Case study 1: Residence and source
Regulation related to Australian Income Tax states that when an individual have a perpetual Australian Visa then that individual will be considered as Australian citizen. If the person who is having a permanent visa, if he is travelling outside Australia then he should have the travel authority on that Visa and he/she should have Intention to come back to Australia.
There are four conducts to test the housing status as per section 6(1) of the Income tax valuation Act 1936, these examinations are as trails:
- Resides test that is nationality test.
- The Residence test for residency.
- 183 days law.
- The test of giving up work.
- If another student of different country comes to Australia for studies and the course duration is more than 6 months then he will be considered as Australian for the tax purpose.
- If a person visits Australia enduringly then he will be measured as resident in Australia for the determination of tax.
- Any person coming on vacation to australian and staying less than six months then he or she wont be considered as resident of Australia.Any stay above six months will be considered as fulfilling residency criteria. (Australian Government, 2017).
By applying these rules to the present case it is clear that Kit was permanent resident in Australia as he was from Chile but he came to Australia for work and he has also purchased a house in Australia which his intention to permanent reside in Australia. Kit has joint account with his wife where he gets his salary, which is chargeable to tax under income tax Act in Australia. Dividend income Kit is also taxable under Australian Income Tax act.
Conclusion: in a concluded way it can be supposed that after significant the delivery of income tax act that Kit should be a permanent denizen in Australia. Hence, all his income should be chargeable to tax in Australia together with his other income from dividend produced by financing in portfolio in Chile engendered from outside Australia i.e. his salary income together with his Dividend income should be chargeable to tax in Australia (Warbourton, 2017).
i. If the establishment sold its possessions as part of occupational with the substances for which it has been formed then the quantity which has been conventional in excess of the expenditures amount of attainment will be measured as profit and gains from professional. In this case it is reflected that the matter of the recognition of a capital asset, and whether or not the return from a deal of assets to be subjugated for the sale of minerals was reckonable as normal income or capital in nature. In this case the company wanted to acquire copper demeanour land, mines, and land also, the company was made with the objects to acquire copper and other mines, mining rights, lands in California or else in unites states of America and to sell, lease or dispose off any property rights and undertaking for limited interest the whole or any part of it. Hence when it is well-known in this case that a establishment traded and sold its belongings as a fragment of commerce with the objects for which the corporation was incorporated then the additional income received over acquirement sum will be income from business and not capital gain (PBR 8095, 2017).
Case study 2: ordinary Income
ii. In this case the company was incorporated for acquiring coal assets. But the taxpayer has not done mining activities, although it may have done mining for a short period. These land were sold, and it acquire further land on which it did the mining. The company was engaged in other activities except mining such as subdivision of land to make it attractive to the purchaser. The finding in this case was that assesse was engaged in realising capital asset. Income from sale of asset not to be said as income of revenue because it is primarily on capital account. Later on, it was appealed by the commissioner from this decision but this appeal was cancelled by the high court (Australian Government, 2017)
iii. The facts of the case are that the assesse purchased a land for the stakeholders of the company access to shacks which they occupies at the beach front and not for profit making by sale or for any other purpose. But they later on engaged in subdivision of land and this changes the purpose of business of taxpayer. The high court then held that there were three points can be taken into consideration for the decision to be passed those were whether there was a business of land improvement in ordinary sense, its use and association. It was held that the assesse used the land for more than advantageous realisation of capital asset and hence its activities claimed to be business of land development. Therefore, the dealings therefore given rise to able to be gauged income under income tax law. But it was ruled out later on, and it is not to be considered as revenue as it is mainly on capital account (PBR 3062, 2017).
iv. In this case also the question were concerning whether the activities of the assesse amounts to the profit making activities that is whether it relates to business or whether it is just realisation of capital asset and is on capital account. Court has given its decision mainly because of following reason. There are two factors, which determines this situation they are when the taxpayer likely and envisioned to originate profit which would be reckonable. Other was due to the transaction, which was carried for business, or which is happened in relation to business operation. and the loss arises due to that transaction. From the facts of the case, it was evident that the taxpayer did not get any kind of advice regarding how to run the business of property development profitably and hence the motive of profit was missing from the facts, which were given in the case. In the present case there was no assessable income and it becomes necessary to know whether that income needs to be earned probably in future, but as the taxpayer did not get any advice to run the business profitable hence profit earning motive was drawn from the case (Bitomsky, 2017).
Regulation related to Australian Income Tax Act
v. In the present case the fact was that the development and subdivision takes place due to the assesse necessities and increasing loan. There was no rational plan to gain the return from such subdivision and development. Also the taxpayer did not undertake to develop or to make any dwelling houses in order make them attractive for selling and to make them a part business, he just did what was very important to take the municipality sanction to increase the presentation of individual allocation for deal as empty land.. But at last it was concluded that the taxpayer did nothing with the land accept which was necessary to acquire the municipality approval. Hence the court held that the land was acquired for residential purpose and not for the business purpose.
vi. In this case it was held that the court has given its judgement in November 1988. In this case there were understanding of earnings from the sale of terrestrial and predictable sale of 50% of the issued capital of Malgor Pty Ltd. The choice was in the errand of the corporation as it was held that the arrangement was not suaitable to the opinion where the auction must be accomplished. Hence the case was obvious in the errand of the company.
vii. In Crow v FC of T88 ATC 4620 it was held that purchasing of properties and then division of those acquired properties were of on-going nature and had the attributes of on-going business of land development. The court opined that the taxpayer purchased and sold the land only for the persistence of making profit. Taxpayer’s activities were giving clear clear hint of carrying on activities related to business and profession. Hence the revenue which has been consequently resulting from such happenings would be chargeable to tax under sec 25(1) (ITAA 1936). The main of discussion under this case was to know whether the sale of land amounts to business activity by the taxpayer and whether sale of land amounts to business operation and income generated from such activity is a business income which is chargeable under the section 25(1) (ITAA 1936). The transaction cannot be a isolated transaction but it was the transaction which comes within the purview of ordinary business activity. In this case the evidences suggest that the business in property development were there and hence the income generated from the these transaction were normal income of the business and hence chargeable under section 25(1) under (ITAA 1936) because there were profit motive in the activities carried on by the tax payer. In this case taxpayer was involved in purchase and sale of properties which was of continuing nature, there were existence of profit motive in the activities done by the taxpayer. Hence point of decision was whether the profit earned from the sale of land were to be chargeable to tax or not and the conclusion of this has been discussed earlier.
viii. In the open case it was seen that there were two people Bradley and Brett and both of them wanted to build three town households on the avenue property of Addison. Out of the three houses, one of the house Bradley and Brett wanted to sell for the purpose of profit. The two houses which were left were used for residential purpose. In this case the verdict was delivered that the house for sale was not to be taken as reckonable income and the earnings which will be consequently resulted from the sale of house will be chargeable to tax.
References.
Wine garden, W. (2017). PRO CON[online] Available at: https://www.pacificresearch.org/article/oct-4-pro-con-are-tax-cuts-best-for-america/
[Accessed 9th April. 2017].
Australian Government. (2017).Australia permanent resident information. [online] Available at: https://www.border.gov.au/Trav/Life/Aust-1 [Accessed 9th April. 2017].
Warburton, D . (2017).The law society . [online] Available at: https://cdn.tspace.gov.au/uploads/sites/70/2015/07/30_The_Law_Society_of_New_South_Wales.pdf [Accessed 9th April. 2017].
PBR 8095 (2017). Sale of land . [online] Available at: https://austaxpbr.com.au/document/PBR_8095 [Accessed 9th April. 2017].
PBR 3062 (2017).Assessable income. [online] Available at: https://austaxpbr.com.au/document/PBR_3062 [Accessed 9th April. 2017].
Bitomsky,G (2017).The concept of assessable income [online] Available at: https://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1023&context=rlj [Accessed 9th April. 2017].
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Morse Group, (2017). Selling the Farm Piecemeal[online] Available at: https://www.morsegroup.com.au/files/docs/white%20papers/morse%20group_white%20paper_selling%20the%20farm%20piecemeal.pdf [Accessed 9th April. 2017].
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https://www.austlii.edu.au/au/journals/SydLawRw/1983/9.pdf
https://www.morsegroup.com.au/files/docs/white%20papers/morse%20group_white%20paper_selling%20the%20farm%20piecemeal.pdf
https://www.iknow.cch.com.au/document/atagUio539843sl16716249/casimaty-v-fc-of-t
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