Case study 1
According to the given case study, the person in question is an American citizen, Kit, holding a Chilean citizenship but resides in Australia. Despite working for an American company, Kit evidently falls under the Australian tax pay laws since he is considered an Australian citizen when taxpaying is considered. This law is evident because his intentions are to settle permanently in the present country he is residing in. His owning of a personal residence and his employment in Australia proves this fact (Abbott, Pendlebury and Wardman, 2013). An Australian bank makes the payment for Kit's salary, and even he has a joint account with his wife in an Australian Bank. Even his family comprising of his wife and children are an Australian citizen. Therefore, as per the taxation rules, the facts make it palpable that Kit is entitled to be a citizen of Australia. It should be considered that in spite of having few settlements and investments back in Chile, Kit has an intention to reside in Australia permanently. That is why, apparently, Kit will be considered and Australian citizen and is eligible to be levied the tax as per the taxation law in Australia.
In this case, the residency of a taxable person receives a lot of focus. A tax officer needs to understand the eligibility of the person in question to pay the tax or not by justifying their residency status, as per the Australian law (Allison and Prentice, 2009). A person’s residential status is given so much of importance only because the Australian taxation law treats a resident and a non-resident in different ways. If a person is a resident of Australia, then he/she is charged for all the different incomes in general. The form of income, whether it is an earning from the overseas or earning in domestic, does not matter if the person is considered a resident of Australia. Taxes will levy upon the person for only his income according to the Australian law and not the source of his income will give much importance (Bhimani and Horngren, 2008).
However, in the case of a person who is considered a non-resident, he/she does not have to pay for every sort of income as per the tax department laws. These laws enable the tax department to charge people with the order of payment of taxes coming from different sources. A tax is levied on people, income, property, transactions and commodities for involvement in funding the government to develop the government sectors that form the socio-economic structure of the country (Chen-Wishart, 2015). Taxation follows the state, federal and local rules as the main criteria and the tax levied is divided into two categories, such as direct tax and indirect tax. The special characters that feature compulsory payments are the factors raised due to the government issues only, and the consideration of these payments as service tax will not be justified. The payments that are collected due to the tax payment are not credited as penalties. Taxation system also has a specific set of goals. Tax payment is benefitted to the public as these are considered as a collection of revenue for the citizens (Dauber, 2005). Problems often arise in the common mass when payment of tax is considered as the collection of the penalty amount. It can be explained as economic obligations that are driven by the tax expenses, as incentives for the determination of economic sectors and macro-level objectives and imperfections arise when the market does not exist and free market correction exists. If there is a case of being a non-resident, Medicare Tax does not become necessary to be paid.
Kit is bound to pay the different sorts of taxes that are applicable since he is considered a resident of Australia. Though, the non-resident taxes are much worse than the taxes applicable to the residents (Duxbury, 2015). The tax charged on the non-residents considers their global income. However, normal bank rate interests apply to them, and they are also subjected to pay the capital gains tax.
The verification of citizenship or verification of residences of a person can be conducted depending on a few tests as mentioned below depending upon few factors that determine the basic concept of a residence:
- If a person keeps on coming back to a country some times and returning to the country is variable, then he is considered as a resident (Gillies, 2004).
- If a person has an extent of family ties or has business deals in the country, he resides in then also he is considered as a resident of that country.
- It is also to be considered whether the person is accompanying family members to different kinds of trips in a country.
- If the person is employed to a job in a country as a regular
- If the person has his personal belongings kept permanently in the country he currently resides in (Engdahl, 2011).
- If the person has an extent of bank or assets kept in the country.
- If the migrant in question has set up or started a business in the country, he resides in
The different features in this test determine the fact that whether the person in question is a resident of that particular country or not.
There is another criterion about a duration of 183 days, i.e., more than six months that a person needs to fulfill in dwelling in a country to become a resident of that particular country.
In this particular case, this person called Kit has been lodging in the country for quite some time. His family also resided in the country for more than three years. This makes him a citizen of the country. Since his private owned residence and family is in the country of Australia, he is considered to be an Australian citizen (Horngren, 2013). He is already a citizen of Chile, but despite the fact, he is considered a citizen of Australia and is liable to pay the taxes in the country as well depending on the facts mentioned above. In spite of having his properties in Chile, he has his wife and children residing in Australia that automatically makes him an Australian citizen. If any other taxes are levied on him for the properties, he owns in Chile, that are to paid by him accordingly as per the Chilean Taxation Laws.
Case study 2:
i) Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159
A company wanted to procure a land which would contain ample copper for its purpose. Although, after procuring the land, the company didn’t extract copper from the land. Instead, it sold that property to another organization and expected some shares of that second company in reciprocation. The court gave the verdict that the land deal was conducted for earning a higher income in the future as the main aim of the organization was collecting more revenue by sale of the land (MacIntyre, 2016). Due to such reasons, it was regarded as a common occurrence in the business where taxpayers are involved.
ii) Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188
A company purchased a land and on that land, formed a coal mining business. Within a period of time, the entire coal was extracted. So the company took a decision to try selling the property. So that the sale could be more profitable, the organization made subdivisions within the land and constructed several roads as well as other types of infrastructure The profit that was obtained from the sale of the land was detained by the court, because the organization was using it as a capital asset for earning more profits (McMillan, 2010). The commercial motive of the company made the court take the decision against it. The profits earned were regarded as capital benefits.
iii) FC of T v Whit fords Beach Pty Ltd (1982) 150 CLR
Here the payer of the tax was a company included for obtaining a portion of land in the White Fords beach. The area in question had a beach frontage which was still usable, and a particular group of people formed the company for purchasing the land. They were permitted to make use of the beach for the purpose of fishing. After a few years, noticing that the land was a problematic capital share, the taxpayer sold it to clear himself of the probable hassle in future. The shareholders who were the new owners purchased those shares for exercising control over the land only (Mott, 2008). The other objective was that the taxpayer from whom they had purchased the land would increase the land, subdivide it and sell it at considerable profit margins. At the time of final selling of the property, the payer of the tax did not agree that the earned profits were normal income. The court although, detained that the profits were made from selling the land and hence were qualified as a regular source of income. The court also detained that when the next shareholders took control of the organization, there was a reversal in the objective. The land was now possessed only for its development, subdivision, and sale and not for any non-commercial purpose (Oppermann, 2009). The selling of the land piece was thus a common occurrence and hence a quantifiable part of the income as well.
iv) Statham & Anor v FC of T 89 ATC 4070
The case under consideration is concerned with income tax. The assessed income tax was reframed in an unjust manner. Such cases of improper tax assessment for wrong motives are very common nowadays. Later on, a decision was made that the income earned by the estate was adjusted by the commissioner (Ruff, 2014). The final adjustments were made in the proper manner according to the rules prescribed for assessment of taxes.
v) Casimaty v FC of T 97 ATC 5135
The case in consideration dealt with demonstrating circumstances where there was no intention of profit making. The concerned person was aiming to make a profit from the sale of a land fragment. The source of generation of the conflict was that whether the profit earned is taxable (Schroeder, Clark and Cathey, 2011). If the profits were found to be taxable, there would be no scope of earning a profit.
vi) Moana Sand Pty Ltd v FC of T 88 ATC 4897
The case in discussion dealt with a company using sand which possessed the land even after the extraction of the sand. The company was the owner of the property. It was unwilling to sell the land to any other taxpayer before any hike in its pricing. This was a way of increasing the return on the investment. But in the process, the company was not using the land and was retaining it for a long period (Ruppel, 2015). On selling the land, later on, there was a conflict on the tax that had to be paid. The decision taken by the court said that the land could be applied only for commercial use and not for other purposes. The court also said that the buyer of the land had to be someone who would use it for commercial use. It could also be a relative of the company’s owner.
vii) Crow v FC of T 88 ATC 4620
This case relates to a farmer who is considered a taxpayer. The farmer had attempted to buy the land stretch, regarding which there was a dispute. The case arose due to the conflict in the land which the farmer wished to procure. However, on the completion of the case, the land was found to be offered to the farmer (Tracy, 2013).
viii) McCurry & Anor v FC of T 98 ATC 4487
The case in consideration dealt with the ownership of land by two brothers. However, the land had very few numbers of houses. If the land was to be renovated, the houses required complete removal from the land. The conflict, on the other hand, arose from due to the tax-paying liabilities of the two brothers (Lakshmanan, 2015). The brothers argued over whether they required paying taxes at all. Ultimately, when the verdict was announced by the court, it was in favor of both the brothers. It said that both the brothers did not require paying any taxes.
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