Get free samples written by our Top-Notch subject experts for taking online assignment help services in Australia.
Tax Law - Residency Determination and Income from Sale of Property Assignment Sample
Tax is a compulsory contribution for the state revenue, a fee charged by the government on product, income or other activity. The tax imposed on personal or corporate income, then it is known as direct tax and if the tax imposed on the price of a goods or service than it is called an indirect tax. The most important use of the tax is to finance public goods and the other services such as common expenses like street lights and the roads repairing and street cleaning. Taxes are a monetary assessment imposed on an individual or a business by the legislative branch of the federal government. To know the taxation law and to understand tax law are very important aspects in the successful business. In each country, the tax law are different (Graetz, Schenk, 2009).
There are different rules for the resident tax. Resident tax is decided by the federal government of the state. Criteria of residence tax are physical presence in the jurisdiction.
1.1 Case 1 (Samantha Case)
The issue that needs to be decided in the present case is that Samantha was an Australian citizen and she used to live in Melbourn with her husband and children. She was the executive in the a finance company (Balotti, Finkelstein, 2008). In year 2012 her company asked her to open a branch in Singapore. In January 2013 Samantha and his husband moved to Singapore to set up her branch of the company but his children were living in Melbourn. They both rented out an apartment in Singapore and until the company was setup they stayed in Singapore (Picciotto, 2007). Than in July 2015 they shift back in Australia so as per the facts Find out the primary test of residency and the domicile test ?
As per the facts of the case there are some common situation in residency status for tax purpose in that it was mention that leave Australia temporarily and did not set up a permanent home in another country than the person need to pay the Australian resident for tax purpose.
And there are different different tax implication of residency the facts of the case related to that if the resident are from the Australian resident for tax purpose than the person generally have to declare all his income that he earn both in Australia or from outside the country on Australian tax return (Hogg, Magee, Li, 2013). However the person have a temporary visa it means they are the temporary resident it means that they need to declare income which is from Australia and need to pay according to income from Australia.
The primary test of tax residency is known as resides test. If a person reside in Australia, than the person will be considered an Australian resident for tax purposes and don't need to apply any of the other residency tests. There are some kind of test to define that whether the person is Australian resident or not the test are-
Resides test A resident permanently, or a considerable time to have one's settled or usual abode, to live, in or at a particular place.
Domicile Test if a person is Australian resident if they domicile in Australia, unless they are satisfied that the permanent place of abode is outside Australia (McKerchar, 2010). If a person is Australia than the impact on her residency status is person will generally remains an Australian resident for tax purpose if: they overseas temporarily and they don't set up a Arpanet home in another country. To understand the tax situation , everyone first need to work out if they are an Australian or foreign resident for tax purpose. If a person have Australian income than they need to file a tax return and the income include employment income or rental income or pensions and the Australian assets (Haig, Adams, Powel, 2009).
An individual may have multi pal residences at one time, but only one domicile-
Domicile means the origin(birth) and a domicile by the operation of law or domicile by the choice. The legal residence or domicile is the one an individual regards as his true home or principal residence. An individual cannot choose to make his home one place for the general purposes of life and in another for tax purposes (Sansing, Yetman, 2006). One's legal residence is usually the place where an individual maintains the most important family, social, economic, political and religious ties.
As according to the situation Samantha is a citizen of Australia and she used to live in Melbourn in with his family she was offered by his company to open a branch in Singapore. So shifted to Singapore for a period of time to set up his branch so as per the Australian residency status person who leave Australia temporarily and the person who did not set up a permanent home in another country than the resident has to pay an Australian resident for tax purpose (Woellner, Barkoczy, Murphy, 2016). Samantha done need to pay the residential tax in Singapore she need to pay that tax in Australia. As per the facts the permanent house of Samantha was in Australia and she went to Singapore for some period of time so need to pay the residential tax in Australia ans don't need to pay the residential tax in Singapore she needs to pay the other taxes in Singapore (Avi-Yonah, 2008). And the tax which she needs to pay that is upon the income of Australia she doesn't need to disclose her income with she earn from Singapore. Samantha will pay the other taxes of that country as income tax and other as well. There are two cases related to this case FCT v. Applegate and FCT v. jenkins (Sackman, Van Brun, Rohan, 2015).
FCT v. Jenkins case was about the non resident case where a bank officer had been transferred from Australia with his wife and family to work in the bank. A taxpayer will not, however, have a permanent place of abode outside Australia where he has not abandoned his home in Australia (case Q68 83 ATC 343). In such a case, the taxpayer's stay outside Australia will be regarded as merely temporary or transitory (Hopkins, 2011). And as per the case to determine the residency status of individual the following factors are
- the actual length of individual's stay in other country .
- Intension either to return to Australia at some definite time from other country.
- Duration and the continuity in other country.
An individual is a resident of Australia if resident “ has actually been in Australia continuously or intermittently, during more than one half of the year of income, unless the commissioner is satisfied that his usual place of abode is outside Australia and that they does not intend to take up residence in Australia (Piketty, Saez, 2007).
As per the case where a person have his permanent resident the resident tax will be paid on that house if a person is going outside the country but not for the permanent basis for the temporary basic the period was already decided by the citizen (Harrison, Theeuwes, 2008). For the payable of taxes duration also matter that for how much time they going to stay outside the country. The person need to pay the other taxes for that country but not need to pay the residential tax. So according to the given facts Samantha was the permanent residential was Australia and she need to pay the tax in Australia (Ferreira, 2010). And she want to Singapore for the time being so she was not count as a permanent resident of Singapore so she will not pay the residential tax in Singapore.
Case 2 ( Jim Case)
In this case facts are Jim and his family wanted to move out of the city and they live in a rural environment. Jim sold his house in 2002 and purchase a hectares of land 30 km way from city and he build a new home their. cost of land was 400,000 euro and 150,000 to build the house. As per the facts he realise that the value of property increased and than he arrange a meeting and convert that house into town house for the selling purpose (Anderson, 2006.). The issue arise in these facts are whether the income from town house in ordinary income with in ITAA97-s6-5 or not?
Rules must be use the correct one on the correct situation. ITAA is a act this act full name is income tax assessment act . As per the section 6-5(1) of ITAA 1997 , include in assessable income, income according to ordinary concepts (Alexander, 2008). Income according to 'ordinary concepts' is not defined but is considered to be what amounts to that which people would normally consider to be income, or which fits within the common law concept of income.
There have been numerous court decisions on whether an amount is income and when it is derived. In some cases where the courts have decided an amount is not ordinary income, the provisions of the ITAA have been amended to specifically include in income the amounts from that activity(Stern, 2009).Thus amounts derived in similar circumstances would be included in assessable income via the Statutory Income provisions.
There is generally considered to be three components of ordinary income.
- Income from personal exertion. example- salary and wages
- Income from property. example- rent, dividends, interest
- Income from carrying on a business . example- Retail sales, farming
while each of these components are included in assessable income, it is important to distinguish between them as some deductions are dependent upon which category of income the deduction relates to (McGee, 2006).
Capital receipts refer to incoming cash flow origination from one of the following three sources:
- Cash from the sale of fixed assets it can be tangible or intangible. That also include the payment associated with an insurance claim from a damage fixed asset.
- Cash from the sale of share in the business it include common and preferred stock.
- Cash from the issuance of a debt instrument it can include bonds and loans,
These receipts are recorder in balance sheet not included in income statement-
sell a fixed asset (Cabral, Hoxby, 2012). That include as a debit cash account and credit fixed asset account.
Sell share in a business. That include debit cash account and credit equity account.
Issue debt that include debit cash account and credit loan account.
The capital receipts is that they are not generated by the sales of goods or service in the ordinary course of business. Thus they do not arise from the operating activities of a business.
As per the given facts given in the situation that the ordinary income which describe in the three parts that first one is voluntary payment that constitutes ordinary income which received is an incidence of employment. This also explain in a leading case which was colvert v. wainwright case related to taxi driver received a tip (House, Shapiro, 2008). Possible ordinary income that based on the nature of payment this define the characteristics of income the related case law is FCT V. DIXON in this case additional periodic payment as a substitute for wages that were relied upon by the taxpayer.
Second one is price non assessable income. That is gain by the luck include example of winning of casual participant on a TV show. Ordinary income that derive by the exercising degree of skill that sufficiently out weights the luck. There are a leading case related to this is Kelly v. FCT.
Third one is gift not ordinary income and that is for personal qualities the recipient has been fully remunerated for service there is a leading case Scott v. FCT. In his type of income they both the parties have personal relationship.. ordinary income arising from the taxpayer's ability to work and the employment contract. There is case related to this is Scott v. FCT.
As per the given facts about the Jim's income his income include in the capital receipts and that will not include in the ordinary income because the income which receive from the employment or the money receive from the other source are comes in the ordinary income the income from the gift and the price they all include in the ordinary income. All the investment income include in the capital receipts. Capital receipts refer to incoming flows that include sale of fixed assets that also include common stock and the last thing that also include bonds and the loans. So the property which was sell by the Jim include in the capital receipts. And that include in the selling of fixed assets. The property is known as a assets and Jim convert his house into town house and the house was his fixed assets. The profit of 300,000 per town house that include in the capital receipt. This is non continuing nature Thus, the sale of a fixed asset or shares in a business arises on only an occasional basis. One exception is when shares are sold on an ongoing subscription basis.
As per the given facts above explain about the ordinary income and the capital receipts. In this case there are explanation about the income from the different different sources. In above rule explain the ITAA act and the relevant cases for the better understanding of the facts. And the income from the land will count in capital recipes. As per case the income will be show in capital receipts.
This project give the knowledge about the tax law and it give the the brief idea about the residential law in Australia and it give the basic about the Singapore residential law brief. The laws which are relating to to the residential and the other laws. And the importance of the tax and the tax law. For the government also tax laws are important and government collect the tax for the public improvement. There so many kind of taxes residential is also one kind of tax and which is the important as well.
The tax law is an area of legal study dealing with the constitutional, common law, statutory, tax treaty and regulatory rules that constitute the law applicable to taxation. The taxes differ from country to country. Tax law is an important ingredient of literally every commercial, corporate or personal transaction. This project showcase the value of residential tax and the other taxes laws.
Books and Jounrals
Graetz, M.J. and Schenk, D.H., 2009. Federal Income Taxation: Principles and Policies. Foundation Press.
Balotti, R.F. and Finkelstein, J.A., 2008. Delaware Law of Corporations and Business Organizations: Statutory Deskbook 2009 (Vol. 4). Aspen Publishers Online.
Picciotto, S., 2007. Constructing compliance: Game playing, tax law, and the regulatory state. Law & Policy, 29(1), pp.11-30.
Hogg, P.W., Magee, J.E. and Li, J., 2013. Principles of Canadian Income Tax Law.
McKerchar, M., 2010. Design and conduct of research in tax, law and accounting. Thomson Reuters/Lawbook Company.
Haig, R.M., Adams, T.S. and Powell, T.R., 2009. The federal income tax. BiblioBazaar, LLC.
Sansing, R. and Yetman, R., 2006. Governing private foundations using the tax law. Journal of Accounting and Economics, 41(3), pp.363-384.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation Law 2016. Oxford University Press.
Avi-Yonah, R.S., 2008. Corporate social responsibility and strategic tax behavior. In Tax and corporate governance (pp. 183-198). Springer Berlin Heidelberg.
Sackman, J., Van Brunt, R., Rohan, P.J. and Reskin, M., 2015. Tax Issues in Condemnation Cases (Vol. 7). Nichols on Eminent Domain.
Hopkins, B.R., 2011. The law of tax-exempt organizations (Vol. 5). John Wiley & Sons.
Piketty, T. and Saez, E., 2007. How progressive is the US federal tax system? A historical and international perspective. The Journal of Economic Perspectives, 21(1), pp.3-24.
Harrison, J.L. and Theeuwes, J., 2008. Law and economics. Norton.
Ferreira, F., 2010. You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities. Journal of Public Economics, 94(9), pp.661-673.
Anderson, N.B., 2006. Property tax limitations: An interpretative review. National Tax Journal, pp.685-694.
Alexander, G.S., 2008. Social-Obligation Norm in American Property Law, The. Cornell L. Rev., 94, p.745.
Stern, S.M., 2009. Residential protectionism and the legal mythology of home. Michigan Law Review, pp.1093-1144.
McGee, R.W. and Preobragenskaya, G.G., 2006. The ethics of tax evasion: A survey of Romanian business students and faculty. Accounting and Financial Systems Reform in Eastern Europe and Asia, pp.299-334.
Sikka, P. and Willmott, H., 2010. The dark side of transfer pricing: Its role in tax avoidance and wealth retentiveness. Critical Perspectives on Accounting, 21(4), pp.342-356.
Cabral, M. and Hoxby, C., 2012. The hated property tax: salience, tax rates, and tax revolts (No. w18514). National Bureau of Economic Research.
Voigtländer, M., 2009. Why is the German homeownership rate so low?. Housing Studies, 24(3), pp.355-372.
House, C.L. and Shapiro, M.D., 2008. Temporary investment tax incentives: theory with evidence from bonus depreciation. The American Economic Review, 98(3), pp.737-768.
Commonwealth of Massachusetts. 2016. [Online]. Available through< http://www.mass.gov/dor/individuals/filing-and-payment-information/guide-to-personal-income-tax/residency-status.html>. Accessed on 23rd December 2016.
Thomson Reuters. 2015. [Online]. Available through <http://codes.findlaw.com/ny/tax-law/>. Accessed on 23 December 2016.
Southern Auto Color . 2016. [Online]. Available through<http://southernautocolor.com/2016/01/29/industry-leading-waterborne-technology/>. Accessed on 23rd December2016.