Essay on Determining Assessable Income

2521 Words Oct 17th, 2011 11 Pages
Introduction.
Individuals thrive off producing income in order to meet their day-to-day needs and wants. Tax is imposed on these income producing activities to provide the government revenue. This involves identifying the various ranges of assessable income. The legal question which must be addressed is any of the income that was earned by these individuals assessable income under the Australian income tax assessment act? To answer this question, we must determine if a nexus exists between Australia and the person(s) being taxed by applying the concepts of Residency, Source and Derivation.
1. Residency.
Residency is important because it is the basis as to how the government will tax individuals.
S6-5(2) and s6-5(3) ITAA97 states
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Therefore, it can be stated that the income produced by the couple is solely sourced within the country of Dubai. As such, under source of income, the Australian taxation office cannot impose tax on the income relating to work completed outside of Australia as it is not assessable.
2.1.1.2 Income generated from rent of the house located in Australia.
However, the income generated from rent of the house located within Australia requires further deliberation. The question which stems from this is whether the income produced from the rental property should be treated in the same manner as the income from the contract. Under s995-1(1) ITAA97 which states that ‘ordinary and statutory income has an Australian source if, and only if, derived from a source in Australia for the purposes of the Income Tax Assessment Act 1936’
In this particular case, the house is rented out prior to leaving for Dubai which indicates the house is situated in Australia. This means, even though the owners of the property are occupied in another country, the service of accommodating tenants is being provided in Australia.
Therefore, all the rent giving rise to income is sourced directly within Australia; and thus, assessable.
2.1.2 Financial period from July 2008 to 15th January 2009.
In addition, based on s995-1(1) ITAA97 income has an Australian source if it is derived from a source in Australia. In referring to the facts, the couple was in

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