HA3042 Taxation Law-Income Tax Rules
Kit is a permanent resident of Australia. He was born in Chile and retains his Chilean citizenship. Kit spends most of the year working off the coast of Indonesia on an oil rig for a United States company. He was recruited for this job in Australia and signed a contract with the company here. For the last four years, Kit’s wife has lived in Australia with their two children. They purchased a home in Australia three years ago. Kit and his wife have a joint bank account with Westpac Bank. Kit’s salary is paid directly into his account. All of the family’s other investments, including a share portfolio that generates dividend income, remain in Chile. Kit gets one month off from work every third month and, on these occasions, he meets with his family either in Australia or on holidays around South America (usually in Chile where his parents reside).
(A) Discuss whether Kit is a resident of Australia and how his salary and investment income would be taxed.
Answer:
The given scenario is associated to the residential status of an individual living in Australia named Kit. The main purpose of the study has been seen in terms of the assessing whether the salary drawn by his employment in an Australian based company is taxable or not. Based on the analysis made in the study it has been discerned that Kit’s place of birth is Chile, who is identified as permanent resident of Australia. It has been further seen that Kit is seen to hold a Chilean citizenship even after holding the permanent residency status based in Australia. This is seen to be based on the “IT 2650 as stated under ITAA 1997”, the Australian individual can be further seen to be held for tax assessment considered form the worldwide sources (Besley and Persson 2013).
The residents
of the country have been further seen to be regulating the temporary differences in the overseas inhabitants, who are seen to be inhabitants based on the income level and the worldwide sources. The primary incidence of the taxation is seen to be based on the different types of the considerations taken from the people working in Australia. The tax liability determination is seen to be observed from the necessary prerequisite to ensure the tax residency for the taxation purposes. Based on the discussions despite’s of Kit’s permanent occupancy in Australia, he cannot be regarded citizen of Australia(Piketty and Saez 2013a). This has been mainly considered due to the reason of holding a permanent residency status based on the following criteria:
Test of domicile:
The important laws for the residency status have been seen to be based on the different types of the consideration based on the domicile test. This working is seen to be associated to the original place of domicile and birth. However, it needs to be further considered that the different types of the considerations are seen to be based on certain expulsions. The rule allows maintaining the person with the domicile unless that individual is observed to acquire a place of abode at their own discretion or in any state or nation.
It has been seen to be further evident that the present study is seen to be based on the decision to purchase a property three years ago and residing with children and wife (Jacobs and Boadway 2014). This has been further seen to be based on the different types of the considerations which are seen to be based on “Henderson v. Henderson [1965] 1 All E.R.179”. This is seen as the main consideration which needs to be applied based on the choice of the pace where an individual decided to build the place of abode. It has been further seen to be evident from the study the person decided to buy the house in three years earlier and resided with children and wife (Alworth and Arachi 2012). These criteria are seen to be based on the choice of living in Australia.
The “section 6 (1) of the taxation rulings 2650”, shows the determination of permanent place, seen to be essential for knowing the main intent of the individual making the necessary choice in building a home. As Kit is having a place of abode in Australia but residing outside the country, his domicile status will be associated to foreseen conditions. With relevance to the particular case, Kit is seen to be an employee in the oil rig of Indonesian coast and visited his children and wife. The incidence is seen to be related to “section 6 (1) of the ITAA 1936”:
- The acquisition of the permanent place of abode in Australia is seen to comply with the necessary conditions which seen to be related to occupying a permanent residency in Australia (Rothschild and Scheuer 2016).
- Being a resident of Australia for more than half income year, she was transferred to Indonesia for separate job and it was further seen Kit was able to satisfy the various types of the residency status in Australia and be able to comply with the domicile test.
183 days test:
As per the 183 days test, an individual is seen to be resided in Australia for more than half of the income year. This may be done either in breaks or on a continuous basis, then the residential status of the individual will be regarded as Australian. The discourse of the study has been further been able to state that as Kit was seen to be transferred to Indonesian oil rig, and he visited the family members once in every quarter. This is seen to add up to 120 days in a within his occupancy inside or outside the country.
Despite of this, it cannot be ignored that Kit is seen to be permanent resident of Australia he shall be regarded as permanent resident of Australia. It has been further seen Kit is seen to be a permanent resident of Australia and will be further regarded as the occupant in Australia to have purchased a property three years ago along with his children and wife. This is seen to be based on the ruling of “F .C. of T. v. Applegate (79 ATC 4307; (1979) 9 ATR 899” (Piketty and Saez 2013). Despite, of the absence of Kit from Australia, it cannot be overruled that he was seen to be having a permanent place of domicile based in Australia. This is seen to be complying with the 183 days test and domicile test.
Assessment of Income tax:
It can be seen that the residency of the taxpayer is seen to be linked to the of tax liability, which is seen to be complied with the income year. In this case, the taxpayer is seen to be in conformity with the ordinary concepts of the residential test. It has been further seen that the individual needs to be assessed for the taxation purpose as per the residency test. The particular case reveals that Kit has been associated to withdraw the salary from the West Pac bank can be considered as the entering into Australian contract(Smith 2015).
Based on the ruling stated under “Applegate per Franki J 79 ATC”, Kit is seen to be a resident of Australia and the need to acquire the worst income while lodging of the income tax, along with the foreign employment income. Despite of the different types of the test assessments it can be seen that Kit can avoid instance of double taxation. This particular trend is seen to be based on the several types of the consideration which are associated to exemption on share portfolio, which is as per the agreement of treaty of 40 other nations (Baskaran 2014).
Reference List
Alworth, J. S. and Arachi, G. (2012) Taxation and the Financial Crisis, Taxation and the Financial Crisis. doi: 10.1093/acprof:oso/9780199698165.001.0001.
Baskaran, T. (2014) ‘Taxation and Democratization’, World Development, 56, pp. 287–301. doi: 10.1016/j.worlddev.2013.11.011.
Besley, T. and Persson, T. (2013) ‘Taxation and Development’, Handbook of Public Economics, 5, pp. 51–110. doi: 10.1016/B978-0-444-53759-1.00002-9.
Jacobs, B. and Boadway, R. (2014) ‘Optimal linear commodity taxation under optimal non-linear income taxation’, Journal of Public Economics, 117, pp. 201–210. doi: 10.1016/j.jpubeco.2014.04.012.
Piketty, T. and Saez, E. (2013a) ‘A Theory of Optimal Capital Taxation’, Econometrica, 81(5), pp. 1851–1886. doi: 10.3982/ECTA10712.
Piketty, T. and Saez, E. (2013b) ‘A Theory of Optimal Inheritance Taxation’, Econometrica, 81(5), pp. 1851–1886. doi: 10.3982/ECTA10712.
Rothschild, C. and Scheuer, F. (2016) ‘Optimal taxation with rent-seeking’, Review of Economic Studies, 83(3), pp. 1225–1262. doi: 10.1093/restud/rdw017.
Smith, J. P. (2015) ‘Australian state income taxation: a historical perspective.’, Australian Tax Forum, 30(4), pp. 679–712. Available at: https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=111795016&lang=es&site=eds-live.
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