Taxation Law and Compliance Assignment Help

Question A: Advise Glenn and Andrea which, if any, of the amounts received by them may have income tax implications.

Introduction:

The Australian taxation system is one of the most efficient taxation systems in the world. The Australian tax payers are widely divided into personal income, business earnings and capital gains (Woellner et.al. 2012).

The present scenario concerning Glenn and Andrea falls under the category of ordinary income which is more in line with a business earning.

Analysis:

Ordinary income as defined by the government of Australia is an income which can be in the form of cash or cash equivalent. The income must be a result of some activity or effort undertaken by the tax payer or from property investments or any other form of investments. An important regarding this law, which is critical to the case is the fact that capital receipts, gifts and other forms of voluntary income are not covered under the subset of ordinary income. The law also suggests that the business activity should be conducted in an orderly and systematic fashion in order to be classified as a commercial activity (Woellner et.al. 2012). The law also clearly mentions that any activity done as a hobby cannot be called a business and hence is not liable for tax.

Considering the case of Glenn from the case let, it is evident that Glenn has the job of a part time doctor. Though it is a part time job, Glenn is still providing professional services. It can be argued that Glenn is not doing the job as a full time profession and is doing this as a hobby in which case all his earnings and the additional benefits that he gets due to his practice are not liable for tax. However, though Glenn is a part time doctor, the services provided by him are on a regular basis and it is his major source of income and hence it can be considered as a taxable activity and the profits that he gets can be classified as liable to tax.

The gifts that he gets from his clients over and above his fee are a matter of contention. The gifts including the chickens that he got is also a cash equivalent and is legally taxable under law as it is not a gift given on a special occasion or out of love but as an add on to his regular fee for his service. Hence Glenn must try to put an approximate value on the cash equivalent of the gifts that he receives from his clients for his service over and above his fee.

The income from the gardening activities of Andrea and Glenn is another point of contention. They started to grow their own vegetables for the purpose of their own consumption, this is clearly not taxable as it is not functioning as a business and they have no intention of deriving profits from the same. However as the productivity increased and they decided to sell the produce in the local markets for profit, it becomes a subject of interest in terms of tax liability. According to the case, they have a regular income of 60$ a week from selling their weekly produce at the local markets. This amounts roughly to 2800$ a year, which by itself is not liable for tax as it is below the taxable income limit as per the government of Australia.

Conclusion:

To conclude, Andrea and Glenn should consider the income from their gardening and the non cash fee that Glenn receives as part of his practice to their regular income and this income should be ideally added to their regular tax liability competition during the time of filing their taxes.