Taxation Law Residency Tax of Stakeholders

Question: Describe about the Taxation Law for Residency Tax of Stakeholders. Answer: Introduction The focus of this study is to understand the liability of tax for Stephanie, Ronald her husband and the liability of tax of Rogan Advertising, an organization established by Stephanie herself. In this respect, it is important to know the nucleus functions, which are allocated to Ronald and Stephanie, which requires proper evaluation with regard to the appropriate ITAA 1997 provisions. A considerable amount of profits is extracted from a contract agreement based from Brazil due to which both Ronald and Stephanie had to settle in Brazil for specific time period. The above information is gathered from the case information provided. Core problem Residency tax of stakeholders The primary concern is to ascertain the residency of tax for Ronald and Stephanie as they have been out of the country for a significant amount of time. The matter is important because the Australian resident income tax received from both foreign and domestic origins are taxed unlike tax residents of foreigners. The money obtained from them acts as a bestowal to computable income. The tests done to determine the residency of tax of these individuals according to TR 98/17 is as follows: Domicile Test The tax payer in concern should be flexible with conditions like; The taxpayer with respect to the 1982 Domicile Act must resume being a resident of Australia. The fixed house of the persons connected will not move from Australia to somewhere else. Reside Test This test is based on the court judgements and the tax ruling tribunals to ascertain the status of tax residency of visitors who do not acquire Australian domicile (Woellner, 2015). 183 Day Test The test is done for people who are not tourists. The two important conditions to comply with for clearing this test are: The concerned taxpayer requires living for a period of 183 days minimum in Australia. The taxpayer should expect to live in Australia in the near future. If one fails to meet any one of these criteria, then they will not pass this test (Sadie et. al., 2015). Superannuation Test The mentioned test is only for the government officers of Australia working outside Australian territory, Tax residency is calculated based on benefaction to the assigned superannuation fund with negligence to the other conditions discussed above (Coleman, 2011). In light of the mentioned examinations and the relevant information, the tax residency status for Ronald and Stephanie needs to be calculated for FY2016 and FY2017. The appropriate test in Stephanies case will be Domicile Test. This is because both Ronald and Stephanie are from Australia and so will have an Australian domicile. Now the important factor to be taken into account is whether the shifting of couples to Brazil really changes the status in permanent abode. In respect with Income Tax 2650, an estimated living of two years or less is thought to be transitory while two years or greater in thought to be permanent. The estimated time limit of staying for the couple is thought to be near 1.5 years. Moreover, the abode in Australia is given out for lease and not sold and the bank account in Australia is working for the whole time period where payment of rent is credited. The settlement for the lectures is transferred into the Australian account. The professional allies are also preserved with Australia as the stakeholders predict the business to evolve when they return. So, the wish to come back to Australia after the work gets over is imminent (Deutsch et. al,, 2015). Thus the need for the calculation of the tax for Stephanie and Ronald are important. Stephanie The estimated calculation of income for FY2016 is as shown below. Annual remuneration from Rogan Advertising = $ 80,000 The said income is regarded as normal income in correspondence with Section 6(5) of ITAA 1997 because it is calculated from employment/business. As she is a tax resident and so income from employment from foreign sources will be computable. Estimating that Stephanie has a share of 50% in the house thus 50% of payment of rent will be normal income. Rent receipts = (450/2)*52 = $ 11,700 Computable income from Monash University = $ 24,000 It is also in knowledge that any income of the organization after subtracting the expenses will be given out as dividends but the information about the income and expenditure of the organization is not provided, it is thought that the company does not make any profits and breaks even for both FY2016 and FY2017. Total computable income for FY2016= 80000 + 11700 + 24000 = $ 115,700 Total computable income for FY2017 = Employment income + Rent income (depending upon the exact date of arrival) + Unfranked dividends from the organization (predicted to be zero) Expecting that both will come back home by on 31st October 2016, the payment of lease will be receivable for 17 weeks. Hence, computable income for FY2017 = 80000 + 17*(450/2) = $ 83,825 Ronald The estimable income for Ronald would essentially comprise of the information comprising of his tax status as an Australian for both the years. Income from Employment from Rogan Advertisement ($ 80,000 pa) Income from Rent according to the stake in the house (Assumed to be 50% thus $ 225 per week) Interest credited to account in Australia (predicted to be zero). Interest ctredited to joint account in Brazil (predicted to be zero). Unfranked dividends to 50% of the net profits of the organization (estimated to be zero as no data is available on income and losses). The above said information will be normal income as per Section 6(5) of ITAA 1997, Thus, computable income in FY2016 = 80000 + (450/2)*52 = $ 91,700 Computable income in FY2017 = 80000 + 17*(450/2) = $ 83,825 Rogan Advertising The desired company is Australian since both the owners of the organization are Australian themselves. This reason enables the company to obtain variety of reductions in the profit obtained to reach at the estimated income for each of the year FY2016 and FY2017. Information Required The following information is necessary. Exact date of return for the couple Income from interest received on the bank account of Australia and from Brazilian Account. Reports of the financial part of the organization, to calculate the unfranked dividends to be paid to both Ronald and Stephanie. Share of ownership for both individuals about the house in Australia. The actual date of lecture in Monash University in Brazil. The preparation of house in Brazil and to calculate whether any fixed assets has been obtained or not. The management team needs to get involved in Roger Advertising when both Stephanie and Ronald are in Brazil. Reference List Barkoczy,S 2014, Foundation of Taxation Law 2014,6th eds., CCH Publications, North Ryde CCH 2011, Australian Master Tax Guide 2011, 49th eds., WoltersKluwer , Sydney Coleman, C 2011, Australian Tax Analysis, 4th eds., Thomson Reuters (Professional) Australia, Sydney Deutsch, R, Freizer, M, Fullerton, I, Hanley, P, Snape, T 2015, Australian tax handbook 8th eds., Thomson Reuters, Pymont Gilders, F, Taylor, J, Walpole, M, Burton, M. Ciro, T 2013, Understanding taxation law 2013, 6th eds., LexisNexis/Butterworths Sadiq, K, Coleman, C, Hanegbi, R, Jogarajan, S, Krever, R, Obst, W, and Ting, A 2014 ,Principles of Taxation Law 2014, 7th eds., Thomson Reuters, Pymont Woellner, R 2015, Australian taxation law 2015, 8th eds., CCH Australia, North Ryde