Taxation Law: Analysis of Residential Status and Relevant Case Studies

This report delves into Australian taxation law, beginning with an introduction to tax and its impact on income. It explores the concept of residential status, outlining the criteria used to determine an individual's tax obligations, including domicile, duration of stay, and employment contracts. The report then examines Case Study 1, applying these criteria to assess Kit's residential status and the tax treatment of his salary and investments, including interest and dividends. The second part of the report, Case Study 2, analyzes several landmark case laws, including Californian Copper Syndicate Ltd v Harris, Scottish Australian Mining Co Ltd v FC of T, and FC of T v Whitfords Beach Pty Ltd, among others. It identifies the issues, defendants, plaintiffs, and key aspects of each case, focusing on assess ability of profit, capital gains, and the sale of land. The report concludes by summarizing the key takeaways from the case studies and their implications for taxation law, highlighting the importance of understanding residential status and the application of relevant tax regulations.

TAXATION LAW
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Table of Contents
INTRODUCTION...........................................................................................................................3
CASE STUDY 1..............................................................................................................................3
Explain the residential status of Kit and treatment of its salary and investments for the purpose
of taxation....................................................................................................................................3
CASE STUDY 2..............................................................................................................................4
a) Describe case issue..................................................................................................................4
b) Identify defendant and plaintiff...............................................................................................5
c) Case description.......................................................................................................................6
Question 3........................................................................................................................................8
Highlight all the sections breached in the case law and explain all the sections.........................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
Tax is regarded as one of the factor that reduces an entity's earned income which will be
recognize in the initial stage. This project is all about explaining various case laws and the
residential status of an individual by fulfilling various conditions. Lastly the report end with the
case law about the taxation on the basis of PAYG tax to be paid by Walker on the taxable salary
earned by them.
CASE STUDY 1
Explain the residential status of Kit and treatment of its salary and investments for the purpose of
taxation
Residential status of an individual is determined for determination of tax liability of a
person as in Australia residential status of a person will facilitate an individual in knowing its tax
liabilities in advance. There are various conditions that act like a residency test in order to
determine the actual obligations of tax imposed on a person.
A person whose domicile or home is in Australia are regarded as the resident of Australia for the
purpose of tax unless its permanent home place is in outside Australia.
An individuals stay in Australia for half of the income year or for a period of 183 days or more
are taken as Australian resident unless that individual locates outside the Australia and does not
want to stay here in Australia for permanent purpose.
Another residency test used to asses the residential status of an individual in Australia is
of eligible employee. A person who shift to Australia for an employment contract from its
original place of location will be count one among the resident of the Australia for the purpose of
taxation. Citizenship and nationality of a person will not restrict its residential status in order to
determine its tax liability for the income tax rules and the regulations of imposed by the
Australian government.
Above mentioned conditions will help a person in ascertaining its residential status for
the purpose of taxation as this would help an individual in order to get further relief in their tax
obligations as all the reliefs are mentioned in the act especially for resident and non-resident
individuals.
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In the given case scenario, Kit has fulfilled two of the above mentioned conditions that his
domicile or home lies in the Australia as he purchased home and he has an employment contract
for Oil rig job in Australia will determine its overall residential status according to the purpose of
tax. From the above application of various conditions that shows that Kit is an Australian
resident that help him to adjust all its incomes according to the regulations applied on them as a
resident.
Salary amount received by Kit will be taxed as per the rules and regulations of ATO
under PAYG that stands for pay as you go tax in which tax will be charged when an employee
received salary are required to be paid PAYG tax rate of 46.5% on the amount of salary.
Tax will be paid by an individual on the amount of interest received by Kit as he has joint
saving bank account with her wife on which interest is paid to them. Tax will be charged on the
amount 50% amount of interest received by them in a particular year of income. Dividend
received by Kit for the investment made by them in share portfolio attracts the tax to be charged
by them as he is Australian resident every income received by him whether is located the source
of income from Australia or from outside the Australia that is in Chile. Dividend received by Kit
in a particular income year in which its taxable proceedings are performed the amount of
dividend received by them would be taxable in hands of kit after knowing its accurate source as
without knowing about is actual source no income received him would be tax.
CASE STUDY 2
a) Describe case issue
Californian Copper Syndicate Ltd v Harris (1904) 5 TC 159- The issue under this case law is
related to identifying assess ability on the generation of profit from the sale of land.
Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188- Issue or conflict in this
case law is related to business income and sale of land.
FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR- Profit assess ability will be checked in
the given case law along with the realization of capital asset on which profit generated by an
individual.
Statham & Anor v FC of T 89 ATC 4070- In the case law issue is related with the
consideration of net proceeds from the sale of subdivided lots under the head of asses sable
income.
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Casimaty v FC of T 97 ATC 5135- Consideration of amount received as income from the sale
of subdivided land under two different sections either in 25(1) or 25A.
Moana Sand Pty Ltd v FC of T 88 ATC 4897- The current case is all about excluding costs
from the taxable income of an individual and also to consider the profit arises from the sale of
land.
Crow v FC of T 88 ATC 4620- This is all about taken into considerations the income earned by
an individual in a particular time period along with the inclusion of profit derived from the sale
of land near Hobart. Tax regulations will be followed by a person in order to deterine its overall
tax obligations that reduces an individual's burden by providing taxation relief to an a prson in
the year of taxation.
McCurry & Anor v FC of T 98 ATC 4487- It is related to the profit generated by an individual
from the sale of land tax under section 25 (1). All tax related consequences will be educes by an
individual by proving the actual point of both parties to the default.
b) Identify defendant and plaintiff
Case laws Defendant Plaintiff
Californian Copper
Syndicate Ltd v Harris
(1904)
Copper syndicate Harris
Scottish Australian Mining
Co Ltd v FC of T (1950)
Australian Mining company Federal commission
FC of T v Whitfords Beach
Pty Ltd (1982)
Whitfords beach Federal commission
Statham & Anor v FC of T
89 ATC 4070
Statham&Anor Federal commission
Casimaty v FC of T 97 ATC
5135
Casimaty Federal commission officer
Moana Sand Pty Ltd v FC of
T 88 ATC 4897
Moana Sand Pty FC
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Crow v FC of T 88 ATC
4620
Crow FC
McCurry & Anor v FC of T
98 ATC 4487
McCurry&Anor FC
c) Case description
Californian Copper Syndicate Ltd v Harris (1904) 5 TC 159- In this case law taxpayer
involves in selling of land to other company through allotment of shares by realization of
substantial profit. Harris as the surveyor of tax has assessed the profit liability of taxpayer from
the resale of single land. The purpose of taxpayer’s in the given transaction is to acquire and
resell the same land in order to generate higher amount of profit. Decision of court of law in this
particular matter is in the hands of tax surveyor as the taxpayer's income was asses sable. The
current decisions in the case law is backed up with the legislation of income tax act 1842 under
schedule D in determining the income tax liability of a person.
Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188- The case law is all about
explaining various tax regulations related to the capital gain which arises on the sale of land or
property sold by an individual in one year to another. The capital gain is generated by deducting
all kinds of expenses from the sale considerations amount for which the property is sold. Section
108 sub section 5 sub section 1 of the income tax assessment act will be used in order to
determine the overall liability of an individual. In the given case land is taken as the capital asset
as the tax prepare has sold land on which profit arise from the sale proceeds is considered as the
taxable income of an individual that attracts all the regulations related to the capital gain. Tax
payer has in total 1771 acre of land in the lambton estate that was purchased in the year 1860.
After the purchase of land they decided to sell the land in order to recover all its costs and able to
generate higher amount of profit. Federal commissions who reviewed the current case of
Australian mine has assessed that profit has generated by an individual for the sale proceeds
which would be taxable in hands of defendant that is Australian mine in the given case.
FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR- Whitford is the tax payer who is a group
of fisherman who have acquired land on the beach. Three development companies purchased the
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fisherman's shares for$1.6 million (Ardanaz and Scartascini, 2013). The land zones will be
changed by the taxpayer as they want to sell the land in order to generate considerable amount of
profit from the subdivided land amog the three companies. The argument made by the tax payer
on the grounds that the current event takes places is just the realization of capital assets and
profit will not be taxable but the legal authorities take the correct decision in hands of tax payer
whop would be liable to pay tax on the amount of profit generated by them in a particular
financial year.
Statham & Anor v FC of T 89 ATC 4070- The dispute in the given case law id based on
determining the asses sable income of an individual due to different transactions takes places in
an entity such as sale of units of land divided among one or more individuals. The land is
originally purchased by one individual and it is used for non-commercial purpose specifically for
the purpose of farming. The decisions of the court will be depends on the consideration of
various sections such as 25(1) and 26(a). The decision of court in the given case is that in
accordance with the sections 25(1) and 26(a) the sale proceeds of land used for farming will not
be treated as the asses sable income as the produce of land is for farming and doesn't involve in
any kind of commercial dealings.
Casimaty v FC of T 97 ATC 5135- Major issue of the given case is all about the determination
of special grounds on which an individual will consider the sale proceeds generated from the sale
of subdivided land as the income which will be taxed in the hands of an individual.
Moana Sand Pty Ltd v FC of T 88 ATC 4897- Current case law will emphasize on the
transactions are regarded as the isolated transactions as per 25(1) of the income tax assessment
act 1936 which helps an individual in order to determine its overall obligations of tax imposed on
an entity owner. The term isolated transactions refers to all those transactions in which events or
transactions takes places outside the overall scope of ordinary business of a taxpayer and all
other transactions considered by an individual by a non-business tax payer. Tax ruling that helps
the authority in determining the tax liability in terms of capital gain on the sale of particular land.
In this particular case scenario, there is agreement formed among a person to purchase a land
from family association for a total sum of 2000 GBP out of which 400GBP will be paid through
deposit and balance of the total amount of money will be paid in from of yearly installments.
Verdict of the court in the given case scenario is that costs incurred by a person in
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acquiring the land will be excluded from its total asses sable income and then the remaining
amount will be taxed in the given sections.
Crow v FC of T 88 ATC 4620- Dispute arises among both the parties on a common ground of
taking the sale proceeds generated from the sale of land in the taxable income of an individual or
not as both the parties provided their specific arguments which will be resolved by the court of
law by giving opportunity of being heard to both of the parties (INCOME TAX ASSESSMENT
ACT 1936 - SECT 6, 2016). The farmer has borrowed a sum of money for a period of 10 years in
order to purchase the five year block of asset. The case is base on the dispute of paying the
amount of installment properly in order to reduces the overall burden of paying the debt. The
decision of the authority has based on the verdict of the case law of Australian coal mine ltd in
which the land was used for the purpose of coal mine for long period as compared to the land
used as farming purpose.
McCurry & Anor v FC of T 98 ATC 4487- In the present case law McCurry and Anor were
two brothers who intends to purchase a land on which were appurtenant to old house on it for
which they take a loan in order to fund the same proceedings. After the purchase o land,
additional loan taken by them to move the old house and construct three townhouses on the same
land. The status of the newly construct house has changed from vacant to the residential house of
the owner as they moved with their families in 2 and 3units and advertised the 1 unit for sale. FC
commissioner has determined that they generate profit from the sale of land and file a taxation
charge in accordance with the section 25(1). Decision in hands off two brothers was that the
court has considered the generation of profit from the sale of land.
QUESTION 3
Highlight all the sections breached in the case law and explain all the sections
Walker v. Federal Commissioner of Taxation - (14 March 2017)
Above mentioned case law is related to the tax liabilities incurred on an individual as the
given case is all about Mr Walker who have dual taxpayer's identity that created he whole
dispute. Study ha reveals that Mr Walker has two identity among which one is about farm
worker and other as itinerant worker. Other issues related its case includes phone and Internet
expenses are claimed by him on the grounds of incurring all these expenses for the purpose of
work.
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Facts related to the above case law shows that Mr walker has found to be the supervisor
of farm and he was PAYG taxpayer for several times. He grew up on farm and manage all kinds
of operations of frame and indulge in various activities takes places at farm. He worked for three
employers in their past for a period of two years. Three employer for whom Walker had worked
for includes Benyendra citrus, craxcorp and wrendo Produce.
Tax legislation violated in the given case includes section 8(1) of the income tax
assessment act which is all about PAYG scheme by considering various elements considered by
an individual in the above mention case law (Case law, 2017). Pay as you go scheme will impose
the taxation liabilities on an individual in which the tax will be charged on the salary and wage
payments provided by an employer to its employee which in the given case Walker receives
three different salaries from all of its employer has not paid the PAYG tax by violating the
sections. The claims of Walker is for general expenses as they avoided the basic tax paid in the
salary paid by them in a particular time period.
Legal decisions of the court of law states that the claim of Mr walker is not valid as he
was not itinerant worker on this basis taxpayer were not required to travel from one place to
another which in the given case Walker has shifted from its original place of origin after
fulfilling all its workplace duties. The basic claim about its taxpayer identity is void ab initio that
cancel all it claims on different expenses incurred by them in the particular financial year.
CONCLUSION
It can be summarized from the above project that tax obligations incurred on an entity are
explained with various case laws that guides an individual in resolving all their problems. Most
of the case laws is based on the capital gain on which profit arises by a person on the sale of land
will be take into considerations. The last case law is related to various tax regulations that
describes about the violation of Section 8(1) about the PAYG charged on the salary and wage
payment of Walker.
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REFERENCES
Books and Journals
Ardanaz, M. and Scartascini, C., 2013. Inequality and personal income taxation: The origins and
effects of legislative malapportionment. Comparative Political Studies. 46(12). pp.1636-
1663.
King, M. A. and Fullerton, D., 2010. The tCase law, 2017axation of income from capital: a
comparative study of the United States, the United Kingdom, Sweden and West Germany.
University of Chicago Press.
Knoester, A. ed., 2016. Taxation in the United States and Europe: Theory and Practice.
Springer.
Vítek, L., 2013. Changes in the taxation of personal and corporate income in developed
countries. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis. 60(2).
pp.465-474.
Online
INCOME TAX ASSESSMENT ACT 1936 - SECT 6, 2016. [Online]. Available through:
<http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s6.html> [Accessed on 22nd
May 2017].
Case law, 2017. Available through:
<https://www.ato.gov.au/law/view/pdf/misc-case/rdr_2017aata324.pdf> [Accessed on 22nd
may 2017].
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