Taxation - Theory and Practice and Law

Question: Discuss about the Taxation, Theory and Practice and Law. Answer: The government of Australia uses income tax as one of its primary method of earning it revenues. In particular, the government imposes three kinds of income tax. Namely, there is a tax from individuals salaries and wages, income tax from business, plus tax from capital gains (Reinhardt and Steel1, 2006). This paper will study analyze the case where a citizen works outside Australia, but his family resides within Australian. From the study, the paper will be able to determine whether the citizen is supposed to pay his tax to the Australian government or not. The first question here is deciding where specifically Kit residence is. Of course, before any government imposes tax liabilities to someone, it has to be determining whether the person resides in such country or not. If not that, it has to assess the source of your income (Clark and Miller, 2000). Even though, to some extent, the way the Australian government carries out its tax regulations seems different from other countries. In analyzing their residency for tax, you may find that someone is not its resident due to immigration demands, but when it comes to tax liabilities, the government includes that person as a resident, and therefore the person is charged the income tax (CCH Editors, 2009). With that, it would be necessary for this paper to determine the kit residence. In determining someones residence and citizenship, Australia adopts the use of nationality test. The objective of this test as centered in helping migrants to integrate and also maximize their opportunities (Bacc hi, 2009). For participation in this test, an applicant would be required to be permanently residing in Australia. Also, a person needs to present the identity confirmation at the time of enrollment. Plus, the department would take require a photo from someone (Braithwaite, 2009). The law of taxation in Australian covers all the details in determining whether an individual is an Australian resident or not so as to impose tax duties. In our concerned case, Kit is a permanent resident in Australia only that he spends most of his time outside Australia, and that is just because of his job's demands. If someone stays outside Australia in the most of the year, such a person would be considered a non-resident as far as tax duties are concerned (IBP, Inc., 2015). Even though, Kit case is different. He is working in Indonesia, but he signed the contract in Australia. In (Vrellis, 2011), the work states that a contract is governed in the country where it was finalized. So it means that Kit's contract was concluded with the laws of Australia. So that part alone gives a presumption that Kit would want his family to live in Australia. The next presumption of Kits residence in Australia is his Bank Account. Kits Bank Account is in Australia, and its the same bank where his salary is credited. In short, the taxation law can conclude that Kit is conducting some economic liveliness in Australia, and in doing that he has an Australian residence. Thus, this piece of information again favors Australian Residency for tax purposes. Another thing, during work-offs and holidays, were are told that Kit finds the time to come and be with his family. This fact can also be used to imply that he wants to stay in Australia. To clarify on that, citizenship is available to any applicant with an intention to reside in Australia if he or she visits Australia regularly. Having this and the fact that his family is in Australia, it also give a presumption that he is an Australian resident. So, from the information given, it's worth concluding that Kit is an Australian residence. Even though he doesn't spend much of his time in Australian, he his investments is not within Australian, his conducts portray an intention to remain in Australia. Now that he is an Australian Resident, he is eligible to pay his income tax and other taxes as stipulated by the law of Australia. For example, in (Fisher, 2012) the work states that the house owner submits charges of fire service levy to the government. Similarly, Kit has to pay for these. At the same time, the government won't charge him any tax on the income that he receives as dividends from those countries mentioned to his dual citizenship (Ashby et al. 2009). Accordingly, Kit would not need to pay any tax from the money he receives from Chile as a dividend. Additionally, in the concern for the income that he is earning from his investment in Chile, that one would be treated as income coming from foreign investments. Therefore, that would be taxed accordingly. If he wants, he can raise a claim over his foreign assets tax offsets. However, this would only apply if he has applicable offsets. Furthermore, he would have to present his capital gains or losses that he faces from his sales. So they would all appear in the tax returns and would be taxed as other regular Australian Resident. The question in the law concerning this case was whether taxation should extend to the profits the taxpayer earned from the disposition of land. The taxpayer had bought this land for mining, but he decided to sell it due to lack of capital to carry out the mining and hence he started disposing of the land. The taxpayer gained some profit from the sale, and it claimed that the government should not assess such income for the purpose of the tax. However, the court held that such profit should be evaluated for taxation (Taxation Of Gains From Banking and Insurance Businesses In New Zealand, 2017). Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188 The Taxpayer acquired had acquired for coal mining. The business worked until 1924 when the coal exhausted from the ground. As a result, the taxpayer partitioned the land, constructed roads, and buildings incorporating railway stations with the plan of selling the property at a profit. When it came to payments of tax demands, the taxpayer contested what the commissioner argued that the profit earned from the subdivision should be included as assessable income (Gaal, 2010). It argued that the business operations were not in line with their actual business. They were undertaking such action to only dispose of their assets which were not helpful to their business. To their side, the court ruled that the profit was not assessable for taxation purposes. FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR Initially, the taxpayer had acquired the land for domestic use and for the fishermen who had their shares in the company. Later on, three construction companies bought the fishermen's shares. They all adopted the article of association of the company, but they had an intention to develop and partition land for sale. When it came to tax payment, the Taxpayer contested that their profit shouldnt be taxed as income. However, the court dismissed their claim and concluded that the tax papers dealing didnt constitute a separate dealing from their overall business operations (CCH Australia Ltd, 2011). In this case, the taxpayers held the land in trust for the estate of Charles Aderman. The deceased had obtained the land with the intention of carrying out desultory farming. Later on, the deceased sold half of the shares to his brother-in-law. Both decided to undertake cattle farming in a partnership business. However, the whole plan failed due to the adverse market situation and the proprietor's health (Morse Group Accountants Advisors, n.d.). So with that, the co-owners opted to subdivide the land and sell it. The council of the co-owners procured the subdivisions, and the co-owners presented a bond to the Council through a bank guarantee. They both sold the plots, and they earned a sizable profit the deal. The Taxpayer disputed that the dealing with that land should be taxed, and they argued that they were merely trying to dispose of their capital asset. To their favor, the court ruled that they were not supposed to submit their tax payments from the sale. The Taxpayer purchased the land for farming business. He carried out the farming work for some time but afterward, he found that the property would not be as profitable as it was expected due to severe drought, poor health, etc (Cooper Grace Ward, 2015). So he partitioned the land and disposed of it in 8 different blocks. The Taxpayer objected to pay the tax since profit was earnings from a capital asset. The Court accepted his appeal; it ruled that he should not pay the tax from the partitioned plots. The court reasoned that he had not acquired the land with the intention of subdividing for sale, only that he found that the farming was not as profitable as he thought. Moana Sand Pty Ltd v FC of T 88 ATC 4897 The memorandum stated that the taxpayer's objective was to carry out business in selling the sand that was on the property. Additionally, their intention indicated that they planned to also sell the land after harvesting the sand. So the Taxpayer subdivided the land after exhausting the sand and then sold it at a profit (Prince, 2011). The Taxpayer argued that it wasn't their actual business of selling land, so they should not remit tax as required by the law. However, the court objected to their claim. About this case, Taxpayer bought agricultural land. He subdivided it and sold for a profit. He contended that the profit earned was not supposed to be a tax. However, the court declined his claim and ruled that he was expected to pay tax. It seemed to the court that he was buying and subdividing the land, and then selling it at a profit (Smith, 2003). The Taxpayers bought the land and cleared all the old houses, and then replaced them with three townhouses. Ahead of completion, he decided to search for buyers but he didn't get them (Austaxpbr.com.au, 2017). Later he started living in the houses while searching for buyers. Finally, the buyers came, and he sold the property making a profit. He then contended that he be exempted from tax obligations which the court dismissed. Conclusion If you're new to Australia intending to live there permanently, it would be good to understand that you'll be an Australian resident for tax purposes (Hill and McCune, 2007). Similarly, if you're an entrepreneur, it is also worth knowing whether a particular scheme is a little realization or you'll be required to remit your income tax. All this would be necessary to avoid huge penalties that can be imposed by the law. 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