HI6028 Taxation, Theory, Practice & Law Sample 4

Case Study 1 Residential status and source

The system of Taxation in Australia is such that the income tax of a person is charged based on several important factors namely, the business income of the person, capital gains and also the salary of the person. The procedures for the collection of taxes are also very strict in Australia since the main revenue source in Australia is the taxation system. For the smooth flow of revenue collection, the Australian Government has hired Taxation officers to collect the taxes smoothly. The Officers must collect the taxes and deposit them to the Government on time. The rates of taxation in Australia vary from resident payers to non-resident payers. To collect tax it is very important to know whether a person is a resident of Australia or a non-resident.

According to the 9995-1 ITAA95 Act, a person is an Australian resident if he efficiently follows the following characteristics- superannuation test for common health, domicile test, 183-day test and residential test. The Tax officers must find out the proper residential status of a person in Australia before collecting the income tax (Bell & Hindmoor, 2014). To determine the status of residence of a person in Australia, the following tests are performed:

Everything You Need To Know About Alliterations

The primary test of tax residency in Australia is known to be the resides test. There are several circumstances based on which a person is considered to be a resident in Australia and falls under the income tax system of Australia. An individual is considered to be a resident of Australia if the person is a migrant if the person is studying in Australia, if the person is a tourist in Australia and also if a person is employed in Australia based on the employment contracts. If these conditions are applicable then the person can be considered to be a resident in Australia.

Behaviour while staying in Australia

In determining the residency test of a person the behaviour of a person is a very influential factor. Behaviour in actuality means the domestic and the economic affairs that are a part of the person’s life.

One such behaviour is the day-to-day activity that is carried by a person while staying in Australia. In the case of residence, the situation of a person is taken into account to determine the residency status of the person. The following are the factors in detail that are to be considered to determine that the person is a resident. These are the:

Intention and purpose of the person to be a resident in Australia, that is a person might have no intention to stay in Australia but his bank account, his property lease or property owned belongs to the address of Australia and so he will be considered to be a resident of Australia, though he might have no intention to stay in Australia ((Taylor & Richardson, 2013).

Leadership and Management in Healthcare Assignment Sample

The presence of the person’s family in Australia will also make the person a resident of Australia. This means that the person might stay outside Australia for employment or any other reason, but his family stays in Australia. In this case, the person will be considered to be a resident of Australia even though he might not stay with his family all the time in Australia.

The way a person maintains his residential property will also determine whether the person will be considered to be a resident of Australia. For 0065ample if the person owns a house in Australia and pays the electricity, and phone bill to the government of Australia then he will be considered to be a resident of Australia.

A person who is not residing in Australia has to go through the following tests to prove that he is a resident of Australia:

Domicile Test: A person will be considered to be a resident of Australia if his residential address is that of Australia that is the person is staying in Australia (Saad, 2014).
183-day test: A person who has been a resident in Australia for 183 days or more will be considered a resident of Australia. It would not matter if the person is continually residing there or maintaining breaks.
Superannuation Test: A person who has been a government employee of Australia and has been transferred to any different location as per the requirement of the work, then he/she will be considered to be a permanent resident of Australia (Taylor & Richardson, 2013).

PM614 Organisational Management

However, it should be kept in mind that a person will be considered to be a resident of Australia if any one of the above tests is satisfied.

In the case study mentioned Kit is a resident of both Australia and Chile. He has his family, his wife and children who reside in his house in Australia. Though his work location is in Indonesia, he has been recruited by a company in Australia. He gets a holiday of one month in every third month of his work and comes to Australia to spend time with his family. Thus, in this case, determining the status of Kit as a resident in Australia is difficult. But with the information on the laws of the Australian Taxation system, it will be a bit easy to judge the status of residence of Kit.

Determining the status of residence of Kit based on the tests:

Test of Residency: In Australia, the primary test of tax residency is known to be the resides test. In this test, a person has to reside in Australia, to be considered to be a resident of Australia. But in the case of Kit, he does not stay in Australia as for work he has to stay in Indonesia. So he needs to go for another set of tests.

Test of Domicile: In this test, a person has to have a residential address to that of Australia and in the case of Kit, he has purchased a home in Australia where his family stays. So he got the residential address of Australia and will be considered as a permanent resident of Australia.

183- Days test: In this test, a person will be considered to be a resident of Australia if he has stayed for 183 days minimum in Australia. But in the case of Kit, he has not stayed in his residence for 183 days and he just comes for a month to visit his family in Australia. So if this test is taken then Kit will be considered as a nonresident of Australia.

LAW 835 – Transactional/M&A Due Diligence

Superannuation Test: In this test, a person will be considered to be a resident of Australia if he is a government employee and has been shifted for government work in some other location. In the case of Kit, he works for a private company in Indonesia and has no relation with the Government sending him out. So under this test, Kit will be considered as a nonresident of Australia (Burke, 2012).

With the tests being done completely, it is now easy to determine the status of residence of Kit. Kit was born and brought up in Chile and he has a permanent residential address in Chile. But Kit has no intentions to stay in Chile for which he has purchased a house in Australia. Even his family also stays in Australia. So considering the overall case of Kit, it is clear that Kit wants to stay in Australia, as per the Domicile test. So in the case of Kit, he will be considered as a permanent resident of Australia.

The taxation system of Australia on the Income of a person:

If a person is considered to be a resident of Australia, then the taxability of the person’s income will be calculated based on the following tax provisions:

If a person is a resident of Australia then all the amount of money which is his income from different parts of the world will be declared on the tax return of Australia only.
A resident of Australia will get the benefit of a threshold limit on the income of the person according to Australian tax laws (Lanis & Richardson, 2012).
A person, who is a resident of Australia, has to pay a mandatory Medicare levy amount every year.
In comparison to other residents of foreign countries, there is a maximum benefit for a resident in Australia paying the income tax.

Unit : 12 Physiological Principles for Health and Social Care

Ordinary Income

Kit has been confirmed to be a permanent resident of Australia, and so he falls under the tax provisions of Australia. It is from his salaries and investments in Chile that his income source is maintained. He has a joint account with his wife and the salary is credited to his bank account. Also from his investments in Chile, he is getting interest. So Kit’s income tax will be calculated on consideration of the tax provisions of Australia.

The income of Kit will be liable to the provision of taxes in Australia.
Though Kit works in a different location his salary will be liable to be taxed in Australia. Even the location of the bank will not be considered when it comes to the tax provisions of Australia.
From the investments in Chile, Kit earns a certain amount of interest. Since it is a part of his income, the Australian tax provision is applicable even in this case (Guest, 2013). Moreover Kit is a permanent resident in Australia so the income from his investments in Chile is liable to tax provisions under the Australian tax laws.
Kit also has to pay a levy amount for his Medicare to the Australian Government since he is a resident of Australia.

MBA501 Dynamic Strategy and Disruptive Innovation Assignment

Case Study 2 Ordinary Income

Examples of different kinds of Ordinary Income:

This was the case in which to extract copper from the land, the land was acquired by the company. However, due to issues of the company, there was no copper extracted by it. Later the company sold the whole land to another company and then it grabbed some shares in the company. As the company intended to earn profit by selling the land, the court considered it to be an ordinary incident of the business of the taxpayers (Brown & Davis, 2012). Thus the land sold became a kind of income for the company.

Scottish Australian Mining Co Ltd vs FC of T (1950) 81 CLR 188:

The mining company bought land to extract coal from the land. When the company was done with extracting coal from the land, it sold the land. To make the process of selling the land the company built different infrastructure and roads on the land (Bell & Hindmoor, 2014). As the company wanted to gain some profit out of it and had no actual intention of selling it, the Court held the land sale and the land became a kind of capital for the company.

In this case, a company was formed by some individuals who acquired underdeveloped land at Whitefords Beach with the purpose of fishing and easy access to the beach. After some years, the share of this company was bought by a new taxpayer to subdivide and sell the residential sites on that land (Ariel, 2012). As the purpose of the new shareholder was to earn some profit from the land, the court held the sale of the developed land and considered it to be the income of the land.

Strategic Management Sample assignment

Statham & Anor v FC of T 89 ATC 4070:

In this, there was a deceased estate involved and the taxpayers were the trustees of this estate. A few years ago, a bunch of farming lands was acquired by the deceased to engage his family members in some farming activity. After a few years, half of the land was sold by the deceased to one of his family members with no intention of any kind of profit. With the motive of cattle business by the new owner and the deceased they came into a partnership. But the partnership did not work out and the new owner wanted to subdivide the land and sell his part. While the land was getting sold, the former died but ultimately the land was sold after the former’s death. (Eslake, 2013).