Taxation (Coursework Sample)

By







Taxation
Fred’s residence of Australia for taxation purposes
The economy of Australia is dynamic in nature and tries to account for any significant value that is being realized by the residence of the particular economy. The evaluation of whether an individual is an Australian resident for tax purposes is crucial and is clearly stipulated in the part IV A of the ITAA. Australian residents taxed on their worldwide income, whereas non-residents taxed on their Australian-sourced income. The residency tests the Australian Taxation Office (ATO) uses to determine residency status for tax purposes differ with other Australian agencies for other purposes, such as immigration. To be considered an Australian resident for tax purposes, a number of factors have to be considered in the determination of the relevancy of the particular concepts. The party must always live in Australia for a period more than half a year. The party concerned must have moved to Australia and live there permanently concerning the kind of business that is being transacted.
To stress on a factor, the individual(s) must have been in Australia continuously for half a year and been in the one job and living in the same place. The duration of stay should be more than half of the financial year unless the usual home of the party is overseas and do not intend to live in Australia (BARKOCZY, 2014). The vital part is the declaration of the worldwide wealth to the ATO. If a party is not an Australian resident, they only have to report Australian income. Their tax rates are different to those applying to Australian citizens and are not entitled to a tax-free threshold. The interest paid from their Australian bank account will have tax withheld. The party under consideration do not pay Medical Levy and may not be entitled to claim Medicare benefits. Certain tax offset or tax credits can’t be claimed in return as such benefits are only available for residents. Taxation laws are very complex and vary significantly from country to country. Before accepting a job in Australia, it is prudent to find out exactly the available options, rights and obligations. The recommendation provided is the engagement in a local tax accountant to lodge the Australian tax return. The implication of such is to optimize the local deductions. With the same magnitude, the initial tax withheld reduces, and the maximum value for the tax credit utilized in the country of residence correctly accounted. Fred is not a resident of Australia for tax purposes due to the violation of certain requirements outlined in the above description. He didn't declares much of the worldwide income to the taxation authority. The period of stay was not certain in the particular context making him to legible to the Medicare. He had to travel out of the country to seek for treatment. In summary, Fred is not a resident of Australia for taxation purposes.
Assessability of the receipt
The kind of ownership that existed in the particular case involved the family relations. Though it was a partnership encounter, the taxpayers were a father and his two sons. The sale agreement of the particular piece of land was evident when the father entered into the sales contract. He, however, stated subject to reserving the right to live in the dwelling on the land to the partnership of his two sons, who would continue to carry on the business. The consideration was that the two sons had to pay a particular amount of money in relation to an annuity to the father for his life. After the death of the an annuity to be paid to the father’s widow for her life, the daughters to be factored in as well in the process. The annuity to the father was secured by a registered instrument of charge over the land and in accordance with the agreement the sons paid the sum of £659 to their father in the relevant income year. The commissioner assessed the father on the amount under the Income Tax Assessment Act 1922 (Cth) on the basis that it constituted an income receipt. The father contended that the receipt was not of an income nature but, rather, of a capital nature, being an instalment of the money price received in respect of the sale of his land.
The father alternatively argued that even if the annuity received by him was of an income nature, part of the £659 represented the purchase price of the annuity. He was therefore excluded from his assessable income under s 4(d) of the Act (BARKOCZY, 2014). The sons contended that if the amount received by the father constituted assessable income. They should each be allowed a deduction of half the amount from half their assessable income under s 23(1)(a). That section authorizes the deduction from a taxpayer’s assessable income for all expenses incurred in gaining the assessable income. It was subject t s 25(e) which prohibited the deduction not accounted for the production of assessable income. The annuity amount paid to the father constituted assessable income as the proceeds from the sale of a capital asset(land) had been converted into an income receipt(annuity). The payment made by the sons could not be characterized as mere instalments of purchase money paid for the land. The payment in this case constituted by the annuity was of an income nature as it could not determine what fixed gross amount would be payable to the father. No part of the pension could be excluded from the assessable income of the parent under s 4(d) as it was impossible to identify a definite fixed for the purchase of the annuity. Paying an obligation from income realised from the property does not amount to a ductile expenditure. In such a case like the present, the land is a necessary implement for the production of income. Aa cost that the taxpayer pays and the tool seems naturally to fall under the description of the amount laid out for the production of income. The taxpayer is concerned it is an expenditure incurred to create his assessable income (CLR pp 579-580).
The receipts treated as income capital
On the contrary to the case presented above, the amount remains to be income since it was expected periodically and was relied upon by the taxpayer for personal and family expenditure. When, for example, an amount is paid to an Australian resident beneficiary out of foreign source income that has been accumulated in a non-resident trust. Such an amount is assessable to the beneficiary in the year of receipt if the beneficiary is a resident and Pt III Div 6AAA does not apply (BARKOCZY, 2014). The beneficiary could also be assessable where an amount is representing foreign source income. It is paid, and the beneficiary is not a resident at the time the income is derived from the trust but is a resident at some time during the year in which the amount is paid. The amount to be included in the assessable income of the beneficiary under s 99B is the amount paid to the beneficiary other than amounts that would not be assessable if derived by a resident taxpayer. It also factors in the amounts liable to tax in the hands of the beneficiary or the trustee, even if the number would not realize tax in the hands of the recipients. That result in case the income is below a minimum amount.
Advise Angelina and Bradley on the capital gains tax consequences
As an investor, after you determine the potentia...