Taxation in Australia - Assignment

Added on -2020-02-24

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Running head: TAXATIONTaxationName of the Student:Name of the University:Authors Note:
TAXATION2Table of ContentsIssues................................................................................................................................................3Legislation.......................................................................................................................................3Application......................................................................................................................................3Residential Status.............................................................................................................................4INCOME FROM PRIMARY PRODUCTION:..............................................................................7CAPITAL GAINS TAX CONSEQUENCES:................................................................................8Conclusion.......................................................................................................................................9Reference.......................................................................................................................................10
TAXATION3IssuesIn this case, the issues is related to the determination of the consequences of tax forsmith. In order to do that the residential status of smith is determined, as he has to move out ofAustralia for the employment related purpose. The study will be helpful in determining thecapital gain of the land subdivided by smith. LegislationSubsection 995-1 (1) of the ITAA 1997;Taxation ruling of 98/17F.C. of T. v. ApplegateF.C. of T. v. Jenkins 82 ATC 4098; (1982) 12 ATR 745Subsection 6 (1) of the ITAA 1936;Application.The domicile test 1982 provides that a person living in Australia shall be regarded as aresident for the purpose of tax unless the tax administrator is satisfied that the permanent place ofabode of the individual is in any other country outside Australia (Lang 2014). In determining theresidential status the domicile is considered as the legal concept. It is generally seen that anindividual generally adopts the domicile of his father as the individual is born. It is observed thatmost Australian leaves Australia with the passport and continues to maintain the domicile inAustralia for a large period. In this case, Smith is the resident of Australia and is regarded as theresident assuming that his permanent place of abode is in Australia (Markowitz et al. 2017).
TAXATION4Residential StatusThe section 4-15 of the Income tax Assessment Act 1997 provides that taxable income isrequired to be calculated by deducting the allowable deductions from the assessable income. Theincome tax laws classifies assessable income as the ordinary income (section 6-5 ITAA 97) andthe statutory income (Section 6-10 ITAA 97). The section 6-5 and 6-10 both states that in caseof resident taxpayer income from all the source are taxable and in case of nonresident tax payerthe income from Australian sources are only taxable (Ting 2014). Therefore, it can be seen thatthe tax liability of an individual is dependent on the residential status and hence it is important todetermine the residential status of the individual. The section 6-1 of the Income Tax AssessmentAct 1936 provides the meaning of the term resident and highlights different types of test that areapplied to determine the residential status (Highfield and Warren 2015). There are four test thisare:Ordinary test;Test according to domicile;Test as per 183 days rule;Superannuation test;Residential status according to the ordinary conceptThe residential status is conducted to determine whether an individual is a resident inAustralia according to the ordinary concept. The law states that if an individual is residing inAustralia and lives in Australia then the individual shall be regarded as the resident of Australiafor the purpose of tax. In that case, the individual is not required to apply any other tests fordetermining the residential status (Eccleston and Warrnen 2015). The Taxation Ruling 98/17provided the guidelines for ascertaining the meaning of the term residential status that is

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