Capital Gains Taxes and House Prices †Free Samples to Students

Question: Discuss about the Capital Gains Taxes and House Prices. Answer: Introduction: The present study involves depicting the current residential status of Kit. Another main objective of this report is to determine the taxable income of Kit. As per the case study, Kit is a permanent Australian inhabitant and his birthplace in Chile. As described under IT rulings 2650 underITAA 1997, an Australian resident is liable to tax for his/her income that comes from universal sources (Auerbach and Hassett 2015). As per the regulation Management of Australian Taxation Office, a foreign occupant residing in Australia will be liable to tax based on his/her source of income. As an example, it can be said that a person working in Australia will be subject to tax for his/her income generating from Australia. In order to define the tax liability of Kit, it is essential to determine his residential status first. A residential test needs to be conducted in this regard: As per Domicile Act 1982, domicile test refers to a permissible procedure of determination of residential status. This test is a useful tool to identify the residential status of the individuals. According to Section 6 of the Taxation Ruling 2650, the individuals who have the desire to be the Australian citizen are subject to taxation under the taxation laws of Australia. The verdict of Henderson v Anderson 1965 states that every person has the authority or right to select his/her domicile nation (Buckley and Jackson 2014). With the assistance of the domicile test and Section 6(1) of ITAA 1936, the residential status of Kit can be determined. Kit has been residing in Australia and is working in an Australian company. In addition, he has his wife and children with his residing in Australia. Thus indicates the desire of Kit to make Australia to be his domicile nation. As per the above-mentioned case of Henderson, it is the responsibility of the individuals to manage the decisions of th eir domicile nation. From this test, it can be seen that Kit is fulfilling the basic criteria of domicile test and hence, he can be considered as a citizen of Australia. As per the rules of 183-day test, the individual needs to comply with some rules and regulations to become a citizen of Australia. The individual will be considered as a citizen of Australia in case he/she resides in the country for more than 183 days. In the provided case study, it can be seen that Kit has resided in Australia for more than 183 days as he works for an Australian company in Indonesia. On the other hand, for more than three years, Kits wife and children have been residing in Kits house in Australia and this aspect has made them the residents of Australia. Another major aspect is the bank account of Kit as he has his bank account in Westpac. This bank account is associated with Kits wife. The F .C. of T. v. Applegate (79 ATC 4307; (1979) 9 ATR 899 states that an individual residing in a nation for a long period of time is considered as the citizen of that nation (Gambiza and Pinto 2016). Hence, as per the domicile test, it can be said that Kit is a resident of Australi a and for this reason, he is subject to tax liability under the tax authority of Australia. According to the provided casse study, the Australian company provides the salary of Kit in the Westpac bank that is an Australian bank. In addition, Kits working organization is located in Australia. It can be seen that the company provides Kits salary in the form of Australian dollar. Another important aspect is that Kit is living in Australia with his wife and children. Thus, he has fulfilled all the criteria to be a citizen of Australia. As per the verdict of Applegate per Franki J 79 ATC case, it can be said that Kit is a resident of Australia and he needs to comply with all the national rules and regulations of taxation (Kaldor 2014). The generated income of Kit from the source of Australia is under the liability of taxation. In this regard, it is the responsibility of the Australian individuals to disclose the details of the overseas income. As per the rules of Australian taxation, the investment portfolio of Kit is subject to double taxation as it is forming a part of Kits in come. However, as per the taxation guidelines, Kit can claim to the Australian taxation authority for the exemption of tax liability on share portfolio. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159 The main concern of this case is the realization of capital assets. As per the verdict of the court regarding this case was that the Management intention of the taxpayer was to generate income with the help of selling the land. Thus, the total capital was not enough to start the mining of the land. As per the judgement of the court, the sale of the land cannot be considered as the substitute investment (Lam and Whitney 2016). The main concern of this case is income from the business. The court stated that the taxpayer earned a significant amount of profit from the disposal of the land and the tax commission has assessed the individual based on the sale of the land. Hence, as per the Section 26 (a), the taxpayer is subject to tax liability for taking the whole profit from the disposal of the land (Sackman et al. 2016). The main concern of this case is the determination of capital assets. The verdict of the court provided the direction to treat the profits from Isolated Transactions as a taxable income and hence, they are subject to tax liability under the act of Section 25 (1) of the Income Tax Assessment Act 1936. Regarding this case, the court has stated that the taxpayers income generated from the activity of land development had to be assessed as per the principles of general accounting and they are subject to tax liability (Aregger, Brown and Rossi 2013). This case has brought forward that fact that net income generated from any subdivided land is liable for assessment under the section of section 25 (1) or 26 (a)of the ITAA 1936 (Barkoczy 2016). As per the argument of the taxpayer, the land could be used for commercial purposes as there wass not any intention to make profit. The court stated in the verdict that realization of land cannot be any part of the commercial activities and they are subject to tax deduction. The main intention of the case was to determine whether the sale of land parts needed to be assessed under the act of section 25 (1) or 25 A if ITAA 1936. The taxpayer has 988 acre of land for the beginning of agriculture. In this regard, as per the outcome of the verdict of the court, any income come from the sale of lands had to be assessed under the act of section 25A (1) (Lignier and Evans 2012). The main issue of the case is to determine the assessed profit generating from isolated transactions under the section of Section 25 (1) of the Income Tax Assessment Act 1936. In this regard, the federal court determined the income of the taxpayers with the help of the section 25 (1) and 26 (a). By comparing this case with the case of FC of T v The Emporium Ltd 87 ATC 4363, the court provided the verdict that the income of the taxpayer was subject to tax liability (Oats 2012). This case sheds light on the sale of land under the section of Subsection 25 (1) or sec 26 (a) of the ITAA 1936. As per the verdict of the case, any income generated from the development of lands will be assessed under the taxation regulations. However, the court also mentioned that the land was used for agricultural purpose and due to poor financial situation, the taxpayers had to sell the land. Hence, the income from the land will not be subject to tax liabilities (Sharkey 2016). This particular case was about two brothers who took a bank loan in order to build a townhouse. Later, by selling the house, they generated an income of $75,811. As per the section 25 (1), the court stated in the verdict that the income generated from the selling of the house will be assessed and will be subject to tax deduction as the process of selling was a profit making scheme (Yagan 2015). It was a venture of the two brothers that helped in getting high amount of profit. Hence, this activity is purely business activity and thus, they are subject to tax liabilities. References Aregger, N., Brown, M. and Rossi, E., 2013.Transaction taxes, capital gains taxes and house prices(No. 2013-02). Auerbach, A.J. and Hassett, K., 2015. Capital taxation in the twenty-first century.The American Economic Review,105(5), pp.38-42. Barkoczy, S., 2016. Management Foundations of Taxation Law 2016.OUP Catalogue. Buckley, C. and Jackson, T., 2014. Dividend access shares: The ATO clarifies its position.Taxation in Australia,49(2), p.74. Gambiza, T.M. and Pinto, D., 2016. Sharing the rides but are we sharing the profits?.Tax Specialist,19(5), p.187. Kaldor, N., 2014.Expenditure tax. Routledge. Lam, D. and Whitney, A., 2016. Taxation and property: Practical aspects of the new foreign resident CGT witholding tax.LSJ: Law Society of NSW Journal, (21), p.84. Lignier, P. and Evans, C., 2012. The rise and rise of tax compliance costs for the small business sector in Australia. Oats, L. ed., 2012.Taxation: A fieldwork research handbook. Routledge. Sackman, J., Van Brunt, R., Rohan, P.J. and Reskin, M., 2016.Tax Issues in Condemnation Cases(Vol. 7). Nichols on Eminent Domain. Sharkey, N., 2016. Departing Australia: a complex tax situation with possible benefits and hidden traps.Tax Specialist,19(5), p.180. Yagan, D., 2015. Capital tax reform and the real economy: The effects of the 2003 dividend tax cut.The American Economic Review,105(12), pp.3531-3563.