Template Letter of Advice - Math Problem Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxxx Title : Template letter Tutor : xxxxxxxxxxx Solicitor: (Your name) Phone: (Student #) Matter ID: (1500) Date: (Date submitted) Mr David Grinch 1 Elves Way THE NORTH POLE 0000 Dear Mr Grinch Thank you for meeting with me on Friday, 4 December 2009, to discuss the tax issue which has culminated with a reversal of your initial income. As set out below, the following amounts $45 000 should be included in your assessable income as per year for the services you offer to the organization under the initial terms of contact. This is based on the information provided at our meeting. However, this advice may be affected due to income tax regulation laws which basically influence the action plan under the present conflicting circumstance. In addition this advice may turn out to be different if we carefully apply section 6-5 of the Australian Income Tax Assessment Act 1997. As you are aware the application of the law is fundamental in resolving matters that deal with employee ordinary income. It is therefore important to make an in-depth analysis of the major issues to be evaluated in your case. Contract Reversal It is vital to make a distinction concerning the nature of your present earnings. As you have stated the initial contract stated that your annual earnings per year amounted to $45, 000 and a further discount of 25% for the clothes that you purchase for yourself. The company has however presently reversed the contract terms. It is vital to make an evaluation of the circumstance that lead to facilitation of such changes on your income. There are basic rules which determine the regulation of Australian companies in terms of taxation purposes. These provisions are outlined in Section 6 of the 1936 IAAT. The requirements of these regulations are also outlined within section 6 of the 1997 Income Tax Assessment Act. These rules are founded on the incorporation place of the company. If the company you work for was incorporated in Australia, it is therefore categorized as an Australian company. In addition if the if the company’s business operations are centrally controlled and managed in Australia it will be treated as a resident organization therefore the company is to be subjected on the income tax rates that are presently applicable in the country. The base of this particular principle in accordance to section 6 of this particular Act may actually have influenced the contract reversal .However this aspect cannot exclusively be the sole reason for the contract reversal due to the fact that your case is surrounded with other underlying factors. The table below highlights the rate of income tax also referred to as Resident tax rate for the years 2007-2008. Income range for Tax threshold $ Tax Rate % 0- 6,000 0 6,001- 30,000 15 30,001-75 000 30 75,001- 150,000 40 150,001+ 45 Based on the fact that the Razzle Dazzle clothing Inc carries out its operational activities as an Australian resident. The organization is therefore subjected to Australian tax rate regulations. Therefore if your ordinary earning reduced this may have been attributed to the earnings being subjected to a reversal due to the shift in tax rates of the years 2007-2008. Income tax rate for For the year ended 2007-2008 6 000 * 0%= 0 23999 * 15%= 3 599.85 15001 * 30%= 450030 Gross income = 45 3629.85 Minus other deductions= Present Annual income of $ 40 000. Ordinary income Analysis The Australian tax jurisdiction is founded upon the source of income of the tax payer and their residence. These particular principles are emphasised by section 6-5 of the 1997 income tax Assessment Act (IAAT 1997). The act highlights that the assessable income of an Australian resident includes the gross income obtained indirectly and directly from all sources in or out of Australia. In this case when trying to analyse if your additional income can be categorized under ordinary income the clause is useful to make an introspective analysis. Ordinary income basically entails income that is attained in accordance to ordinary concepts. Sub- section 6-5 (4) of the 1997 Act on Income Tax Assessments further defines this particular legislation. Whether a certain receipt is termed as an ordinary income in the hands of a certain taxpayer the influencing factor will be based on the individual circumstance that surrounds the receipt. Income is frequently received regularly, periodically, recurrently. However, a lump sum attained in relation a transaction that is isolated can also be referred to as income if the objective of the transaction is basically to gain profit. In light of the contract reversal in terms of the salary allocated. You devised a mechanism to supplement you’re income by stealing from the store which is defiantly unlawful practice. In despite of the fact that the terms of your initial contract were reversed it is not prudent for one to engage in unlawful means of earning additional income. The consequence of such action may result to you loosing your job depending on how strict the management of the company is on such issues. A considerable number of case laws have been presented whereby courts have applied a numbers of factors and principles to make verdicts on the amount of income in accordance to aspect of ordinary income. It is not vividly possible to determine ordinary incomes from a list of activities which may seem to have features of ordinary incomes. However in accordance to your case I do agree that you tried to make additional income apart from the normal earnings you got. The following gives guidance on composition of ordinary income Services fees Gross sales Gross rent Royalties Special credit made on sales tax on the available stock In order to evaluate whether the income that you presently receive can be categorized under the ordinary income it was vital to have attained the amount as soon as it was dealt with or applied, as regulated by Sub- section 6-5 (4) .The next step would have been to make an inquiry if the reasons behind the changes enacted on your income where relevant. The agreement made between you and the Fyshywick branch of Razzle Dazzle Clothing Company was a restrictive one that involved giving you a discount of 25% off from the clothes you buy yourself, however this terms were further revoked. The big question to be contended is whether the Razzle Dazzle Company has legal rights to revoke the initial contract. Consequently as highlighted under section 6-5 on Transfer of Liabilities and Assets, the amount paid should not be subjected to assessment, whether the amount is allowable in terms of a deduction to the corporation that is receiving. Keeping in mind CGT provisions are excluded. In case the receiving organization decides to transfer liabilities then it should specifically consider the original transfer. The section highlighted above therefore indicates that you have a lawful right to receive your income as you had originally agreed with the management of the company. However due to the fact that you acted to address the issue through methods that are unlawful by making unrecorded sales for your personal gains, the company has a chance to defend its decision of reversing your initial income. This is because due to the loss of stock, the annual earnings of the Razzle Dazzle Clothing Company may have reduced. In addition an increase in the 2007-2008, tax rates may have adversely reduced the annual expected profits. Trading stock Transfer As you indicated due to the reversal of your contact you decided to transfer the company’s stock to increase your income. However this particular move was definitely against the law. Section 5 highlights that in case transfer of stocks occurs in an organization in a particular year. The circumstances under which deductions are allowed include when the organization experiences losses as indicated by subdivision 170-A of the 1936 income Assessment Act. However subsection 170-A of the newly enacted 1997 Income Tax Assessment Act prevents the company from making a deduction on the income amount due to loss incurred at the end of the year. Basing on this particular clause the terms of the initial contract should not be reversed in despite of the transfer of stock, through unrecorded sales. Conclusion It is vital to make a distinction of the nature of the earning activities of your incidental income. The former earnings are not generally assessable due to the fact that they actually relate more to chance and luck than business activity or income earning because the company did not realize that you were supplementing your income by stealing from the store. However the latter was definitely expected on the content of the assessable income, given that they were attained as a direct outcome of the company gaining losses from missing stocks. If any particular amount is to be considered as assessable, it can be termed ordinary income as indicated under section 6-5 of the 1997 Income Tax Assessment Act. I would conclude by stating that deductions on an employee’s income should be made after in depth consultation however it is important that you settle the issue with the company in much more negotiate manner due to the fact that both parties have questions to answer. Bibliography Comasters Law Firm and Notary, 2008, Public Australian taxation resident rules. Sydney. Commonwealth Consolidated Acts .Income tax assessment act 1997. Gates, SJ Taxation and insolvency, North Ryde, NSW, Australian Tax Practice, 1998 Lehmann, G & Coleman, 1998, Taxation law in Australia, 5th ed, Sydney, LBC Information Services. Woellner, R et al 2000, Australian taxation law, 10th ed, North Ryde, NSW, CCH. Read More