The given case study is about a person named as Kit who is a permanent resident of Australia. After understanding this case, we would come to know about the residency provisions of Australia.
Though Kit was a permanent resident of Australia, he was born in Chile and also retains the Chilean citizenship. He was an educated individual who used to work with a US based company. His time was mostly spent in Indoesia. Even though he was working for an US Based company, he had more of a site work so he has to be in Indonesia. Since last four years he was staying in Australia with his wife and children. He had also purchased a home three years ago in Australia, but actually he belongs to Chile. Kit’s salary used to get credited in his Westpac Bank account. He had a joint account with his wife. Apart from his salary income, he also had many other incomes like investment in a share portfolio, which generates dividend income. All these investment were made in Chile. Apart from all this he used to get a month off in every three months and during this off he used to travel either to Australia or South America where his parents resides.
On the basis of the provisions of permanent resident provisions of Australia, one can conclude that whether Kit is a permanent resident of Australia or not. The provisions for permanent residency are explained below.
As per Australian Taxation Law a person can be considered as an Australian resident if he passes the resides test. If anyone wants to know that whether he is a resident of Australia or not then he has to pass the resides test. If a person resides in Australia then he would be considered as an Australian resident. If this condition is not satisfied then three tests would be performed and a person would be considered as a resident if he passes any of the below mentioned three tests:
There are some common scenarios as well which is mentioned in the Australian Law, which would put light on the residency provisions of Australia. The common scenarios are explained below in the table.
|
Scenarios |
Australian citizen or not |
|
If a person leaves Australia for a temporary period and has also not set up any permanent home in any other country |
Australian Resident |
|
An overseas student came to Australia after enrolling in a course which is more than six months at an Australian institution |
Australian Resident |
|
A person visits Australia and for most of the time he is travelling and working in various locations around Australia |
Foreign Resident |
|
A person visits Australia, working and living in one location and has also taken steps to make Australia his permanent home |
Australian Resident |
|
A person came to Australia for holiday and is there in Australia for less than six months |
Foreign Resident |
|
A person who is migrated to Australia and his intention is to stay here on permanent basis |
Australian Resident |
|
A person who is leaving Australia on permanent basis |
Foreign Resident from the date of departure |
Application: Kit would not pass the resides test since he is not residing in Australia on regular basis. Now since he has failed this test other three tests needs to be performed on him. All the three tests are discussed below in detail:
Conclusion: The Income Tax Act and its provisions thus prove that Kit is an Australian Citizen. Now, since Kit is a permanent citizen of Australia all his income shall be taxed under the Income Tax Act of Australia, whether the income is earned within Australia or not. Hence while filing his Income Tax Return Kit needs to show two incomes: one from his salary and the other from the investments made by him Chile from which he earns dividends. Hence Kit would be considered as a resident of Australia and he needs to pay income tax on his income earned.
In this case where a company wanted to acquire a land which should have mining rights, copper mines or any other place but it should be in U.S. If company had received an amount which is in excess of the amount of net assets of the company then such amount would be treated as profits and gains from business. Here, the company had sold its assets as a part of its business which shows that the intention was to earn profit from it. With the help of this case one can easily understand that company can also sell some part of its assets as a business so that it can earn profit. (Manyam, 2017)
This case highlighted the arrangements of business pay of the organization. The choice, which was taken for, this situation was about that whether arrive utilized for mining ought to be considered as common salary or acknowledgment of capital resource. The given organization had sold its territory, which was utilized as mining. Organization was occupied with different exercises too thus the High Court had at last chosen that organization had found a way to understand the land in the way which was profitable to the organization. Thus the benefit was not assessable. For this situation acknowledgment of a benefit in an ambitious was mostly on capital record. It is not to be considered as income in nature. Toward the end Judicial Terrain had precluded High Court decision. (Taxation, 2017)
This case highlighted the provisions of business income of the company. The primary agenda which is to be decided in this case was that whether the land used for mining should be considered as realization of capital asset or ordinary income. In this case company had sold its land which was used for mining purpsose. Company was not only enegaged in the business of mining, instead it was engaged in the other businesses as well. So on the basis of this High Court concluded that company had used the land in such a way that it would be beneficial to them. On the basis of this decision profit of the company would not be assessable. (AustralianGovernment, 2017)
The choice of the court was supported by two fundamental reasons. On the off chance that a misfortune has been seen from a segregated exchange it is to be deducted under Section 51(1) (ITAA 1936). The two cases are specified underneath:
In the given circumstance as there was nonattendance of assessable salary, it was important to set up the way that a desire was there to create assessable pay. In the long run, it was seen that the citizens were not able get exhortation with reference to how to run gainfully a property improvement business. Subsequently, benefit thought process was missing from the given facts. (morsegroup.com.au, 2017)
AA farm named as Action View was gifted by a father to his son in the year 1955. Son was then using the land for his business purposes, so any income derived from such business has to be chargeable as per Section 25 91) of the ITAA Act,1936. Son was carrying out the work which was relating to the farm which was gifted by his father. The land was held by the son as Action View and it was mainly used for residential property and for the production purpose. Hence on the basis of this decision was taken by the court which was in favor of the taxpayer. (austaxpbr, 2017)
The judgment of the Court was given on 21st November 1988. Benefits earned by the organization for this situation was in two sections. The two sections are given underneath:
The choice was made for the organization since the plan was not progressed to the time when it would have finished the deal. This demonstrates the organization must not have finished the deal before the expulsion of sand mills.
This case study relates to the business of purchasing multiple properties. On 17th August, 1988 the judgment was given by the High Court. The primary discussion in this case was that whether the profit earned from the sale of land should be considered as income under Section 26 (a) of the Income Tax Assessment Act 1936 or Section 25 (1) of the Income Tax Assessment Act 1936. After the Court’s decision it was concluded that the profit earned cannot be considered as income as per section 25 (1) of the Income Tax Assessment Act, 1936. Section 26 (a) clearly states that if the income as to be charged as per this section then the undertaking must be profit making. The main purpose of the company must be earning profits and on the basis of this the decision was given by the court.
The judgment was given by the Federal Court on fifteenth May 1988. For this situation both Brett and Bradley had aim to erect three townhouses on Addison Avenue Property. Out of these three houses, they needed to offer unit 1 for benefit and utilize unit 2 and 3 for their private living arrangement. Henceforth it was chosen that unit 1 would not be assessable wage and duty should be charged on it.
References
austaxpbr, 2017. austaxpbr. [Online]
Available at: https://austaxpbr.com.au/document/PBR_8095
[Accessed 29th April 2017].
AustralianGovernment, 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-residency/
[Accessed 29th April 2017].
AustralianGovernment, 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Individuals/International-tax-for-individuals/Coming-to-Australia/
[Accessed 29th April 2017].
AustralianGovernment, 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-residency/residency-tests/
[Accessed 29th April 2017].
AustralianGovernment, 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/law/view/document?DocID=TXR/TR923/NAT/ATO/00001
[Accessed 29th April 2017].
Manyam, J., 2017. epublications.bond.edu.au. [Online]
Available at: https://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1211&context=rlj
[Accessed 29th April 2017].
morsegroup.com.au, 2017. morsegroup.com. [Online]
Available at: https://www.morsegroup.com.au/files/docs/white%20papers/morse%20group_white%20paper_selling%20the%20farm%20piecemeal.pdf
[Accessed 29th April 2017].
Taxation, F. C. o., 2017. eresources.hcourt.gov.au. [Online]
Available at: https://eresources.hcourt.gov.au/getPdf/1/238280/1_81clr188.pdf?sequence=3&isAllowed=y
[Accessed 29th April 2017].
visabureau, 2017. [Online]
Available at: https://www.visabureau.com/australia/australian-immigration.aspx
[Accessed 29th April 2017].
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