You are a Tax Director of Global Accounting & Tax Services. Tamika Red is a new trainee and has sought your advice on the following: a) A client of the firm has enquired about how to treat the income of
You are a Tax Director of Global Accounting & Tax Services. Tamika Red is a new trainee and has sought your advice on the following:
a) A client of the firm has enquired about how to treat the income of Oliver Martin and Erica Ferguson who both provide services to AGL Limited. The client indicates that she is unsure of the type of employment and how to account for the income tax for each person. The client provided Tamika with the following information:
Oliver Martin provides accounting services for the company. AGL Limited provides him with a computer. He works from Monday to Wednesday only. He is paid at the end of each month. To obtain his payment he must provide the company with an invoice detailing the days worked. He is paid a daily rate of $7,000 for 8 hours of work. Should he need to work overtime approval is required. He is paid an agreed rate for overtime work. Tasks are assigned to Oliver by the Head of Reporting & Finance. He reports directly to the Head of Reporting & Finance. Oliver is entitled to vacation leave, sick leave, however, he does not participate in the company's pension plan.
Erica is an on-call machine technician. She repairs the company's machines in the factory. She uses her own tools. For each machine serviced a flat fee is paid on a monthly basis. Erica is also paid separately for repairs. Each month she provides a report to the Operation Manager for the work done as well as her invoice for payment. Erica performs work for several other factories not connected to AGL Limited. She is provided with a lunch card which she uses to obtain lunch at the company's canteen. No other employment-related benefits are provided.
(a) Provide guidance to Tamika on the factors she should consider in determining the type of employment.
(b) Based on your own assessment advice on the type of employment for each person, advise Tamika on the correct way each person's income tax should be accounted for.
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