Notes on International Finance and Finance Laws

1. Distinction between income and capital S6-5 * A capital receipt is not ordinary income. E.g. tree producing fruits. If I sell tree and makes a profit, it is a capital receipt because it is the sale of the profit making structure. If sell fruits, that is ordinary income. 2. Ordinary income comes home to the recipient: Income must come in and derived from an external source. * Generally a saved outgoing cannot be ordinary income and the taxpayer cannot be the source of his/her own income: Cooke v Sherden. * E.g. Growing your own vegetable is not ordinary income because it is not derived from an external source. But if you swap your vegetables for your neighbour’s eggs, it could be ordinary income if you are carrying on a business. 3. An amount must be characterised as ordinary income in the hands of the recipient. 4. Ordinary income has sufficient connection with an earning activity 5. Ordinary income is money or money’s worth (able to be converted into cash) * Even if a receipt is connected with an income producing activity, it must either be money or something that is capable of being converted into cash in order to be ordinary income. 6. Compensation for an amount which would’ve been ordinary income has the character of income (compensation receipt principle)An amt received as compensation for lost income is itself income: Carapark; Heavy Minerals; Phillip * Compensation for loss of capital asset is not income: Glenboig; Californian Oil Products; Van Den Berghs * Week 3 Residency * Australian resident – taxed on worldwide income. * Non resident – only taxed on Australian sourced income * 1. Common law test - “reside” in Australia * 2. Statutory test – domicile test * 3. Statutory test – 183 day test * 4. Statutory test – Commonwealth Superannuation fund test * Reside * 1Levene * Facts – Tp a resident of UK. Went o/s and only came back 5 mths per yr. whilst o/s, only lived in hotels. Gave