Australian Taxation Law report

Document Type:Thesis

Subject Area:Law

Document 1

Australian taxation law considers many factors before determining the assessable income of a taxpayer. To begin with, there is the aspect of nationality. Residents and non-residents incomes are calculated differently to come up with the assessable income. The subsection 6(1) of the 1936 act of the Australian constitution defines the term resident as an individual, and not an organization living or residing within the Australian borders. Ideally, the Australian taxation office considers one an Australian resident if they have always resided in Australia, or have immigrated to Australia with the purpose of living there permanently. Definitely, this implies that John was intending to live in Australia for a considerable amount of time in the foreseeable future. Applying the domicile test, one can determine john’s residency.

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This test dictates that a taxpayer can be treated as a resident if they have lived in Australia for 183 days or more of the tax year2. However, john’s intentions were clear and therefore, the domicile test may not be very important in determining his residency. All factors considered, John will be considered as an Australian resident for the remaining part of the year, and so will his tax. With reference to the guidelines of the Australian taxation office, John's income from his rented home, the $1500 per month will make up part of his assessable income. However, since John might also be paying tax for the home back in South Africa, he may claim a foreign tax offset in his Australian tax.

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All factors considered, it is therefore apparent that John's income will be taxed first as a non-resident and secondly, as a resident. For the first two months, his salary, equivalent to $9,000 will be taxed as that of a Non-resident. After the two months henceforth, his salary, together with the allowances will be taxed as that of a resident. Usually, the basis of an asset is its cost to the owner. For instance, in the case of a house, its basis is the construction cost. An owner may, however, adjust this cost upon considering a range of factors. (a) What are Carlton’s net capital gain or net capital loss for the year ended 30 June of the current tax year; To determine the net capital loss or net capital gain that Carlton amassed from selling his house, it is imperative to, first of all, identify the price or cost of the entire property.

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This includes the amount that the land was purchased for, which is the original purchase price and the amount that was used to build the rental house referred to as Capital Improvements. Inheritance to family members is also a non-taxable transaction9. However, if the inheritance or gifting process is done in a businesslike manner, tax laws apply. The transaction of Carton to his daughter can therefore not be referred to as a gift since the value of the gift was over $10,000 by market price and it was done in a business-like manner. Therefore; $200,000-150,000 =$50000 Considering 50% discount entitled to each individual, Net capital gain= $25000. c) How would your answer to (a) differ if the owner of the property was a company instead of an individual? Individual transactions and company transactions are quite different under the Australian law.

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