PART 1 – INDIVIDUAL’S TAX RESIDENCY AND TAX ASSESSMENT3
ADVICE TO MR. BASIL ON TAX POSITION AND THE ASSESSABILITY5
PART – 2 ADVISE TO KUMAR9
The issue in the first case is sit out about the Tax Residency of overseas employee working in Australia and Assessing the Taxable income and Tax liability in regards to Income Tax laws in Australia. It provides insides about Australian Taxation System and Common law cases effects on determination of Taxable income and deductions to different types of income.
The second case is based on taxability of Income and deductions arise from the transactions related to property and its maintenance. It gives importance to individuals’ general savings strategies and how they can get tax offsets and Capital Gains benefits in tax. It also gives the idea about properties contributes to total income and which types of deductions can be claim as tax offsets.
The whole assignment is concentrated on the individuals’ tax accessibility and different types of Tax offsets can be claim by the individual.
PART 1 – INDIVIDUAL’S TAX RESIDENCY AND TAX ASSESSMENT
According to Income Tax Assessment Act 1936, Section 6(a) gives the definition of Residency of individual with any one of three tests to pass to be Australian Tax Resident. The definition determines resident of Australia means, A. A person who resides in Australia and includes a person, i. Whose domicile is in Australia, unless the commissioner is satisfied that his permanent place of abode is outside Australia ii. Who has actually been in Australia, continuously or intermediately, during more than one half of the year of income, unless the commissioner is satisfied that his permanent place of abode is outside Australia and that he does not intend to take up residence in Australia.
Mr. Basil has to evaluate on test given. As his usual domicile is England he is not qualified for first test. In Second test, He becomes tax resident as he was in Australia for more than half of taxable year i.e. he arrived in Australia on 28 August 2009 and the tax year completes on 30 June 2010 but he can also become non – resident if tax commissioner satisfies that his normal place of Abode is England he is not willing to take residency in Australia.
As per the FCT v Jenkins case, Mr. Basil has developed home in Australia as he rented a accommodation in Adelaide and looking to buy a property if he likes the country and spots a real estate bargain in addition to that he has a bank account in Australia which shows clear intension to be in Australia for permanently for tax year which gives rise to residency as Australia becomes his permanent place of Abode.
According to FCT v Applegate case, the permanent place of abode did not mean one that was everlasting or forever but it was permanent in relation to a particular year of income. As Mr. Basil came to Australia on 3 years working visa with his wife and two children. It shows clear intention to be permanently in Australia for tax year. It also came in light that he set up rent accommodation and willing to buy property which shows his intensions to permanently be in Australia. These all facts consider the Mr. Basil as Australian resident for tax purpose and he has to pay tax on Australian income as well as income from outside Australia.
ADVICE TO MR. BASIL ON TAX POSITION AND THE ASSESSABILITY
• Salary: - Section 6-5 of Income tax assessment act, 1997 lay down Assessable income is all income in ordinary concept. In section 6-5(2), it describes if person is Australian resident, accessible income includes all ordinary income derived directly or indirectly from all sources, whether in or out of Australia. Mr. Basil has salary which is provided as ordinary income and must become taxable. • Rent Subsidy: - It’s also ordinary income for Mr. Basil as he received it in addition...