Kit was a permanent resident of Australia who was born in Chile and has a Chilena citizenship. He works on the coast of Indonesia on the oil rig in United States company for most of the year. He signed a contract with a company whereas his wife lives in Australia for four years with two children where they had purchased a home three years ago. The bank account held by them is a joint bank account with the Westpac bank where his salary is directly paid (Economic Times, 2016). He meets the family either in Australia or during the holidays around the South America.
So, now the issue arises if Kit is a resident of Australia or not and how shall his income and other investments be taxed.
As he spend more of his time in Australia also his wife and children live in Australia and he has a house in Australia hence he is the resident of Australia (Goel, 2016).
He migrates from Chile to Australia and resides in Australia permambnetly. So Australia can be considered as his permanent residence.
For the purposes of tax it is required that Kit:
It has been held that the rate of tax that is paid by the Australian residents is much lower than the other foreign residents (Hoffman, 2017).
In the above case kit is the permanent resident of Australia for the purposes of tax along with that he:
The issue in this case was weather the tax payer was assessable for the profits that arose from the sale of land.
The decision of this case by the court was that the tax payer has to pay tax on the profit from the sale as that profit was of income nature (Annoynomous, 2000). The capital that were available with the tax payer that it had no sufficient funds to mine the land and that the sale was not a substitution for the purpose of investment rather it was a trading transaction.
The issue in the above case was weather the profit arising from the mining of land was assessable as ordinary income or was a capital asset.
The decision of the court was that the income was realized on the capital account. Though there were considerable profits realized by the tax payer from the sale of subdivided allotments but according to Section 104-10 of the ITAA 1997 the occurrence of CGT event A1 is when a CGT asset is disposed off.
The issue in the above case was that weather the tax payer assessable for the profits that arose from the sale of subdivided land or was it a capital asset that was realized by the tax payer (Annoynomous, 2000).
According to the decision of the high court the tax payer was assessable on the profits that arose from the sale of land according to section 25(1) as the profits arising from the sale of land had gone beyond just realizing the capital assets and the activities on it constituted on carrying of the business of the development of the land.
The issue in the above case was that weather the net proceeds received from the sale of subdivided lots constituted assessable income under section 25(1) or under section 25(a)
It was decided that the net proceeds that were received from the sale of land did not constituted assessable income under the section 25(1) or 25(a). Here the point can not be noted that just because the owners of the land decided to sale the land and not to persist with farming the income shall be taxable. Here the owners just abondened there intention of farming and decided to sale the land so the profit can not be taxable by any means.
Here the issue was that the profit that arose from the sale of sub division was taxable under section 25(1) or section 25A
The federal court decided that the profit from the sale of subdivision and the parts of the property were not assessable under either section as there was no conduct of business under this case from where the profit was derived. Rather, the profit was realized from the realization of the capital asset (Semontachi, 2007).
The issue in the above case was that for the year of the income ending that is 30 June 1980 were the section 25(1) and 25A apply on to the tax payer so that the assessable income of the tax payer can be included for the amount that the tax payer received in the year minus the relevant costs which amounts to the profit arising from the land sale (Hoffman, 2008).
In the above case the federal court announced that for the year ended 30 June 1980 both the sections 25(1) and 25A apply to include the assessable income of the tax payer for the amount that was received by the tax payer minus the costs that were relevant as the profit arising from the sale of the land. Though the amount that the tax payer received was from the single transaction but the profit arising from the sale of land was the income according to the ordinary concepts according to the decision of the High Court. Under this case the tax payer main purpose of acquiring the land was to work on the land and sell the sand that was on the land so, the profit arising from the particular sale is the profit from the resumption of the land and hence it is assessable.
Here the question arises that the profit that is derived by the tax payer from the sale of land near Hobart comes under the accessibility of the Section 25(1) or section 25A of the ITAA 1936.
The facts of the case proved that under this case the farmer had borrowed a large sum of money for purchasing the five blocks of land for a period of 10 years. That land was used by the farmer for farming, grazing crops and growing crops and after some time the land was subdivided. After few years of purchase the land was sold by the farmer with overall profit of $388,288. It was held by the federal court that the profit received by the farmer was assessable as his income as he was in to the business of land development. Though he used the land for farming for sometime but eventually he was very well aware that for overcoming the debts he would be required to sell the land and hence the income is assessable under ITAA 1936.
The issue that arose in the above case was weather the profit arising from the sale of land was assessable under section 25(1) of ITAA.
According to the decision of the federal court it was held that the income arising from the sale of land was assessable under section 25(1) of the ITAA as the tax payer was in to the profit making undertaking which was considered as business dealing or a commercial dealing. The venture that was being operated by the tax payer was a trading venture and various profits were made by them from this venture. Hence the income is assessable.
Annoynomous, 2000. Capital Gain Treatment. ABA Journal, 53.
Annoynomous, 2000. The Monthly Digest of Tax Articles – Volume 46 – Page 7.
Annoynomous, 2011. Top 100 Tax Q&As 2011 – Page 17.
Annoynomous, 2015. Taxpayer Information Publications: (1994) – Volumes 1-3 – Page 207. London.
Bankbazar, 2015. bankbazar. [Online] Available at: https://www.bankbazaar.com/tax/calculate-income-from-other-sources.html [Accessed 25 April 2017].
Bruce, B., 2013. Trading and Money Management in a Student-Managed Portfolio. New York: Springer.
Economic Times, 2016. Budget 2016: Dividends above Rs 10 lakh to attract additional 10% tax. The Economic Times Wealth, 29 Februray.
Goel, S., 2016. How to compute your total taxable income. The economic Times, 19 July.
Hoffman, W., 2008. South-Western Federal Taxation 2009: Individual Income Taxes. Lomdon: Cenagge.
Hoffman, W., 2017. South-Western Federal Taxation 2018: Individual Income Taxes. New York C: Cengage.
LLP, Y., 2014. EY Tax Guide 2015 – Page 740.
Office of Federal register, 2014. Title 26 Internal Revenue Part 1 (§§ 1.1401 to 1.1550).
Semontachi, S., 2007. Taxation of Capital Gains Under the OECD Model Convention. New York: Springer.
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