Case study 1: Residence and source
Fred, an executive of a British corporation specializing in management consultancy, comes to Australia to set up a branch of his company. Although the length of his stay is not certain, he leases a residence in Melbourne for 12 months. His wife accompanies him on the trip but his teenage sons, having just commenced college, stay in London. Fred rents out the family home. Apart from the absence of his children, Fred's daily behavior is relatively similar to his behavior before entering Australia. As well as the rent on the UK property, Fred earns interest from investments he has in France. Because of ill health Fred returns to the UK 11 months after arriving in Australia.
Discuss whether Fred is a resident of Australia for taxation purposes.
Case study 2: ordinary income
Explanations of the respective outcomes reached by the courts in the following cases which all involving sales of land
I. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159
II. Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188
III. FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR
IV. Statham & Anor v FC of T 89 ATC 4070
V. Casimaty v FC of T 97 ATC 5135
VI. Moana Sand Pty Ltd v FC of T 88 ATC 4897
VII. Crow v FC of T 88 ATC 4620
VIII. McCurry & Anor v FC of T 98 ATC 4487
This assignment is based on the Australian Taxation. It has two case studies - The first one requires analyzing the residential status of an individual for taxation purpose. The second case pertains to short specific taxation cases on Ordinary Income and requires analyzing the same and highlighting the net outcome from each of the mentioned cases relevant to whether the transactions qualifies for Ordinary Income or not.
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As per section 6(1) of the Income Tax Assessment Act, 1936, the residency status of an individual for taxation purpose can be determined on the basis of few suggested tests. Income of an individual is assessed under the Australian Taxation laws for a particular period if that individual is deemed to be a resident of Australia for income tax purposes.
The criteria stated by the above section are tested to ascertain whether the individual meets them and is then deemed to be a resident for taxation purpose.
In the given instance, the residency status of Fred for income tax purpose can be determined on the basis of the following test:
1.Ordinary Resident Test: In order to identify an individual as a resident of Australia for tax purposes a number of factors is taken into consideration which varies on case basis. One such factor states taken into consideration is the period of physical presence in the country. An individual is deemed to be a resident of Australia if he resides in the country for a relevant period.
In the give case, Fred was physically present for eleven (11) months in a particular period. Moreover, maintenance of family ties is also to be considered and it is seen that Fred had maintained a house in Australia with his wife accompanying him. Therefore, there are reasonable grounds to consider Fred as a citizen of Australia for the particular period.