A Resident for Purposes of Taxation - Assignment Example

TAXATION LAW ASSIGNMENT PROFESSOR’S NAME STUDENT NAME COURSE TITLE DATE Introduction Income Tax Assessment Act (ITAA97) does not give a definition of income but describes is under section 6-1(1) as consisting of ordinary income and statutory income. At the same time section 6-5(1) of ITAA97 describes assessable income to include income according to ordinary concepts directly derived directly or indirectly from all sources during the financial or income year1. It is important to note that in Australia a person residing in Australia is a resident for purposes of taxation if he actually stays in Australia continuously or intermittently during a period of more than one-half of the year of income2. In essence an amount received in relation to employment as compensation or reimbursement is treated as income for purposes of taxation. Fringe Benefits Tax is a separate type of tax operating outside ITAA 97 and it is to tax the non-income earning private benefits provided by the employee and it is provided to the employee for income-earning purposes is subject to deductible rules3. The FBT year is as from 1st April to 31st March. FBT is self-assessed by the employer and that the employer must sign the FBT return specifying the benefit provided to the employee, taxable value of the benefit and the tax is due in respect of the benefits. FBT is only applicable when there exists an employee employer relationship and the employer is subject to tax4. In case where there is no relationship (employer-employee) but a business relationship exists then the recipient of the benefit is subject to income tax under section 6-10 of ITAA97. A benefit includes “any right, privilege, service or facility”5 ADVANCE IT Group (ADVANCE) a software corporation and has signed a contract with a multinational financial institute for the development of a new operating system in the next two years. It has plans to recruit three highly skilled programmers but each of the three candidates has proposed a package for two years contract as from 1 July 2013. Assumption a. Company tax rate is 30% b. 2013/2014 financial year tax rate applicable is $17,574 + 37% for amounts >80,0001- Read More