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Aug 4, 2023


  • All questions must be answered by using the answer boxes provided in this paper.
  • Completed answers must be submitted to Blackboard by the published due date and time.
    Please ensure you follow the submission instructions at the end of this paper. 

Solution 1

Due to the global mobility of people from other countries to Australia, the issue of Australian tax residency has become a controversial issue for many taxpayers in Australia. To be an eligible resident of Australia an individual needs to fulfill the following criteria:

  1. he must be residing in Australia with a valid visa for the past 4 years,
  2. He should be a permanent resident and a citizen of New Zealand for the past 1 year
  3. He has been traveling out of Australia for less than 12 months in the last 4 years and less than 90 days in the last 12 months (Breunig & Sainsbury, 2020, p. 35).

In the given situation, the residency of Jack would be Brisbane. This will be because he is having a permanent job and is a permanent employee at Brisbane’s office. Jack is also having a high interest-bearing bank account in an Australian Bank. Earlier, he used to receive his salary in Fiji’s bank account which was shifted to the Australian bank. Hence, the source of income is clear as per the Australian rules and it will be taxed accordingly.

Apart from this his income arising from renting his own house in Fiji will be taxed in a country which is having a higher tax rate. As per the reports it has become a trend for owners to rent their flats in Fiji on rent for earning additional income. Also, it will be considered a source of outside-country transactions which will attract therefore DTAA transactions. The DTAA or the Double Taxation Avoidance Agreement is the agreement that has been signed between two countries to prevent the taxpayers from paying double taxes on both countries, the source country from where the income is being earned, and the resident country of the taxpayer. In Australia and many other countries like the USA, Canada, the UK, etc., the DTAA rate is presently 15% ( Jacobson, 2020, p.82).

Jack is here earning his rental income from Fiji and he is a resident of Brisbane as he is working on a permanent job there. His salary income and his interest income from the high interest-bearing bank account in Brisbane will be taxed according to the Australian taxation system but his rental income will be taxed as per the source country which is Fiji.

Solution 2

The fringe benefits are some special benefits that the employers pay to their employees. It is given in a different form other than regular salary and wages. For Fringe Benefits Tax, an employee can be;

  1. Present, past, or future employee
  2. Director of the organization
  3. The trust beneficiary who works in the firm

Employers can provide fringe benefits to their employees in several ways:

  1. Any employee being allowed to use the office car for his personal use,
  2. Offering a discount on a loan given to an employee,
  3. Giving free tickets to concerts or providing memberships of the gym,
  4. Paying any expenditure incurred by an employee such as paying school fees of kids etc.

However, there are a few items that can not be considered as fringe benefits like paying wages or salary, payments of dividends, employers’ contributions to super funds, payments at the time of termination, and others.

Moving on to the fringe benefits tax, the employers have to pay tax on certain benefits provided by them to their employees’ families or associates.

The fringe benefits tax is different from the income tax and is paid on the taxable fringe benefits amount. The employers are supposed to file a return of FBT and assess their liability on account of FBT for the income year starting from 1st April and ending on 31st March every year. Also, they can claim for deduction in Income tax for the cost of fringe benefits taxes paid by them and also on the FBT paid. In the case of a type 1 fringe benefit, a GST credit can also be claimed by employers on the products that had been provided as fringe benefits.

In the given situation, the fringe benefits tax can be calculated as :

=[(Leased car value * total days) – (Maintenance cost)] / total days

=[(22000*365) – (1300)]/365


Solution 3

An income tax is a fixed rate of the amount that a taxpayer has to pay to the Government on the income or gain of an individual or entity. Some tax laws provide the taxpayer a benefit to reduce the tax imposed on the taxpayer but certain criteria should be fulfilled to enjoy these tax benefits. These tax benefits can be in the form of deductions, refunds, or exclusions. The most common type of tax benefit is a tax deduction. A taxpayer can claim tax deductions at the time of filing its tax; it helps in reducing the tax (Loughead, 2020, p.36).

Divine Paid $5,000 to the Australian Society of Neurosurgeons which comes under professional membership fees. It does not come under tax relaxation, membership subscriptions, professional membership fees, or annual subscriptions are not considered for tax relaxation. Because it is paid to a professional organization and it is not approved by the HMRC.

Charitable donations come under tax relaxation; taxpayers can take a deduction of up to 60%. So she can take benefit of tax exemption from 20% to 60% depending on the type of organization.

Donations of $1,000 to her local neighborhood community house also come under donations, so she can take benefit of a tax deduction of $ 3,000 at the time of tax filing The normal booking fee would be $250 and does not come under relaxation so it will not be considered for tax relaxation (clear tax. in,2022).

E- A person found that in the end, he has to pay many taxes which costs him around 25000 so he finds a way to save taxes by donating 10000 to organizations like NGOs and animal wellness and going on a trip to attend a conference which cost him 5000 and by this way he saved all his taxes to be paid off.

Lastly, she paid the newspaper part which saved many taxes for her and she found out that by donating 500 she was able to save 1500.       

 Solution 4 

Capital assets are those assets that have a useful life of more than 1 year. When capital assets are sold a net capital gain or net capital assets arise. Any profit or loss occurs for the sale of the capital assets short-term capital gain /loss or long-term capital gain /loss. Any assets sold before 24 months of the assets acquired come under short-term capital gain and any assets sold after 24 months of the assets acquired then come under long-term capital gain.

Rohan sold his capital assets within 6 months of acquisition which is less than 24 months so his transactions come under short-term capital gain/loss (Tomillo et al. 2021, p.45). Rohan’s short-term capital gain or loss can be calculated by using the following formula.

Short-Term Capital Gain/loss = Sale consideration of the assets – (Cost of acquisition – Improvement cost of the asset – Transfer expenses)

 Sale consideration of the assets = ($6,000+$1,000+$2,500+11,000+ $25,000)= $45,500

Cost of acquisition = ($5,000+ $3,000+$8,500+$15,000+$5,000)= $36,500

Short-Term Capital Gain/loss = Sale consideration of the assets – (Cost of acquisition – Improvement cost of the asset – Transfer expenses)

 = $45,500- ($36,500-0-0)


  = $9000.

Rohan’s assets acquisition price is $36,500 and he sold his capital assets for $45,500.

So his short-term capital gain is $9000. However, this is the only capital gain. In other words, these incomes from the assets sold are not considered as profit as every capital gain is taxable by the Government. So he has to pay a certain amount of tax on his capital gain i.e. $9000.

Solution 5

A company is a base rate entity for an income year if the aggregate turnover of the company for the income year is less than the aggregated turnover threshold for that income year. Also, the company has 80% of its assessable income for that income year as base rate entity passive income – this clause replaces the requirement of the existence of entities since 2017-18.

For the year 2017-2018, the aggregate turnover threshold was $25 million. For the income year 2018-2019 and subsequent years, it was $50 million. If any company is a base rate entity for any certain income year, then it becomes irrelevant to work out the aggregated turnover for any prior income year. A base rate entity passive income can be a net capital gain or income from interest income from rent and royalty or any sort of corporate distributions etc.

For the income years 2017-18 to 2019-20, the base rate entity companies applied the  27.5% company tax rate. However, it was 26% in the income year 2020-21 and it is 25% at present for the income year 2021-22.

Solution 6

A tax appeal is a common way to solve the conflict that a taxpayer has with the IRS. Sometimes IRS makes changes in the tax return. If someone disagrees with the changes, has the right to challenge the decision through tax appeal law. But for this, there are certain procedures that the taxpayer has to follow. Under common law, there are many circumstances where the taxpayer can bring challenges. Before considering the challenge there are certain things the taxpayer has to ensure The first and foremost thing is taxpayer must owe the tax in audit and should complete the tax appeal procedures under the IRS (Esomeju, 2021, p.34). A taxpayer can also take advantage that is liable for a refund of a tax he paid that is not laid or a penalty he had paid. Sometimes the IRS freezes the assets in the bank of the taxpayer for not paying his/her tax timely. But there is a procedure, before freezing the assets of the taxpayer or putting a penalty on the taxpayer the IRS has to provide notice that in case the IRS fails to provide the notice or violates the law taxpayer can take the help of a Tax appeal (Hawkins, 2021, p.25).

References: (2022). changes-to-company-tax-rates [Retrieved from],for%20that%20income%20year%2C%20and [Retrieved on 25th February 2022]

Breunig, R. V., & Sainsbury, T. (2020). The Australian Tax Planning Playbook: Volume 1. Tax and Transfer Policy Institute-Working paper1.

Jacobson, R. (2020). Tax reform: With the 2020 vision. Taxation in Australia55(2), 79-85.


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