Residence and Source – Determining Residential status and Tax Computation
The case study that is under consideration is mainly focusing on the determination of the residential status as the status of a resident is vital for the computation of tax that can be estimated from the remuneration that is given to the person by the Australian organization where they work (Deutsch 2014). The paper concentrates on a person named Mr Kit who is non-Australian in nature despite living in the country on a permanent basis. According to the “IT ruling 2650 under the ITAA 1997 Act”, the government states that any income that is earned a person living in Australia is kept in for collection by combining the income that is gained from the sources that are available globally.
The paper reveals that Mr Kit is a permanent occupant of Australia even though he was born in Chile and even has a citizenship of Chile. It is known that the income that is earned by the Kit is taxable with regards to the taxation method in Australia because the residing configuration of Australia reveals that a person is taxed based on the earnings from Australia (Grubert and Altshuler 2016). The paper shows that Kit being a citizen of Chile is still staying in Australia as being working for his firm and thereby has been earning his income from the country and therefore it is significant for evaluating the residential occupant of the concerned person so that the government of Australia can easily compute the real tax computation that KIT requires to pay. The analysis of the paper reveals that it is essential to undertake various residential examinations in order to gain knowledge about Kit and thus coming to a conclusion regarding the status of resident (Bird and Zolt 2014). The various tests for examination of the residential status is discussed below:
The computation of the residential stature of a person is mainly undertaken by abiding with the rules and regulations that have been stated in the “Domicile Act of 1982”. The Act explains that the every person has power and the authority to keep the citizenship of any other nation or country. The Act even states down the specific rights and the regulations regarding every person that is useful for understanding the status of resident of any individual (Doran et al. 2013). It is even known that the domicile test is actually a legalized framework that aids in the identification of the present residential status of a person. The case study that is under consideration reveals that Kit purchased an abode in Australia and that reveals that the person has the idea of obtaining the Australian domicile.
With respect to Section 6 of the taxation ruling 2650 of the taxation system of Australia, the laws lays down those taxes are implied on persons who have decided to purchase or construct a house in Australia for an indefinite period (Saad 2014). Therefore, when the domicile individual is located in Australia, he or she is taxable with respect to the law of the country. The analysis of the case specific to Kit, it can be said with respect to Section 6 one of the taxation ruling 1936, the case becomes clear that the concerned person Kit is found to be the permanent domicile of the country (Tran?Nam and Evans 2014). Thus the person can be taxed by the taxation personnel of Australia as the conditions are in compliance with the permanent concept of being a resident of Australia. The other factor that has been discovered that the person along with his family have been living in the country without any interval of more than six months of a year and therefore is in line with the Australian residency act (Taylor and Richardson 2013). Therefore, Kit has been declared to be the domicile of the country and thus is liable for tax payment.
The Domicile Test
The investigation that is under consideration describes that once an individual sustainably lives without any interval for more than six months in a year, the person will regarded as an Australian resident (Sharma, Vandenberg and Hollingsworth 2014). It is discovered that Kit absconds from his place of work for more than a month in every yearly quarter to meet his family. However, the scrutiny of the paper shows that Kit is considered to a citizen of Australia as he had been living in the country without a break for more than six months. The fact can be identified that Kit comes to stay with his family in Australia where he has purchased a house and thereby recognizing the status of the resident (Chapman 2014). With respect to the “F.C of T. v. Applegate (79ATC 4307;(1979) 9 ATR 899” , an individual who lives in the country for a period longer than 183 days is taken a occupant of Australia. The case study shows that Kit’s spouse have been living in Australia for over the period of 3 years and thereby making the individual Kit to be an occupant of Australia. The assessment of the test shows that 183 days test has been satisfied by Kit and therefore another test has determined the permanent occupancy of Kit and thus he is liable to pay for all the taxes that are individual specific with respect to the tax authorities of Australia (Howard, Gordon and Jones 2014).
If a person is found to be a permanent occupant of Australia, he or she is bound to pay taxes according to the “Income Tax Act”. It is seen that Kit gets paid in the account he has created in Westpac in Australia. The company under whom Kit works is even Australian based and thus the money that he receives will be taxable with regards to the taxation law of Australia (Cao et al. 2015).
It is seen that Kit even invests a portion of his income that he receives from the Australian based company in the Chillies investment market and even though he does the same, according to the “Applegate per Franki J 79 ATC”, it is seen that Kit is an Australian resident and therefore requires to give out all the information about his domestic and overseas income during filing the return so that it can be taxed by the Australian Taxation Office (Braithwaite 2016). Therefore it aids Kit from the restriction of the error of double taxation and exceptions of claims because of the contract signed by the Australian Government with over forty countries globally.
The case that is under consideration discovers the in general problem that Californian Copper Syndicate Ltd with regards to their non-refundable properties that are utilized for extracting minerals. The court of law with regards to this case gave out the decision that any revenues gained by any person can be taken as a probable income (Bell and Hindmoor 2014). The results of the case therefore have an impact on the capital that was seen during the period of test but were not taken a adequate finances. The case is useful for the minimizing fraudulent activities that were taken by the mining firms to raise their profitability level (Dixon and Nassios 2016). The court gave a verdict that the deductible profit is only taxable only if there is a sale of property or land.
183 Days Test
The specific reveals that particular business earnings and the various divisions that is gathered from the land sales may taken as quantifiable with respect to the products. The court of law explained that commercial operations during the sale of land could be considered as capital asset apprehension (McClure, Sinclair and Aird 2015). The earnings that are of any kind that arises from the selling of land according to the tax authorities of Australia is regarded as taxable. The conclusion states that operations regarding the land sales are taken as capital asset apprehension.
This case explains that the cash that is created from the selling of land has the nature of being a capital or not. One of the renowned case has been the Mason, Wilson and Morphy which discovered with respect to Section 25 (I) that whichever earnings that is created from the property sales is necessary to a property of an individual (Agnew 2013). The money of the individuals who pays tax reveals that apprehension of revenues and properties does not aid in the value evaluation. The synopsis of the decision says that the court is that the earnings are required to be evaluated with respect to the evaluated income of the taxpayers in regards with the standard principles of accounting.
This case shoes that income from the trading of properties that are subdivided is computable under Section 25 and 26. It states that the property sale income because of any business loss can even be taxed. The sale of asset due to losses in farming and the income earned from that is even taxable (Stewart et al. 2015). It can be stated that the level of apprehension is in regards to the nature of earnings from land.
This is a case that portrays the actual transformations in tax that requires to be paid during the segregation of a property that is old and trading them off at during time by an individual. It is essential to portray that the apprehension of the capital asset and the individuals were not doing any business in the concerned land (Boulus and Dowding 2014). The division of the land was done in order to gain the full potential of the land and undertake exact trading that restricts the land to come under the section of capital gains.
This case revealed that the intention of land is not always making profit even if it was bought for making profits (Marsh, Lewis and Chesters 2014). It reveals that people who purchase land in order to make profit requires to pay off additional taxes with respect to the ordinary concepts by looking at the sale earnings profit.
This is a case that portrays about a land that was bought for the intention of farming but later on was divided and sold in order to earn revenue. The court therefore said that the earnings from the sale of land will be granted as income and tax will be applicable over the profit (Abraham, Marsden and Poskitt 2015). The proceeds are sold in a methodical way, which enhanced the owner income.
Income Tax Assessment
The persons who are accountable in this case is alleged of altering an old house to a new one to gain the profit from the proceedings of the sale. The court explained that the individuals paid tax over their profits from sales of the altered old property. The previous property was not kept for profit making purpose. The purpose of the individual is taken into consideration for the renovation of the property to sell it off.
Reference List
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Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, 109, pp.1069-1075.
Sharma, A., Vandenberg, B. and Hollingsworth, B., 2014. Minimum pricing of alcohol versus volumetric taxation: which policy will reduce heavy consumption without adversely affecting light and moderate consumers?. PLoS One, 9(1), p.e80936.
Stewart, M., Moore, A., Whiteford, P. and Grafton, R.Q., 2015. A Stocktake of the Tax System and Directions for Reform: five years after the Henry review. Resource, 56(2), pp.244-259.
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Tran?Nam, B. and Evans, C., 2014. Towards the development of a tax system complexity index. Fiscal Studies, 35(3), pp.341-370.
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