Obligation of Paying Tax on Rental Income †MyAssignmenthelp.com

Question: Discuss about the Obligation of Paying Tax on Rental Income. Answer: Introduction: The study currently is being considered for ascertainment of the residential status of Jack who visited Australia German passport from the year 2007 until the year of 2016, on which year he got the permit for residing and working within Australia. From all of these situations this can be stated that Jack has worked as Marine engineer in Australia during this period. The purpose of taxation is to fist identify if the person is Australian or foreigner. According to the taxation ruling of TR 98/D1, this can be stated that one-person Australia can be considered as the occupant for satisfying the purpose of tax[1]. These ruling are proper for a good number of people that enters Australia as well as this consider prearranged employment contracts. According to the current situation of Jack, this is identified that Jack has worked under this contract policies. In contrast with these elaborations, Jacks situation is considered as matter of element for making it chief conditions that defines compulsion to the Australian income tax. This chief condition is being elaborated within this context for making the context of Jacks right for being an occupant in Australia. Along with this, Australian income tax is also considered to be prioritized as per law for Jack. As held in the case of FC of T v. Applegate 79 ATC 4307; (1907) events for following the time of returns might be helpful in establishing a residential status of individual[2]. As stated in section 995-1 of the ITAA 1936 an Australian corresponds to one individual that occupies Australian taxation system. Jack was present in Australian from 2007 until 2016 that is continuous nine years during this period, only for nine months Jack was not present in Australia for employment purpose[3]. The current situation of Jack is now considering the residential status of Jack that is elaborated as follows; Domicile is known as a lawful theory for ascertaining the Domicile Act 1982 along with the common law rules have made situations that created the ground of private global laws. According to common rule, every individual from a country have the domicile related to their origin from their birth. Whereas there are some exception to this rules. As held in the case of Henderson v. Henderson [1965] 1 All E.R.179 an individual will be have the right to retain residence in their origin only exception is that those individual will be able to choose their residence in different nation according to the operation of law. Likewise, as evident from the current situation of Jack this can be elaborated that in spite of holding the German Passport he was staying in Australia with his family from 2007 to 2016. According to the case R v. Hammond (1852) 117 E.R. 1477 it can be stated that Jack can be considered as an Australian resident as his surrounding place was Australia from 2007 to the end of 2016. Jack stayed for nine years with his family within Australia that made him an occupant for Australias law and income tax laws under different facts that are prioritized in income taxation laws for Australia. As per the 183days test, one person who has been living in Australia for a period greater than half of the financial year either in breaks or continuously, that person might be considered to have productive dwelling within Australia and also have permanent place for abiding out of Australia. This is clarified from the elaborated situation that an assertion can be bought against Jack that he has been present in Australia for more than half of financial year which made him one Australian according to law. He was out of Australia only for nine months for employment purpose and returned to Australia for termination of employment[4]. Therefore, this can be stated that the government of Australia have the right to consider Jack as an occupant of Australia under the 183 days as he was present there for 183 continuous days. The superannuation test makes the sure that Australian employees are working at the Australian post overseas and should be treated as Australian residents. As this is clear from the existing scenario, this is observed that Jack was employed for an Australian post and worked overseas for more than a period of nine months. Therefore, because of these facts, as a result of this Jack will be considered as an Australian occupant according to the Superannuation test. As a general rule, a person that leaves Australia either temporarily would be considered to be an Australian resident provided that the person had acquired the residence in another country either by choice or due to the operations of law. As evident in the current state of affairs of Jack who is employed in china and receives his salary in bank account of Australia. Furthermore, Jack has also invested in the shares in Australia with bank account in Australia. Hence, the salary received by Jack in the bank account of Australia would be liable for taxation. As stated under Section 6-5 (1) of the ITAA 1997 income in accordance with the ordinary concepts comprises of those income which is derived in accordance with the ordinary concepts will be treated as ordinary income[5]. An individual who is a resident of Australia having their taxable income would be included in the ordinary income which a person derives earns directly or indirectly from all the sources weather inside or outside of Australia in the income year. The remuneration earned by Jack from his service in china was received by him in Australian bank account and will be treated for assessment under section 6-5 of the ITAA 1997. The present study is based on the understanding the consequences of tax for Eliza Tower that is related with several transactions which has been incurred in the present year of income. It is noticed from the circumstances of Eliza she has received a dividend which were completely franked from the global AIH. In addition to this, Eliza has also received rental income from the lease of her Australian residence. The Australian taxation office has defined that dividends are usually taxed based on the circumstances whether or not the shareholder is the Australian dweller or non-dweller of Australia[6]. The situation of Eliza states that she has received a fully franked dividend from the Global AIH, which is regarded as the Australian organization. An Australian resident firm that has taken the decision of joining the imputation system of Australia may credit the shareholder with the franked dividend. As has been found in the present study the receipt of dividends by Eliza in completely franked as the full amount of dividend carries franking credit. Eliza is treated as non-resident of Australia since she will be residing outside of Australia for a span of five years[7]. As a rule, Eliza being a non-resident of Australia the amount of franked dividend received by Global AIH is an exempted income together with the withholding amount of tax. Eliza will be disallowed to any franking tax offset relating to the franked amount of dividends received. Therefore, Eliza will not be permitted to use the amount of franking credit to reduce tax which is outstanding on other income derived in Australia and would not be entitled to any tax refund from franking credit. On the other side it was found that Eliza received rental income from her property which was leased in Australia. The Australian taxation office defines that an individual receiving rental income by renting out their property would be required to keep their records and should determine the expenses that can be claimed as permissible deductions[8]. As a general rule, a taxpayer is under obligation of paying tax on the rental income generated from the rental property and must report income in their tax return. Similarly, the receipt of rental income from her residence which is leased in Australia and she did not occur any expense in generating such income. Therefore, the rental income generated from the lease of property would be included in the tax return and will be liable for tax. A person can bring forward the claim of an allowable deductions for the amount of interest charged on the money which is borrowed by Eliza to purchase shares in Global AIH and other related investments through which a person generates taxable income. In the current situation of Eliza, it can be stated that she loaned out a sum of $100,000 to acquire shares. Because of this, she incurs $5650 as interest expense and she can allowable deductions under section 8-5 of ITAA 1997[9]. The expenses incurred by Eliza was for generating the taxable income and as a result, she would be allowed allowable deductions under the act. Reference List: Barkoczy, S,Foundations of taxation law 2014. in . Braithwaite, Valerie, ed.Taxing democracy: Understanding tax avoidance and evasion. Routledge, 2017. Coleman, C, K Sadiq,Principles of taxation law 2013. in . Graetz, M, D Schenk,Federal income taxation. in . Grange, J, G Jover-Ledesma, G Maydew,2014 principles of business taxation. in . Kenny, P,Australian tax 2013. in , Chatswood, N.S.W., LexisNexis Butterworths, 2013. Morgan, A, C Mortimer, D Pinto,A practical introduction to Australian taxation law. in , North Ryde [N.S.W.], CCH Australia, 2013. Woellner, R, S Barkoczy, S Murphy, C Evans, D Pinto,Australian taxation law 2014. in . Woellner, R,Australian taxation law 2012. in , North Ryde [N.S.W.], CCH Australia, 2013.