Taxation Law

Taxation Law

Taxation Law

Residence and source

According to Nolan (2006) the payment of taxes is a mandatory requirement for the residents in Australia as the income tax forms the substantial revenue stream for the Australian taxation system. Nolan (2006) asserts that income tax by the Australian government is entirely generated from three sources that involves personal earnings, corporate income and capital gains. However, Commission of the European Communities and Price Waterhouse (2013) observes that the payment of income taxes by the government not only target the Australian governments but also the non-residents and the foreigners that invest in the Australian territories. Further, Commission of the European Communities and Price Waterhouse (2013) state that the Australian residents that work or leave Australian territories are entitled to the payment of the income taxes if they have not set a permanent home outside Australia. Similarly, Nolan (2006) states that the visitors and the non-residents in Australia are also entitled to pay taxes under certain conditions based on the time frame the persons resides within the country. According to Nolan (2006) the national taxation requirement for the foreigners is done on six moths and annual basis as the people living in Australia for over six months are entitled to income taxes as the residents of Australia (Nolan, 2006). This paper therefore seek to critically analyze the taxation state of the foreigner and the business person Fred as an Australian resident based on the provided case study.

Notably, Fred is a British resident that relocate to Australia for business purposes and rents a home Australia for 12 months and established a branch of his company with a stay time that is not ascertained in Australia. Based on Nolan (2006) observation Fred is thus a residence of Australia due to the period of residence in Australia exceeding six months and is thus entitled for the payment of taxes.

According to Commission of the European Communities & Price Waterhouse (2013) the visitors that arrive and live at the same time for the period of time exceeding six months and have established ties in the local community the visitor is entitled to the payment of income taxes as an Australia resident. Further, Commission of the European Communities & Price Waterhouse (2013)states that the visitors that arrive and live in Australia for more than six months and travel working in various locations around the Australian territory is also entitled to the payment of taxes as a foreign resident. Basing the taxation requirements on the Fred’s scenario, Fred is thus required by the Australian government to pay the residents income tax as a resident of Australia due to his business connection with the Australian community (Commission of the European Communities & Price Waterhouse, 2013). As observed by Nolan (2006) the operation of business and other corporate activities within the same location the individuals operating the business are thus required to pay for the corporate income and the capital income taxes. Fred is thus required to pay the foreign income taxes as a business operator in Australia with braches within the country as required by the taxation system (Nolan, 2006).

In conclusion, Fred as a foreigner and a business person operating within the Australian territories, friend is entitled to pay for the income taxes both for his business and a personal income tax as required by the taxation system based on his individual income sources. Further, regardless his departure from Australia, Fred’s business is entitled to be taxed accordingly in relation to the Australian corporate taxation system.

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

According to Australia federal court (2009) the Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159 is aimed at the realization of the capital assets and whether the profit generated from the sale of a property is essential to be exploited or not. Further, Australia federal court (2009) states that the case also seek to assess and analyze whether the corporates minerals are ordinals income or capital in nature. The case therefore involves the court for the determination of the taxation situation of r the company to ensure that the company adheres to the taxation system accordingly based on the income status. Notably, the organization purchased land for the extraction of copper but the company resold the land for a profit for the exchange of shares with the stock exchange income that is viewed as an ordinary income profit (Australia federal court, 2009). However, CCH Australia (2011) states that the type of income involved in the business transaction is capital in nature as the company sold the purchase of the land as a property within which the company would have extracted and sold in at a profit. Further, Australia federal court (2009) asserts that the company’s director urges that the investment do not require to be assessed as the company did not exchange the land for a different investment but instead sold it for the commodity that would have been extracted and be sold at a profit.

According to CCH Australia (2011) due to the scenarios related to the sale of land based on the business requirement and the and its operation and the taxation system to the taxpayers, the court came up with a ruling that seek to curb the stipulated course of action taken by the business for an effort to provide the effective action to be taken based on ordinals and capital taxpayers action (CCH Australia Limited, 2010). CCH Australia (2011) asserts that it is the requirement by the law that a taxpayer (individual or corporates) to ensure that transactions are done with a profit making purpose (CCH Australia Limited, 2010). However, CCH Australia (2011) observes that the taxpayer is entitled to state the purpose of the business at the time of entering into a business transaction or operation. The court thus specifies that it is essential for the business as a taxpayer to make profit at the time of acquiring the property but with the stated purpose of the acquired property (CCH Australia Limited, 2011).

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

According to CCH Australia Limited (2010) the Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188case is involved with the corporate income and whether there is necessary subdivision and the sale of land that is supposed to be used for the extraction of minerals that is supposed to assessed as either ordinary income or a realization of the capital assets (CCH Australia Limited, 2010). According to CCH Australia Limited (2010) the Scottish Australian Mining Co Ltd had operated for many years and after the company’s mining operations the company subdivided the land and sold the land that the company argues that the company’s course of action in the sale of land was not assessable and the income generated was capital in nature and not ordinary income.  CCH Australia Limited (2010) asserts that the stipulated course of action by the Scottish Australian Mining Co Ltd was a business income and the asset was assessable as the land was acquired for the purpose of making profit. However, the court therefore was whether or not the piece of land was assessable and ordinary in nature or was a capital asset (CCH Australia Limited, 2010).

According to CCH Australia Limited (2010) the court therefore comes up with a ruling that states that corporates are entitled to the generation of profit or gain from the isolated transactions (CCH Australia Limited, 2010). Therefore, CCH Australia Limited (2010) states that the based on the Scottish Australian Mining Co Ltd course of action, it is acceptable by the law for an organization to generate profit from the isolated assets and gain a profit from them if their operations are not based on the assets anymore. CCH Australia Limited (2010) states that the court therefore provides a clear ruling stating that the taxpayers are therefore entitled to embark on their substantial assets that is acquired and generate profit out of the assets.  The corporates involved in larger business enterprises under the law are thus allowed to subdivide their assets and generate profit out of the assets (CCH Australia Limited, 2010). However, CCH Australia Limited (2010) observes that the court views the subdivided asset as an ordinary income and requires to be assessed as the company do not generate the capital income based on its type of operation and the purpose of the company (CCH Australia Limited, 2010). 

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

According to Manson & Dixon (2006) the case of whitford beach pty ltd involves the acquisition of land by the by company to secure the shareholders of the company. According to Manson & Dixon (2006) the company course of action was not aimed at the generation of profit but to secure the beachfront for its shareholders. However, Manson & Dixon (2006) states that the land shares that were in the taxpayer were bought by three corporates that were not the initial shareholders of the Whitfords Beach Pty Ltd whose motive was to develop the land, subdivide it and sell it at a profit. Additionally, Manson & Dixon (2006) observes that part of the land was used for commercial purposes and the other was subdivided and sold at a profit that was to benefit the shareholders in the taxpayer (Manson & Dixon, 2006). Further, continues growth of the sold land that required the generation of roads, electricity and water necessitated the government intervention that accelerated the subdivision of more land by the selling agents of the taxpayer.

However, Manson & Dixon (2006) asserts that the profit generation fostered the necessity for the making of decisions on whether the income was assessable or not (Manson & Dixon, 2006). According to Manson & Dixon (2006) the court treated the income generated as a result of the sale of land as assessable income within the income tax assessment act and stated that the land that was sold was treated as an income in accordance to the ordinary usages and was assessable as a concept of humankind (Manson & Dixon, 2006). However, according to CCH Australia Staff (2012) the trading of land that is sold for a purpose other thus profit generation is not regarded as income and is treated as a capital income (Manson & Dixon, 2006). The sold land was therefore sold for both the purpose of profit generation after the acquisition of shares by the three corporates as well as to secure the interests of the initial shareholders that results in the assessment of the income as an ordinary income.

Statham & Anor v FC of T 89 ATC 4070

According to Australian society of accountants (2011) Statham & Anor v FC of T 89 ATC 4070 involves the subdivision of inherited land that was located in the outskirts of shepparton. The subdivision of the land was as a result of a permit issued requiring the land to be subdivided into smaller allotments and in turn profit was generated. According to Australian society of accountants (2011) the dispute arose on whether the sold land was assessable on the bases of the owner as a business with an aim of making profit (Australian society of accountants, 2011).

According to Australian society of accountants (2011) the sale of land was not a business motivated operation that was aimed at the generation of profit, however, the subdivision of land was thus as a result of the issued permit that implies that the sale of land was not motivated by business intentions. The court ruling therefore requires the taxation of the individual income be based on the taxpayer’s intention and purpose (Australian society of accountants, 2011). The sale of land was thus not an intention of the owner and is thus not assessable as the ordinary income.

Casimaty v FC of T 97 ATC 5135

According to Gaal (2010) Casimaty v FC of T 97 ATC 5135involve the taxpayer and other parties jointly purchasing primary production assets with an aim of expanding the existing business. However, Gaal (2010) states that the taxpayers later sells part of their asset but becomes unsuccessful due to lack of effective subdivision plan. However, the taxpayers later sells the land and secures the approval by the relevant local authority after the provision of suitable  plans as required by the planning scheme and makes a profit in return (Gaal, 2010).  According to Gaal (2010) it is thus a requirement by the law that the taxation system to be taken into consideration for the taxation of the income as the generated profit is acquired in an ordinary manner (Gaal, 2010). 

Reference

Australia federal court. (2009). the Federal Court Reports. Law Book Company.

Australian society of accountants, (2011). The Australian Accountant, Volume 54.califonia. Australian Society of CPAs

Butterworths. (2005). Federal Statutes Annotations, Volume3. Butterworths PtyLimited

Butterworts. (2009). Australian Current Law. Butterworts press.(moana)

CCH Australia Limited. (2010).Australian Taxation Study Manual: Questions and Suggested Solutions. CCH Australia Limited. (Scoteish)

CCH Australia Staff. (2012). Australian Master Tax Guide 2012. CCH Australia Limited. (Casimaty)

CCH Australia. (2011). Australian Tax Casebook. CCH Australia Limited.

CCH Australia. (2011). Master Tax Examples 2010/11. CCH Australia Limited.

Commission of the European Communities. & Price Waterhouse (Firm). (2013). doing business in Australia: A guide for small and medium sized enterprises of the member states of the European Community. Luxembourg: Office for Official Publications of the European Communities.

Gaal, J., (2010). Taxagent manual. CCH Australia Limited.

Lyndon maither (2000).The Federal Income Taxation of Partnerships and Joint Ventures, Precedents, Provisions and Materials, Sixth Edition. Lyndon maither press.(Statham)

Nolan, L., J. (2006). Australia Business: The Portable Encyclopedia for Doing Business with Australia. World trade press.

Prince, B., J., (2011). Property & Taxation: A Practical Guide to Saving Tax on Your Property Investments. John Wiley & Sons (crow)

Queensland Law Society. (2000).Law Institute Journal: The Official Organ of the Law Institute of Victoria. Reviews Pty. Limited

Manson, H., Dixon, J., (2006).Case Companion to Ryan’s Income Tax Manual. Law Book Company


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