Taxation Law For British Corporation Specializing In Management Consultancy

Discuss about the Taxation Law for British Corporation that Specializes.

Issue

Fred is an executive of a British corporation that specializes in management consultancy. He has come to Australia in order to set up a branch of his company. It was not certain that for how long he would have to stay in the country, yet he leased a residence in Melbourne for 12 months. His wife came with him to the country but his sons couldn’t as their college had just started. He rented out the family home at UK and maintained almost the same routine after coming to Australia. Along with the rent from the house at UK, Fred also received revenues from the investments made in France. But Fred fell ill and thus had to return to UK after 11 months of his stay in Australia.   

According to the Australian taxation office, the following conditions are taken into consideration while verifying the Australian Citizenship of an individual:

The connection that the individual has with thee country along with the family members of the individual who are residing in Australia.

Any property owned by the individual in the country (Simonovits, 2013)

If the individual is a regular employee of any organization in the country

If he or she is doing business in Australia

If the individual come to Australia with his family (Navailles et al., 2013)

In this case it can be seen that though Fred is in Australia on the purpose of business, but he is not a permanent resident of Australia. His stay might have been uncertain at the beginning, but ultimately he stayed for 11 months. One has to stay for at least 12 months continuous in order to become a citizen of Austr (LARRIMORE, 2011)alia. But that did not happen in case of Fred. Therefore there is no way in which Fred can be considered to be a citizen of Australia. He had been deriving income from the rent of the house at UK and the investments that he had made in France – but the case study does not mention of him opening a bank account in Australia. Therefore the earnings are supposed to be deposited in the accounts that Fred already has. There is nothing permanent in Fred’s endeavor of setting up a branch of his company in Australia as he did not come to Australia in order to stay forever. Thus it can be clearly observed that Fred does not meet any of the condition or criteria that is required and approved by the Australian taxation Office to become a citizen of Australia. Since Fred is not a resident of Australia, he is not liable to pay any taxes which are needed to be paid for being a citizen of Australia (Ingles, 2001).     

Case Study 2: Main body

Conclusion

Therefore, as the case study presents, Fred had only stayed in Australia for 11 months which is not enough to become a citizen of Australia. Moreover he does not fulfill any criteria of becoming a resident of Australia. Therefore, Fred is not a resident of Australia for taxation purposes.

Introduction

Each and every nation has its own taxation system and laws that aid the government of the nation in collecting taxes from the citizens of the country to spend the money on developing the infrastructure, defense force of the nation and also to maintain law and order of the of the country. Income tax is levied on the earnings of both residents and non-residents depending on the type of income and the rules and regulations about the income tax of the concerned country (Australian Master Tax Guide 2011, 2011). The citizens are liable to pay the taxes to the government as the money collected is used for the welfare of the nation and the society and any individual that fails to pay are taxes is liable to face penalties in the court of law.

I. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159

In this particular case, the main aim of the business was to acquire a plot of land which contained copper. But with the passage of time, the organization did not make any endeavor to remove the copper from that particular plot of land and sold it to another firm eventually. As per the verdict of the court, the land could be used for any purpose which would result in the generation of income and selling the land fulfilled this particular condition. Therefore on the basis of the verdict of the court and the action taken by the company, it can be said without any doubt that selling the land to another company is a general incident which generated a normal income for the company (Mason, 2010). Therefore the company would have to pay taxes on the income as it is ordinary in nature and thus assessable.

In this specific case, the business organization taken into consideration had acquired a plot of land on which it started a business of coal mining. But after some time, the business organization removed the coal from the land and decided to sell the land to someone else. In order to earn more revenue by selling the land, the organization developed the infrastructure of the land and also subdivided the property by making roads in it. But the main business of the firm was not associated with that of real estate and thus the money earned by selling the land to someone else will not be a part of commercial business (Woellner, 2013). Consequently the verdict given by the court stated that the money earned by the organization as a part of selling the land would not be measured (Parsons, 2011). Therefore the money earned by the organization was capital in nature. Here the case presents that a coal mining company after removing all the coal from the plot of land acquired by it improved the infrastructure of the land to make it more profitable and also took grants to build public institutions like that of parks, churches, schools etc (Australian Taxation Office adds voice authentication to its app, 2016). It can be seen that the company is working like a land developed instead of a coal mining company where it is taking different steps to increase the profitability of the land. Because of this, the income that the company had through the selling of the land is taxable in nature.

Here in this case the concerned company intended to get a plot of underdeveloped land at the beach of Whit Fords. The property was situated just at the front of the beach and therefore fishing was an option. After some years the problematic shares of the company were sold out and consequently, the new shareholders go ownership of this particular plot of land. The shareholders then divided the land amongst themselves in order to increase the profitability and sold different parts at the best rate (Boland et al., 2011). Though, the shareholders were happy with selling the land – a disagreement rose amongst them about whether to include the profit earned in their regular income or not (WALLER, 2007). The verdict of the court stated that the shareholders can sell the land in order to make a profit or generate revenue from the business transaction. For this reason the shareholders established a business of land development as that would fulfill the condition of the court on one hand and also make the profits earned through the sale a part of their ordinary income. A lot of member of the high court said that the income generated from the selling of the land was not a part of assessable income, but since the shareholders had established a firm of land development this would fall under ordinary income for them. The final justice was given by Gibbs   CJ, Mason and Wilson JJ that stated that the action of the tax payers is  a business of land development (Haslett and Sarah, 2006).

In this case, the tax that was supposed to be lived was measured and adjusted in a wrongful manner. As a result of this, the court decided that the commission has to work towards adjusting the income of the estates.

In this case it is stated that there has been no intention of making any profit from the deal. The real fact however is that the individual wanted to earn profits by selling a particular part of the land. The problem occurred while explaining whether the profit obtained after selling the land was taxable or not (Krever and Black, 2007). According to the assessment of the tax commission it was found that the income that would be made by the tax payer as a result of selling the subdivided would be looked on as a profit made by the taxpayer under the section 25(1) of the ITAA (1936). But it is also to be noticed that the tax payer did not have any hand in the interest of the potential purchaser and neither did he construct a house on that land. The internal fencing of the land was absent too which proved that the tax payer was not running a business of a land developed there. Therefore, as a result of this, the tax payer is not bound to give any ordinary income tax for selling the land.  

In this case study, a business organization was conducting a business of sand where the company owned a plot of land from which they got sand. The company kept waiting for the price of the land to rise in order to sell the land to another person or firm so that it can incur more profit. As a result of this he company had kept the long for quite a long time while waiting for its price to rise. The issue in this case is the taxable amount that the company has to pay as a consequence of selling the land (Martin, Gregor and Rice, 2008). The verdict of the court was that the land can be sold to any other individual or company for commercial use.       

This case is about a farmer and the position that he stand at from the perspective of paying axes to the government. This helps in understanding the increased purchases of land in order to enlarge the land. The problem is with the particular land and about selling it to the farmer. In this case the completion of the deal aided a lot in the increment of the scheme for the farmer taken into consideration. 

Here in this case, it is stated that a land is in the ownership of two brothers and a few houses had been built in that particular land. To fulfill the purpose of the renovation of the land, the houses would need to be removed from that land. The issue here is whether the brothers are liable to pay the taxes for the plot of land. As per the verdict of the court, the brothers are not liable to pay any taxes that would be levied on that particular land (Woellner, 2013).

Conclusion

The rules and regulations associated with tax in a country needs to be properly understood before assessing the tax. One needs to properly understand the concept of ordinary income and capital tax gain in order to assess the tax of different entities. In the case studies that have been taken into consideration in this report, the decisions have been made by implementing the knowledge of ordinary income law in Australia.

References

Australian Master Tax Guide 2011. (2011). Sydney, N.S.W.: CCH Australia.

Australian Taxation Office adds voice authentication to its app. (2016). Biometric Technology Today, 2016(2), p.12.

Boland, J., Watts, G., Bourke, S., Doolan, P. and Altobelli, T. (2011). 2011 family law intensive. [Adelaide]: Family Law Section, Law Council of Australia.

Haslett, T. and Sarah, R. (2006). Using the Viable Systems Model to Structure a System Dynamics Mapping and Modeling Project for the Australian Taxation Office. Systemic Practice and Action Research, 19(3), pp.273-290.

Ingles, D. (2001). Earned Income Tax Credits: Do They Have Any Role to Play in Australia?. The Australian Economic Review, 34(1), pp.14-32.

Is one man’s clinical benefit assessable by others?. (2010). BJU International, 107(1), pp.155-156.

Krever, R. and Black, C. (2007). Australian taxation law cases 2007. Pyrmont, N.S.W.: Thomson ATP.

LARRIMORE, J. (2011). Does a Higher Income Have Positive Health Effects? Using the Earned Income Tax Credit to Explore the Income-Health Gradient. Milbank Quarterly, 89(4), pp.694-727.

Martin, N., Gregor, S. and Rice, J. (2008). User centred information design practices and processes at the Australian Taxation Office. Information Design Journal, 16(1), pp.53-67.

Mason, T. (2010). Income tax law. Frenchs Forest, N.S.W.: Pearson Australia.

Navailles, S., Lagière, M., Guthrie, M. and Deurwaerdère, P. (2013). Serotonin_2c Receptor Constitutive Activity: In vivo Direct and Indirect Evidence and Functional Significance. CNSAMC, 13(2), pp.98-107.

Parsons, R. (2011). Income taxation in Australia. Sydney: Law Book Co.

Simonovits, A. (2013). Does Higher Tax Morale Imply Higher Optimal Labor Income Tax Rate?.Danube, 4(2).

WALLER, V. (2007). The Challenge of Institutional Integrity in Responsive Regulation: Field Inspections by the Australian Taxation Office. Law & Policy, 29(1), pp.67-83.

Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.