Australian Taxation Law Incorporate Business Federal

Question: Describe about the Australian Taxation Law for Incorporate Business Federal. Answer: There is quite a variety of taxation in Australia which both organizations and individuals may be required to pay charges or taxes to all the levels of government; viz a viz, federal governments, states, and local. These said taxes tend to be collected in order to recompense transfer payments as well as public services. The most important form of taxation in Australia is the income taxes which are collected by federal government via the Australian Taxation Office (Teng, 2012, 295). In most cases, majority of an individuals business is inclined to receive an assessable tax, which includes foreign income. Nonetheless, there exist some exemptions such as the amount which one may have earned from prizes or even hobbies, which are not related to the said business. Due to the verity that assessable income is that which is subjected to tax, when one is calculating their businesses assessable tax, they ought to include the amounts received in the ordinary course of their business (Gee, 2008: p.353). It is imperative to note that assessable income simply refers to the portion of an individuals income that is inevitably subject to tax (Aarbu Thoresen, 2001: p.325). Looking at the case of client #3, he is an Australian resident who had served in a foreign countrys Navy for the period of the first Iraq War which lasted between the years 1990 to 1991. Due to the fact that he was not a resident of the foreign country, he received an ex gratia lump sum payment of $30,000 on the 26th February 2016. Suffice to mention that this particular payment was exempt from taxation in the said foreign country. However, it is imperative to note that if one is an Australian resident, due to tax purposes, one ought to generally include the income from all the respective sources in their assessable income despite having earned the latter either overseas or Australia (Boccabela, 2000: p. 82). It is required by law to mandatorily report ones assessable foreign income, even if at all it was already taxed in the nation where one earned it. In most instances, foreign income that tends to be exempt from tax in Australia may possibly be utilized in order to calculate the sum of tax that one has to pay on their income (Teng, 2012, 300). Having this in mind, client #3 ought to convert the foreign income which is $30,000 and deductions into Australian dollars. In general, the deductions which client #3 claims ought to be converted at the applicable exchange rate when he pays or incurs the expenses. In general, income is supposed to be converted at the rate of exchange when client #3 received or earned the income, or any that occurs first (Gee, 2008: p.362). On the other hand, client #3 may utilize an average exchange rate in order to convert his deduction and income into Australian dollars if at all the said rate is sensibly similar to the rate that he would have to utilize (Aarbu Thoresen, 2001: p.330). Furthermore, client #3 may be qualified a foreign income tax offset in his income tax assessment for any given taxes which he paid in the nation which he earned the said income. References Aarbu, K.O. and Thoresen, T.O. 2001. Income responses to tax changes? Evidence from the Norwegian tax reform, National Tax Journal, 54(3): 319 335. Gee, G. 2008. The 2001 and 2003 tax rate reductions: An overview and estimate of the taxable income response, National Tax Journal, 61: 345 364. Teng, J. 2012. The elasticity of taxable income in New Zealand, Fiscal Studies, 33(3): 287 303. Boccabella, D. 2000. Proposed cash flow/tax value method of determining taxable income: Structure and application, Journal of Australian Taxation, 3(2): 82.