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  • Subject area(s): Engineering
  • Price: Free download
  • Published on: 7th September 2019
  • File format: Text
  • Number of pages: 2

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Introduction

Taxation is a major government income that has to be treated with complete respect regardless of the protocols or the employment class. There is a great reason to pay respective taxes since this is what makes our government and organizations to stand on their grounds and deliver the needed services be it infrastructure or salary payments among the others.

As provided by the Australian taxation laws the individual residing in Australia has the mandate to pay the tax as per provided in the law depending on the category an individual is or depending on the amount and type of the amount earned.

Assessable income is the amount the individual makes during the normal running of the business or say other amounts received in the normal course of running the business these will include all the plans of making extra money by selling goods or even providing services with the aim of making the profit.

Sauces of law

There are three sources of law in Australia which govern and maintain the collection of revenue these sources of law are

•    STATUTE

Which is the main body that collects the revenue in the states and is under the commonwealth it has two branches which are Income Tax Assessment Act 1936/1997 and Primary source

•    COURTS

Which oversees the collection within the various states its subjects are High Court and Federal Court and Primary source

•    TAXATION OFFICE

Then finally in the lower sections are the taxation office that has direct contact with the taxpayers and it issues the rulings such as Rulings - Secondary source and merits of Rulings

In the case scenario Raelene is a member of the civil service and as provided by the law she is a recognized tax payer in the Australian states. I.e. she pays tax which is directly deducted from her income which is basically salary. Being a teacher she was recognized as a tax payer but she had to take a twelve-month leave without pay these exempted her from the list of the taxpayer as provided in the Australian taxation office. But to support herself and to take care of her well-being she sourced some other means of earning to get an income.

Among the first things that Raelene did in her aim of raising the money she needed, she went on and organized the fundraising events with her friends. In these events, she would buy the meat from the butcher at lower cost and then she would sell the meat after being made into the finished product i.e. barbecue to her friends and retain the profits for her upcoming events. First Raelene is purchasing the meat from the butcher at a lower cost, which as per the Income Tax Assessment Act of  1936 the low law states that every product purchase in the idea of making the profit in a business shall and will be taxed as pre the law  provides. Raelene money raised from the barbecues is to be included in the assessable tax and she should pay tax as per the Australian taxation office demands.  Raelene also went on to taking tickets to the theater at a lower price as she was allowed to take at a lower price because she would take many tickets at a go then she would then sell the tickets to the fellow colleagues and friends. These also were an amount to be included in the assessable income since it involved transactions that had profit at the end. As the statute law says that any income that is raised in the form of business transaction as profit is subject to income tax.

Deductions are allowed from assessable income and the resulting amount is that which is referred to a taxpayer’s taxable income.

Ordinary concepts help us to come up with the ordinary income. There are many factors that can indicate whether or not an amount is an income according to ordinary concepts. These are the things that determine the amount earned if it lies within the taxable limits or not. This also allows the people to make their business entries and accounts payments to the tax departments.

Income year can be affected by the source of the income and whether the income has been derived in a case scenario like that of Raelene where an amount of income like that raised from the barbecues, trivia night and the tickets selling is included in a taxpayer’s assessable income and also if the taxpayer is an Australian tax resident and if income has been derived.so the 11000$ she made was a subject of income tax which was assessable tax as per the law.  Specific provisions in the income tax legislation can also specify that an amount of ordinary income is to be included in a taxpayer’s assessable income. Income that is not ordinary income and is usually included in assessable income by way of a specific provision in the income tax legislation is referred to as statutory income.

Personal services income

Raelene also made a lot of money from her sporting club through the participation she made the money which is grouped under the personal services income (PSI) these are the monetary value paid for the services offered by an individual for the personal skills used talents and the effort used by the individual any person who receives the PSI are common services ranging from the engineering, technology consultants to service renders. Raelene offering the services she offers to the sporting club, therefore, the funds raised are subjects of the taxation so it is to be included in the assessable income. PSI does not depend on employment and does not affect anyone if he or she is employed or if she is receiving wages or services but it is important to note that its taxable income.

Any income is classified as PSI in the condition where the 50% of the amount earned from a client or a contract is payment for the skills, labor or the expertise offered. Raelene is offering her services and expertise to the sporting club, therefore, the money made is clearly PSI thus the amount paid of 5000$ is justifiable to taxation.

The first thing that Raelene needs to understand Is to work out her income falls under the PSI classification and then access if it falls under the rules special tax (PSI rules) which in these case the amount is clearly under the Psi classification thus the rules apply to this particular income raised from the sporting club.  Raelene will only avoid the payment of tax if she can prove that her way of earning is not under the PSI but in the personal service business (PSB) where there are no taxes applicable but in real sense this application is not applicable to her case since her case is under the PSI and thus tax obligation is on her.

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