including rent, dividends, salary and wages, and interest before any tax deductions are allowed. Thus, earnings Jane received will be added to her income before any tax is deducted by the Australian Government. Examples include dividends, income from investments, bonuses, and overtime income received by an employee. All these are included in the assessable income of Jane Herman. Jane Herman in the end of the year 30 June 2018 she has received bonuses, allowances, income from investment, dividends that were included in the assessable income.

Taxation Law in Australia

The management, unions and the state play a major role in improving the satisfactory and participatory of employees. The state legislative rules that governs the labour market and provided a social safety web has reduced the amount of financial condition. As for management, there’s no denial of the importance of structure culture (shaping of workplaces) in worker satisfaction. However, some fail to acknowledge the impact they need in shaping it. It’s typically believed that cultures of a geographic point area unit planned, tho’ this can be false, (McCallum, 2008). Australian law deduct outgoings incurred for Australian income tax purposes. However, Expenses specified under income tax law as non-deductible include: fines and penalties imposed under an Australian or foreign law, or ordered by the courts and borrowing expenses related to a loan that was taken out to pay a federal tax liability.

In accordance to the Australian income tax purpose is that an individual who is a citizen of that country either by birth or registration entitled to be taxed by the government based on your income earning per month. Thus, the higher the pay the higher the amount of income taxed, (Woellner, R., et al., 2016). Jane Herman has incurred some outgoings in the year 30 June 2018 such as travel expenses, insurance, water rates, property agent commission, and repairs and maintenance. Therefore, these outgoings will be deductible to her for Australian income tax purposes. However, certain charges and implications from the Australian income tax can be avoided if she employs certain procedures. An income tax return can be defined as document you file with the Internal Revenue Service or the state tax board reporting your income, profits and losses of your business and other deductions as well as details about your tax refund or tax liability, (Buenker, 2018).

The term compensation packages refers to total sum of benefits an individual enjoys such as salary, allowances, bonus, commission and other indirect benefits (such as insurance, pension plans, vacations). There are forms of executive compensation packages which are Base Pay, overtime pay, stock options, travel/housing allowance/meal, commissions, bonuses, merit pay, and profit sharing, (Rodriguez-Fernandez, M. 2016). Another compensation package that the board members enjoy is Executive Perquisites (Perks), which are non-cash items that have a status value as they imply the board executive members are important personnel in the company. For example they can offer tax substantial savings because some perks are not taxed as income, (Boynton, 1995).  The executive members also enjoy the benefit of Long Term Performance Incentives, which helps them to enjoy long-term growth and success of the company based on the executive performance ? based incentives.

Federal Commissioner of Taxation V. Cooke and Sherden Case Analysis

There are implications associated with the transfer of money from a retirement annuity to an Australian bank account. Such as the money can be blocked and handed over to an authorized dealer, also, may incur termination penalties for withdrawing early. According to this case study: Piper and David Chapman on the issue of transfer of money from South Africa to an Australian bank account there are always some implications or income tax liability seen, (Berger, L.L., 2016). During the transfer of this funds Piper will be charged a higher tax rate because of the sum of money been transferred. Money transactions that exceed $10,000 or alert a suspicion are always by law reported by the banks. According to the principle of law it states that people should pay taxes in proportion to the amount of services or benefits they receive. An individual like Jane Herman according to this law she is not entitled to pay any tax whatsoever but the company she works for, Milton Hotel.   

Generally, it is evident from the above paper that without the fundamental knowledge of income tax an individual can be paying more than he earns. Thus, Jane Herman is entitled to be imposed income tax purposes due to the reason of been Australian residents. The Australian Law does not deduct allowances and bonuses made by an employee. However, the earnings Jane received will be added to her income before any tax is deducted by the Australian Government.

PART B

Federal Commissioner of Taxation V. Cooke and Sherden

Facts

The Federal Commissioner of Taxation V. Cooke and Sherden was an appeal filed by two couples (Mr. and Mrs. Cooke and Mr. and Mrs. Sherden) against the trials court judgment linking them to the commissioner of Taxation in bringing to tax as assessable income the value of holidays provided to and enjoyed by the taxpayers, (Conaghan & Rittich, 2005). He was able to defer the taxes due from the sale due to a provision in the lawn and invested that cash in another investment, (Bennett, 1994).  The two parties made agreements to accept the retail distributing rights for the sale of the Company’s product in other district. The Agreement contained a Confidentiality and Non-Disparagement provision where the parties not to reveal to third parties the contents of the agreement. On March 31, 1996, the bank reached an agreement with the lenders and the parties involved to reinstate the loan and the parties entered into a settlement agreement

Issues

1.    Did the two appellants, The Federal Commissioner of Taxation V. Cooke and Sherden, breach the terms of the Confidentiality and Non-Disparagement provision that they had signed with the manufacturing companies.
2.    Did the two parties fully and clearly understand the terms as stated out in the Private Placement Memorandum?

Decision

1.    Yes, the two appellants, in this case, breached the terms of the confidentiality and Non-Disparagement provision.
2.    Yes, from the proceedings, it is evident that the two appellants clearly understand the terms and conditions as set out in the Private Placement Memorandum.

Reason

The confidentiality and Non-Disparagement provision is a clause that is present in the Business law. The provision claims that under no circumstance should business agreements be disclosed to parties that are outside the agreement. Thus, the fact that the two couples, knowing of this, decided to disclose information about the agreement he had reached with FINRA is a contradiction of law.

The Private Placement Memorandum required that all investors should state in writing that they had sufficient knowledge and experience in financial and business issues and that they were capable of evaluating the risks that were inherent and that they had the ability to protect their own interests in connection with such investments, (Latimer, 2011). The two couples signed these terms willingly and by entering into these requirements, he proved that he was knowledgeable in business matters, (Basu, 2016).

There was no service which the respondent retailer rendered to the manufactures. The relationship was essentially one of the seller and the buyer, (Squelch, & Guthrie, 2010). Also, the provision of holidays was not part of any contractual relationship and cannot be said to have been directly or indirectly for the services rendered by the taxpayers.

Thus, the appeals should be dismissed with costs. The decision and the main principle applied in the judgement takes the concept of the facts presented by each defendant and plaintiff in response to the case presented in the law. According to the ruling made by Jenkinson J. in the Supreme Court of Victoria was on the side of the manufacturers rather than the distributors in that there was not agreement that was signed to show if what the Plaintiff said was true.

The above case is relevant today in that it helps business partners to undergo for contract law document that show an abiding policy of their agreement based on the contract given by two parties. A contract can be defined as any legal promise established between two or more parties, therefore a breach of contract can be stated as a legal cause of action in which a binding covenant is not met by one or more parties by performance or non-performance in the contract. There should be the existence of a valid or legitimate contract to ensure both parties abide to those laws.

Reference

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Bennett, L. (1994). Making Labour Law in Australia. Industrial Relations, Politics and Law.

Basu, S. (2016). Global perspectives on e-commerce taxation law. Routledge.

Boynton, J. (1995). Resident and non-resident superannuation funds. Australian Tax Review, 24(4), 224.

Buenker, J.D., 2018. The Income Tax and the Progressive Era. Routledge.

Conaghan, J., & Rittich, K. (2005). Labour Law, Work and Family. Oxford University Press.

Johnson, S. and Breunig, R., 2016. Taxpayer responsiveness to marginal tax rates: Bunching evidence from the Australian personal income tax system. In 29 th PhD Conference in Economics and Business.

Latimer, P. (2011). Australian Business Law 2012. CCH Australia Limited.

McCallum, R. (2008). Australian labour law and the Rudd vision: Some observations. The Economic and Labour Relations Review, 18(2), 23-31.

Oats, L. (Ed.). (2012). Taxation: A fieldwork research handbook. Routledge.

Rodriguez-Fernandez, M. (2016). Social responsibility and financial performance: The role of good corporate governance. BRQ Business Research Quarterly, 19(2), 137-151.

Squelch, J., & Guthrie, R. (2010). The Australian legal framework for workplace bullying. Comp. Lab. L. & Pol’y J., 32, 15.

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

Woellner, R. H., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2010). Australian taxation law. CCH Australia.