Group Assignment of Australian Taxation Law (Term Paper Sample)

Table of Contents
Ans.-1……………………………………………………………..………………….2
Ans.-2……………………………………………………………..………………….3
Ans.-3……………………………………………………………..………………….5
Ans.-4……………………………………………………………..………………….6
References……………………………………………………………………….…...8
Ans.-1
To compute tax on income of any person earned in Australia, first it is required to work out that whether you are an Australian resident or foreign resident. For that first we analyze the definition given under bare act for "resident" and "resident of Australia" under section 6(1) of the Income Tax Assessment Act 1936.
In case of individual resident of Australia for tax purposes means a person who resides in Australia, and includes other persons satisfy following tests-
* Domicile test: A person is considered as an Australian resident if his domicile (A permanent place of home) is within Australia, unless the Australian taxation office satisfied that his permanent place of residence is outside the Australia.
* 183 day test: If a person presents in Australia for more than half of the year of income, then his presence in Australia is considered as constructive resident, unless it has been proved that his usual place of abode is outside the Australia and there is no intention of taking permanent residency in Australia.
* The superannuation test: This test define that the employees of Australian government working at post outside the Australia are treated as Australian residents.
(Income Tax Assessment Act’ 1936, Section-6)
As per above definition whether a person is resident or not is being decided based on fulfillment of certain conditions, like a person is considered as Australian resident for tax purposes if his domicile is in Australia, unless the income tax office of Australia satisfy that his permanent resident is outside Australia, or if a person from outside Australia actually present in Australia for more than six months and for most of the time he lives at the same place, then he would be treated as an Australian resident for tax purposes.
In the present case Mr. Bradley from London, comes to Australia under a contract to work for eight months from January to August on research project and he intends to leave Australia after he finishes the project, so his presence in Australia is temporary. And there is no permanent residence in Australia being owned by Mr. Bradley.
(Australian Tax Office, International Tax for Individuals, Residency-the 183 days test)
Mr. Bradley present in Australia from January to August, so whether his presence in Australia are cover within taxable period required to check.
The definition given of "income year" in subsection 995-1(1) of the Income Tax Assessment Act 1997, means period of financial year starting from July and ending on June.
So, here for the financial year covered by period of Mr. Bradley’s presence in Australia from January to June, represents total of 181 days in Australia. In that case he cannot be considered as resident for tax purpose. And for subsequent year he is present only for 62 days (July and August), so in subsequent year also he is not resident for tax purpose.
Tax Implications of person if he is a foreign resident for tax purposes:
The person require to declare in his tax return any income earned in Australia, However he is not require to declare any other income earned outside Australia.
So, here Mr. Bradley require to show his salary income received from his employer in Australia in Australian Income Tax Return, and require to pay tax if the total of salary income received in particular year of income exceeds the threshold limit. However income earned by Mr. Bradley from his family business situated in London being managed by his wife Mary, not required to disclose in return submitted to Australian tax office as he is foreign resident for tax purposes and only required to pay tax on the income earned from Australia.
Ans.-2
Analysis and comparison of Federal Commissioner of Taxation v. Applegate and Federal Commissioner of Taxation v. Jenkins.
From looking to the judgments given by learned council in both the cases that are related to the permanent place of the abode as definition of resident itself cover it.
The definition given under bare act for "resident" and "resident of Australia" under section 6(1) of the Income Tax Assessment Act 1936 can be analyzed as under:
In case of individual resident of Australia for tax purposes means a person who resides in Australia, and includes other persons satisfy following tests-
* Domicile test: A person is considered as an Australian resident if his domicile (A permanent place of home) is within Australia, unless the Australian taxation office satisfied that his permanent place of residence is outside the Australia.
* 183 day test: If a person presents in Australia for more than half of the year of income, then his presence in Australia is considered as constructive resident, unless it has been proved that his usual place of abode is outside the Australia and there is no intention of taking permanent residency in Australia.
* The superannuation test: This test define that the employees of Australian government working at post outside the Australia are treated as Australian residents.
However nowhere definition about the permanent place of abode is given in the law but decision of the case of Federal Commissioner of Taxation v. Applegate it is provided that the intention of the person for leaving or residing into Australia and period of residing into Australia is relevant for deciding the permanent place of the abode. Whereas in case of Federal Commissioner of Taxation v.Jenkins it is given that intention for returning at time of leaving Australia is relevant factor for deciding permanent place of abode. In both the decision Applegate and Jenkins left Australia for the limited period of time and they intent to settle outside Australia hence in both the cases, learned council opined that intention to reside outside Australia and period for which they intent to reside outside Australia is relevant for deciding residential status of the person.
Hence decisions in both the cases are indirectly same as intention of the person is relevant factor. As in the case of Federal Commissioner of Taxation v.Jenkins learned council opined that intention of the Jenkins at the time of accepting appointment is relevant for deciding there residential status and permanent place of abode and in case of Federal Commissioner of Taxation v. Applegate learned council opined that intention of the person for about period for which he is residing outside Australia is relevant for deciding about the residential status of the person. But when we look into the definition there is mo where any definition are given about the permanent place of abode hence decision should be taken based on the principal of natural justice instead of intention of the person as in decision of the Applegate are some extent are relevant for the decision because in that case period of residing in Australia also consider for the decision.
(FCT v. Applegate, 79ATC 4307 and FCT v. Jenkins, 82ATC 4098)
Ans.-3
As per the Australian Tax Law when any payment received by any service provider against the breach of contracts being entered between the service provider and the service receiver is included in the income of service provider.
In current case service provided by the Morgan brothers and Company to the cigarette company for the research of products but due to some market problem they have decided to terminate contracts and Morgan brothers received $250,000.00 against the termination of contracts hence as per the provision of the Australian Tax Law it will be included into the income of Morgan brothers.
As per the judicial announcement in case of 1995, the Federal Commissioner of Taxation released Taxation Ruling TR 95/35 ("TR 95/35"), any compensation received against the revenue income is consider as revenue income and if compensation is against the loss of capital income it will be treated as capital income. Cigarettes Company is revenue in nature so amount o...