Taxation, Theory, Practice And Law For Modern Treaty Law

Case Study 1: Residence and Source

Describe about the Taxation, Theory, Practice and Law for Modern Treaty Law.

Requirements

As per the Case Study, Fred is a temporary resident of Australia who is a sub-category of resident and special rules apply to these residents. Basically, somebody who holds a temporary visa like a working holiday visa or the visa of an employer sponsored from abroad are defined as temporary residents. As per the Case Study, Fred comes to Australia who is a British corporation in the management consultancy and he wants to set up a branch there. For 12 months, he leased out a resident in Melbourne.    He was accompanied by his wife though his sons do not accompany him because of their college. The behaviour of Fred in Australia was similar to that of the United Kingdom. Fred has rented out a family home but he has to ignore his foreign rent because he holds a temporary resident visa. Fred also earns his interest from his investments which he has in the France. Fred returns to the UK after 11 months after he arrived in the Australia.

There are many other issues that a temporary resident has to consider. Temporary residents are subjected to capital gains tax (CGT) rules for the foreign residents. There are certain rules where the capital gains tax is a share or right which are obtained under the employee share scheme or have been a temporary resident. It means that a temporary resident is subjected to capital gains tax on Capital gains tax events happening to the taxable Australian property (McGee, 2011).

The Migration Act 1958 states that a person holding a temporary visa is called a temporary resident. (Grewcock, 2011). According to the Social Security Act 1991, they are not temporary residents.  (Thompson and Maginn, 2012).

Fred is a temporary resident and is subjected to capitals gains tax in Australia on asset which are taxable Australian property.

Fred ceases to be a temporary resident and so he will be subjected to the tax in Australia on his capital gains and worldwide income. Any capital losses or capital gains Fred has made in respect to the assets held in the United Kingdom will become a Subject to the capital gains tax in Australia and the cost base for the assets will be set in accordance to the market value of the assets (Burman, 2010). Fred will receive a credit in the foreign tax for any tax paid in the United Kingdom on the gains.

Case Study 2: Ordinary Income

When Fred departed Australia, he is able to cash in his superannuation balance. There are also additional sections of the tax returns that require to be completed in a year that Fred becomes a temporary resident and that year Fred would have to cease being a temporary resident. Lodgement obligations must be met and tax refund has to be made sure because Fred is entitled to a refund in the tax. Fred may also be exempt from paying the Medicare levy, which is 1.5% tax on Australian income.

The principle guiding the court decisions in this congested are of taxation law of Australia and the Lord Justice Clerk articulated this in the Californian Copper Syndicate Limited v Harris. This is the case within New Zealand.

The Income Tax was assessed with questions and this is a principle settled well. The owner who has an ordinary investment gets a greater price after choosing to realize the Income Tax. The values are enhanced and there was a profit for the accessibility to the Income Tax. It enhanced the values acquired from the conversation or the realization of the securities measuring where it is done is not the investment change but the act done carrying in and out of the business. The association of the person buying and selling of the securities or the land hypothetically in order to deal with such investment is because the business seeks to make gains.

There is difficulty in defining the two classes of the cases and each case is considered in accordance with the facts, the sum of the profits which are mere enhancement in the value by the realisation of the security or the profit made in the business operations to carry out a scheme in order to make gains. A Delphic significance is given to the Californian Copper Syndicate Ltd v Harris for the oft citation of the truism. But there furnishes no criterion for the determination of such questions which is before the court in this case. The income is the business production. But it depends on the nature of the business and the relationship of the source which is profited by the business. Everything which the taxpayer gets is not necessarily the income.

A significant aspect of the decision was the business activities of the taxpayer who served as the auditor of the company Rangatira Limited. The taxpayer’s capital funds was maintained by the director’s policy and made sure that the dividend yield was that of the regular income stream.         

In this case, when the law changed it represented the high water mark for non accessible receipts. In order to obtain the coal assets incorporation was done by the taxpayer in the New South Wales from a related company. The taxpayer has not been carrying out mining in any of these lands though it may be for a short period. In the past history, this land In the Newcastle area, there was further land where the coal was mined until it got exhausted.  In a large way the land in the sub-division was sold by the firm.  In the previous years, there were minor sales.  There was forty five acres of land which was set aside for the Lambton town for the production of homes for miners.  Roads called Russel Road was built in the subdivision where there was twenty four acres of land.  The appellant commenced for pushing the sale of the land and gained expenditure in sub dining in order to make the land look attractive to the buyers.   Railway stations as well as roads for £5,000 were constructed and public institutions received land like churches and schools there were land for the parks as well (Duncan, 2012). Newcastle Hospital bought a large area of land.  

In order to hold the gain, there were a number of statements of principles from decided cases requiring qualification. . Weights should not be attached to any circumstances that every year there had been large sales. Parts of the estate should be laid out with the sewers and the roads sold it in building lots and it is done for the owner. The Hudson’s Bay will not apply to Scottish Australian Mining as there has to be a nature to purchase the land which merely turns property into money. 

It took two days to hear the Scottish Australian Mining Case as showed by the Commonwealth Law Report and the judgement was determined at the first instance. The information about the extended hearing of the cases is given by the dates which are not a part of the court case. The activities of the taxpayer were not enquired factually or there was a disagreement about the accounting or issues related to the case. The fact of treating the substantially commercial exercise as a mere realisation is well explained here (Aust, 2013).

A block of land was purchased by the taxpayer guaranteeing the shareholders. These shareholders were the proprietors of the fishing shacks which was accessible to the nearby beachfront.  It was not intended to make profit by selling it. The sub divisional needs included road construction as well as installing sewers as well as other services needed. The scale and capture is not different from that occurring in the Scottish Australian Mining Co Ltd. Case. There was success in changing the mind of the firm for changing the purpose as well as the ownership and it reflected the associations and the articles. There is a doubt in this case as to the gains resulting from developing the subdivision as well as selling the land which is taxable and it has not been for the change in the ownership.

There is a distinction between the net profits and the gross receipts and it has not risen according to the legislation of the United Kingdom or under the gains which was based on the tax systems but is essential in the Australian context as once the gross income is brought into the account.  A statutory provision was pointed by the taxpayer relating to deductions allowable if the income which is accessible is unequal to the taxable income.

The final court case in the Whitfords Beach Case was not addressed as it was on common grounds between parties including in the accessible income the taxpayer sold the material though the Gibbs CJ in the High Court said contrary to this. No detachment was there relevant from the other which established an apportionment to certain blocks which the best process involving the averaging was sold.         

In order to make sure of assistance provided in determining the activities are of adventure or business or a nature concern of making a profit undertaking a scheme. Additional land is obtained to be added to the original parcel of the land. For the subdivision of land a rational strategy is required. The business company like the manager, letterhead or an office is required. In order to obtain subdivision, a borrowed fund is financed. In order to settle the sub-divisional costs an interest of money was borrowed and claimed as a business expense.  The land required to be developed beyond the essential for securing the approval for subdivision. The building had also erected on the land.

Examining the facts and the circumstances with respect to a particular case is essential. It needs a consideration of these factors and other factors which are relevant to be weighed as part of the process to reach the conclusion. Single factors will not determine the combination of the factors leading to the conclusion as the character of the activities.

There are many factors in the Casimaty cases for making sure that assistance is provided for determining the activities are an adventure or business or a nature concern of making profit or scheme. The factors include changing the purpose of holding the land. Additional land is got from the original parcel of land. As an asset to business, the parcel of land is brought. A logical plan for the subdivision of land is required. There has been a business company like the letterhead, the office and the manager. The borrowed funds are financed by gaining the subdivision. The interest on the money borrowed for paying the sub-divisional cost was claiming as an expense of the business. A level for developing the land is beyond which is needed for securing the approval of the council for the subdivision.

According to Mona Sand, land was bought for working on the sand on the land. When the land became ripe it was resumed for $500,000.

The consequent gain was held by The Federal Court and was taxable under both 26(a) and 25(1) in spite of subdivisions and the resale which is leading purpose to underline the purchase. The rejection of the requirements for leading purpose to make gains by resale for the operation of the first limb of 26(a) no rationale was there in order to exclude such a requirement from 25(1) was preferred. The Court was assuming that it was not required.

Thus whilst Mona Sand supported the stance of the Commissioner, it never provided a strong authority for the proposition.

Cooling is a taxable nature to a lease incentive payment for procuring Inter Ella a solicitor of a company into a ten years lease agreement respecting to flooring of the building. For occupying the grounds, it is not the sole reason acquiring a commercial profit through leasing incentive was not a purpose which was significant.     

Various properties were brought under the Crow v FC of T 88 ATC 4620 and there was the subdivision of the sale of the parcel of land which involved in the transaction systematic and repetitive and there were characteristics of continuing business of developing the land. The court was satisfied about the taxpayer which was sold and bought the land for profit purpose. The activities of the taxpayer is answered properly the description to carry on the business of developing the land and the profits thereof constitute the income in accordance to the ordinary concepts.

The taxpayer bought land on which there was an old building. The building was removed and three townhouses were constructed on the land. The townhouses were advertised for sale before the completion, however this was not successful. Subsequently, the taxpayers moved into two different townhouses and lived there for approximately one year art which time they were sold which resulted in a total net profit of approximately $150,000. A few years later, the taxpayer s bought a second block of land where they constructed units and then sold them. The Commissioner contended that the profits from the sale of the townhouses were assessable ordinarily as they resulted from a commercial profit making activity. The taxpayer argued that the sale of the townhouses was the mere realisation of a capital asset and therefore not ordinary income on the basis of the townhouses were used as residences and only sold because of difficulties in finance (Chetty, Looney and Kroft, 2009). The court held that the sale of the townhouses was the ordinary income because the land was obtained for commercial purpose and a view in obtaining the profit from the sale. The purchase of the land and the townhouses was not for investment purpose and therefore not the realisation of a capital asset. Although the taxpayer lived in the properties of the land for a period of time the dominant purpose of the arrangement was the sale of the redeveloped property at a profit.

References

Aust, A., (2013). Modern treaty law and practice. Cambridge University Press.

Barkoczy, S., Rider, C., Baring, J. and Bellamy, N., (2010). Australian Tax Casebook. CCH Australia Limited.

Brigham, E.F. and Ehrhardt, M.C., (2013). Financial management: Theory & practice. Cengage Learning.

Burman, L.E., (2010). The labyrinth of capital gains tax policy: A guide for the perplexed. Brookings Institution Press.

Callison, J.W. and Sullivan, M.A., (2012). Partnership Law and Practice: General and Limited Partnerships. West.

Carbone, D., (2010). An extraordinary concept of ordinary income? The significance of FCT v Montgomery on what is income according to ordinary concepts. Revenue Law Journal, 20(1), p.1.

Chetty, R., Looney, A. and Kroft, K., (2009). Salience and taxation: Theory and evidence. The economic review, 99(4), pp.1145-1177.

Duncan, W.D., (2012). Joint ventures law in Australia. Federation Press.

Hanegbi, R. and Obst, W., (2015). Small-Scale Property Development: GST Implications. Adel. L. Rev., 36, p.483.

Manyam, J., (2010). Taxation of gains from banking and insurance businesses in New Zealand.

 McGee, R.W. ed., (2011). The ethics of tax evasion: Perspectives in theory and practice. Springer Science & Business Media.

Grewcock, M., (2011). Punishment, deportation and parole: The detention and removal of former prisoners under section 501 Migration Act 1958. Australian & New Zealand Journal of Criminology, 44(1), pp.56-73.

Thompson, S. and Maginn, P., (2012). Planning Australia: an overview of urban and regional planning. Cambridge University Press.