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Australia taxation law - Essay Example

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This case study consists of preparation of tax lodgings for Andrew and Mary Finlay (with 2 student deductions for children Jason and Angela). The study is an in depth look at how to prepare this family's tax lodging requirements. The resource used to complete these requirements is the Australian Taxation Office, Australian Government, website (…
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Download file to see previous pages The first task identified was the determination of whether, for tax purposes, the Finlays are considered residents of Australia. The determination was made that the Finlays were considered residents based upon the residency test. According to Australian Tax Law the Finlays are considered residents because they were in Australia for 6 months or more during the 2006/2007 tax year. They also meet residency requirements because they met one or more of the three statutory residency tests. They are considered residents because they maintain a residence in Australia, have resided in Australia for 6 months during the tax year, and they contribute to the superannuation retirement fund.
The biggest question to answer about residency and foreign income is what is taxable and what is not taxable. It has already been determined that the Finlays meet residency requirements for tax purposes. Although the tax forms ask for foreign income and foreign taxes paid on those earnings, the tax forms do not explain why. The first determination was that the income was earned in a country that has already taxed the income. If the foreign income was earned but not taxed it would be subject to taxation by the Australian Government. ...
d States and Australia was created for "the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income" (Australian Taxation Office website). This protocol covers all aspects of income earned in the United States. Most specifically, relating to this case study, income earned within the United States is taxed by the United States. Any income not taxed is considered taxable income in Australia and residents of Australia are subject to taxation on that income earned. It is very important for the individual to report foreign income and whether or not it was taxed. All records relating to the income and taxes paid should be kept as proof of income earned and taxes paid. Taxation also applies to dividends earned, interest earned, royalties, and capital gains earned in the United States. In this case study Andrew's earnings were taxed but dividends, capital gains, and interest earned in the United States were not taxed so they are subject to taxation in Australia.
Other instance where income may not have been taxed by the United States include the following:
1) the income is less than the amount where taxation begins
2) the income falls into an exempt category in the foreign country
3) a memorandum of understanding exists
4) The income consists of supplements paid by the Australian Staffing Assistance Scheme
5) The foreign country levies a tax but does not have a system in place to collect those taxes
TaxPack and Forms.
This case study was completed using the Australian Taxation Office's "TaxPack" retrievable from their website at The TaxPack for individuals, supplement section, and Business and professional items schedule for individuals 2007. In addition, the rental property worksheet was used to ...Download file to see next pagesRead More
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