HI6028 Case Study: Ordinary Income, Residence and Source - Taxation Law Assessment Answers

Taxation Law Assignment Help

Case study 1: Residence and source

Kit is a permanent resident of Australia. He was born in Chile and retains his Chileancitizenship. Kit spends most of the year working off the coast of Indonesia on an oil rig for a United States company. He was recruited for this job in Australia and signed a contract with the company here. For the last four years, Kitss wife has lived in Australia with their two children. They purchased a home in Australia three years ago. Kit and his wife have a joint bank account with Westpac Bank. Kitss salary is paid directly into his account. All of the familyss other investments, including a share portfolio that generates dividend income, remain in Chile. Kit gets one month off from work every third month and, on these occasions, he meets with his family either in Australia or on holidays around South America (usually in Chile where his parents reside).

Discuss whether Kit is a resident of Australia and how his salary and investment incomewould be taxed (10 marks, max. 1000 words).

Case study 2: ordinary income

Explanations of the respective outcomes reached by the courts in the following cases which all involving sales of land:

• Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159
• Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188
• FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR
• Statham & Anor v FC of T 89 ATC 4070
• Casimaty v FC of T 97 ATC 5135
• Moana Sand Pty Ltd v FC of T 88 ATC 4897
• Crow v FC of T 88 ATC 4620
• McCurry & Anor v FC of T 98 ATC 4487

Case study 1: Residence and Resources

Kit who is a permanent residence in Australia where his wife and two kids are residing. Kit and his wife have a joint account at Westpac bank where his salary is credited. His family’s investments, including share portfolio that generates dividend income, remains in Chile. Kits go to visit his family, which lives in Chile after three months of working where he is given an off one month. Kit’s wife has been living in Australia for the last four years.

Kit is a genuine citizen of Australia considering he have the following fulfillments that partakes him to be a residence in Australia, which includes:

Talking of the frequency and the duration Kit has been travelling outside Australia guarantee him to be a residence of that country. It is not necessary for an individual to continually be in the country in order to be living there. A person working outside Australia does not necessarily halt to live in the country whilst they are absent. Being absent for three-year would halt you from being a citizen of Australia lest there are exceptional conditions deferring a return (Prince, 2012).

The type of accommodation used by the individual within Australia can be a determinant of a residence in Australia. For a person working oversees him or she is responsible for offering proof that they have a sturdy link to Australia. Having authorized ownership to a property that an individual normally live is a sign that a person is residing there. Therefore is a citizen of Australia since he has a home, which he bought three years back.

The type of wealth that a person own in Australia is a determent that indicates whether the person is residing in the country or not (Kluwer, 2016). Owning some assets in Australia does not guarantee you to be a member of the country but the extent to which to which the properties are linked with Australia matters most. Therefore, the connection between the banks, which his money is deposited by the rig oil company, links him with Australia.

Kit have ownership of property in two countries. His money in the bank of Westpac, which is, located an Australia and his investment in Chile. Individuals living in Australia are taxed on their global revenue from all streams. Revenue from abroad is viewed to be foreign income this includes allowances, salaries, and wages. This can be either paid by an Australian employer or foreign. For people living in Australia, this employments revenue is normally taxable in Australia and it must be counted in the Australian tax earnings. If you have been taxed in the country you are viable to request certain abroad tax as a credit in opposition to the Australian tax responsibility to avert from being double-taxed. For investment in Chile, it is necessary for Kit to understand the taxation law of each country to avoid double-taxation. Sometimes the two countries might come into agreement on the double taxation. The double agreement rule decides which country have the responsibility of taxing each Kit’s earnings to prevent him from being double taxed.

Case study 2: ordinary income

Californian Copper syndicate Ltd vs Harris (surveyor of taxes) (1904)5 TC 159

With this case, the major agenda of the company was to get land, which comprised copper. Nevertheless, it failed to mine copper. Consequently, the company sold off the land to another company-receiving share using the name of the later company. The court alleged the sale of land as income in general. Every time the main agenda of the company was to gain revenue accruing from the sale of the lands. Hence, this was a normal situation of the tariff payer and income in general.

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

With this case, the company mined coal on its own land. Subsequently, after all, the coal was exhausted it decide to sell all the land it had. To increase demand the company partitioned its land while building roads and infrastructure. The court alleged that the gains from the land sale are not assessable since the company was on the enterprise of selling land (Staff, 2012). Hence, these gains were capital in general.

FC of T v Whitfords Beach Pty Ltd (1982)150 CLR

With this case, the taxpayer was an establishment, which was integrated for a reason of obtaining an area of land, which were undeveloped located at Whitfords beach. As a result of the too good deal all the issued share of the taxpayer were sold (Staff, 2011). High Court alleged the taxpayer was exercise an enterprise of land improvement and the gains from the land sold were assessable as normal income.

Statham and Anor v FC of T89 ATC 4070

The taxpayer involved itself into sprouting property enterprise. The taxpayer projects integrated meeting with land investment agents and home project builder. The taxpayer didn’t care more about cost analysis resulting in losses. They ended up selling the land without making any development on the land. According to the court, this loss cannot be deducted under subsection 51(1) (ITAA1936).

Casimasty v FC of T88 ATC 5135

In this case, the taxpayers sold a vast piece of land, partitioned the land into eight different sections, and sold them. In 1950’s he bought the land in two different land acquisitions. The partitioning of the land took twenty years and this encouraged by his increasing debt. Federal court alleged that the taxpayer was not practicing the enterprise of selling and partitioning the land (Staff, 2011).

Moana sand Pty Ltd v FC of T88 ATC 4897

In this case, the Marina sand took part in acquiring the land for the reason of selling of the sand on that particular land. Federal Court alleged the subsequent profit were taxable.

Crow v FC of T88 ATC 4620

With this case, farmer lent a lot of money to acquire five pieces of land for duration of ten years. The land was purposely bought for carrying on agriculture. Later on, it was partitioned into separate pieces. The Court said that the taxpayer could gain entry of the gains since it leads to improvement of the land.

McCurry and Anor v FC of T98 ATC4487

With this case, acquired land, which had an old home. They demolished the home and built 3 townhouses on that particular land. They migrated into two buildings and settled there for one year making a profit of one hundred and fifty thousand dollars (Staff, 2011). The commissioner argued that gain from the sale of the townhouse were ordinary in nature and were assessable.