Question:

You are required to prepare a paper tax return for an individual taxpayer for the 2014/15 income tax year and compile a supporting report to the client discussing the various issues involved in preparing the return.

Answer:

Introduction

A tax payer who is a resident of Australia is legally responsible to income tax on his earnings from every source. Brian Roberts is an Australian resident for tax purpose, so he normally have to state all his incomes he had received in both Australia and worldwide on his tax return for the year 2014/15 income tax year. (ato.gov.au, 2015) Here we will prepare a report on tax return for a taxpayer of an Australian resident, Brian Roberts, for the 2014/15 income tax year and will discuss about the concerning issues related to this while preparing the report. Brian Roberts is a 37 years aged Australian resident for tax purposes. He is a teacher by profession. Brian had utilized the services of an unregistered tax agent who was his uncle in order to help him complete his 2013/14 tax return matter. According to Australian Taxation, using unregistered agents are of huge risks. When some uses an unregistered tax or else BAS agents, that person is taking huge risks because the agent one using might not have the appropriate might not have the educations or knowledge as required of an agent who is registered, and might not have the suitable qualified insurance indemnity cover. In addition, if they are neglectful then one would not be protected under the safe harbor provisions defined in the Taxation Administration Act 1953. (tpb.gov.au, 2015)

“Case study – Kate gets caught out

Kate saw a leaflet advertising tax services. The leaflet was distributed by Bob who claimed that he could obtain deductions of up to $3,000 for clients. Kate used Bob to complete and lodge her tax return and paid him a fee for providing this service. Bob was not registered as a tax agent with the TPB. When reviewing Kate’s tax return, the ATO found a number of errors and issued Kate with an amended assessment. Kate ended up having to pay additional tax and administrative penalties. Following a complaint from Kate and other people who used Bob’s services, the Tax Practitioners Board (TPB) commenced proceedings against Bob in the Federal Court for advertising and providing tax agent services for a fee while unregistered. The Federal Court found that Bob had breached the Tax Agent Services Act 2009 and ordered him to pay a penalty of $32,000.” (tpb.gov.au, 2015)

The ATO had forced $146 in general interest charges or GIC, which Brian Roberts paid it off on 2 nd February, in 2015 because he had paid of his 2013-2014 income tax legal responsibility not on time. GIC may have an effect on income tax return. Generally, one might claim an income tax deduction for general interest charges in the year when the general interest charges had been incurred. On the other hand, where general interest charges incurred was claimed as a deduction or could still be claimed as a deduction, one required to reveal remitted interest earnings in the tax return in that year the remission had occurred. (Australian Taxation Office, 2015)

Assessable earnings (macmillan.com.au, 2015)

To decide on the sum of income tax to be paid by a person, the subsequent method is made use of to estimate their chargeable incomes: “Taxable income = assessable income – allowable deductions”.

The, assessable incomes would comprise of the following things: wages and salaries, other allowances from employer like, travel allowance, tips for example intended for waiters, interest lying on investment, the rent received from properties, profits from the business, capital gains on the sold assets in few cases, unemployment benefit.

The above mentioned list did not left many types of profits exempt from the taxation. Though, there are few receipts by persons that are not subjected towards taxation. These are gifts, gambling win or lottery earnings. Thus, all earnings from commerce are subjected towards income tax.