Taxation Law

Taxation Law

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Case Study 1

Taxation LawAs per the taxation Laws to Australia, a visitor visiting Australia is liable to pay tax. However, there are certain aspects of that are being checked to ensure the fact that the tax liability being imposed is at par the guidelines of Australian taxation laws. As stated by Subedi (2016) one of the major aspects of the taxation laws for the visitors is the fact that the visitor needs to live in the country for more than six months. While a visitor lives for more than six months in Australia he is liable to pay taxes. As stated by Parker (2013) another important aspect is the fact that the visitors needs to stay in the same place for more than six months. While the person is changing his resident to different regions of Australia within this span of six months he is not liable to pay taxes. Another important fact is that a visitor in Australia needs to develop a local tie with the business in the place where he is residing. This is one of the most important aspects that is being considered while evaluation of tax.

In the given case Kit has to visit Australia and has to stay there for four years with his wife and children. Kit is a resident of Chile but for the purpose of business, Kit needs to stay in Australia. While staying in Australia Kit buys a home. In the given case it is also mentioned that Kit had his wife has a joint account in the Westpac Bank. During the stay in Australia Kit has also made some investment in the share market receiving a dividend for the same. As stated by Deeming (2014) one of the main points that need to be evaluated for the resident status of Australia is the duration of his stay. While he spent three months in Australia he gets a break of a month after every third month. Which is being spent by him for meeting the family members. This is one of the most important parts that needs to be evaluated.

As stated by Fox (2013) to consider his residential status of Australia there are few aspects that need to be understood:

  1. Kit stays for more than six months in Australia. As stated by the taxation rules of Australia a number of days spent by the visitor in Australia are one of the main aspects of the evaluation of the tax. This is an essential factor that needs to be considered. While a person is staying in Australia for more than six months he is to be considered for the payment of tax in Australia. This criterion is being met by Kit.
  2. As stated by Clarke (2014) the continuation of stay is another most important factor that needs to be considered. There are several chances that a visitor might come to Australia and keep moving to the different parts of the country without residing at the same place. This is the circumstance where the visitor is to be considered as a person who is not liable to be taxed. However, a person staying in the same region for more than six months needs to pay a tax for the fact that he is to be considered a resident of Australia. As stated by Carpenter (2014) while a person stays in Australia for six months there are several benefits being enjoyed by the visitor. These visitors enjoyed some of the major advantages that are being enjoyed by the permanent residents of Australia. While a person is staying in a permanent location he is subjected to pay the taxes for the fact that he has to Kit has to stay in Australia due to the fact that he has a business in Australia. This is another aspect that needs to be evaluated for the purpose of the tax.
  3. Kit developed a business relationship with people in Australia to expand his business. He also makes a relationship with the local community for the purpose of expansion of the business. As stated by Cao et al. (2015) while a visitor makes local contacts for the purpose of the business that visitor has to pay tax for the business. This is one of the main aspects that differentiates between the visitors who comes to Australia for the purpose of travel and the visitors who come to Australia for the purpose of business. While a visitor comes for the purpose of business it is important for the visitor to understand the tax liability.

In the given case Kit is a person who partly resides in Australia. The purpose of his stay needs to be understood clearly. As per the given case, the purpose of Kit is to grow business in Australia. While he makes a profit out of the business Kit is liable to pay tax.

Taxation Law

Case study 2

  1. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) (1904) 5 TC 159

There was a huge problem in the imposition of the tax for the excessive amount of money received by the sales of land. It is important to note that the amount spent for the acquisition of the land is less than the amount spends for the buying the land. The additional amount is considered to be the income of the company dealing with the sales of the land. The court concluded that if the earning was out of any sort of speculations there the money earned extra is to be considered taxable. For the purpose of concluding the fact the two-fold test was introduced. This test helps in understanding the relationship between the business and the money earned. As stated by Snape & De Souza (2016) while the inspection clarifies the fact that the money being invested is out of a speculation the extra money being earned out of the transaction is considered taxable.

  1. Scottish Australian Mining Co Ltd v FC of T (1950) 81 CLR 188

An Australian mining company known as the Scottish Australian Mining Co. bought land measuring 1771 acres. They bought the land in the year 1863-65. The intention of the company was to conduct mining activity over the land. After buying the land the company started their business and has gone through a process of continuous mining for years till the time the resources got exhausted. Within this period of time, the company started making a huge profit. While the company found that the land was of no use for then they intended to sell the land. In the year 1924, the land was sold and the company made a subdivision of the land to earn maximum profit. The court had made a thorough review of the facts and the figures and concluded the fact that the purpose of the company was to perform mining activity and they sold out the land due to the fact that they found it of no use at the latter period of time. After reviewing the facts and the figure it was found that the income earned out of the sales of the land is not to be considered taxable.

III. FC of T v Whitfords Beach Pty Ltd (1982) 150 CLR

There was an issue faced by the court related profit-making policy of a company. a land was bought by the company for the purpose of fishing activities however, all the shares were purchased three major development companies. While the shares were purchased by development companies the development companies to the complete control over a memorandum. They made a complete change in the functioning of the company by transforming it into purchase and sales of land rather that fishing activities. The main motive of the company was to make a huge profit. The subdivision of land while during the sales and the purchases of the land is also one of the main activity of the company. While the court reviewed the issue it was found that the tax deduction was not made under the section 25 (1).

  1. Statham & Anor v FC of T 89 ATC 4070

There was an about the sales of an isolated property.The issue came to the notice of the court. One of the major issues was that the deduction of loss was not done under section 51(1). The taxpayer and his wife had to incur the loss and the loss was being considered to be a capital loss. To balance the loss the profit was not being used by the capital was being burned by the business. The owner made the sale of land but was not being taxed under the section 25v(1). Prior to the selling of the land, it was being utilised for farming and the motive of the sales was not for the purpose of profit earning.

  1. Casimaty v FC of T 97 ATC 5135

The court received an issue regarding the inherent property. An inherent land is being received by the taxpayer for next 20 years for the purpose of performing the farming activity. Profit was not being received by the taxpayer in the years of his farming. The land was finally being sold by the taxpayer for the fact that he got ill managing the debts. While the case was studied by the court it was found that the amount that the taxpayer received after selling that land is taxable under section 25(1). As stated by Storey (2016) after the review, it was found that he did not indulge in any business activity but sold his land for the purpose of meeting his outstanding debts.

  1. Moana Sand Pty Ltd v FC of T 88 ATC 4897

The tax was imposed on sales of land by the court. A sand selling business was being conducted by Moana Sand Pty Ltd. The business was conducted for a long period of time and there was an exhaustion of the resources till the time the company found that the land was of no use to them. They decided to sell the land. However, to get higher profit from the selling the decided to go through a development process. The land was finally sold before the development could be completed. The tax that was imposed upon the sales of the land was under section 25 (1). However, the reviews have shown that the transaction was not done as part of business activity. This is the reason the tax also needs to be paid by them for the purpose of the amount earned through sales of the land.

VII. Crow v FC of T 88 ATC 4620

There was an issue raised to the court for the nature of transaction done. As per the court, the discouragement of the imposition of tax on income is being analysed through the nature of the business transaction done. While the business transactions are in a systematic manner and in organised ways that tax can be imposed. A regular transaction is being conducted in the business for the purpose of growth, while a business increases its transaction for the purpose of attaining of profit the profits are taxable under the section 25(1). The company is engaged in the process of the regular transaction of land buying and selling. As stated by Prestridge (2014), as per the review of the court, the transactions are in a systematic and ordered way. This is one of the reasons the tax can be imposed upon the income under the section 25 (1).

VIII. McCurry & Anor v FC of T 98 ATC 4487

There was an issue raised in front of the court regarding the profitability scheme of the business. As per the court’s decision the profit being generated under the profitability, the scheme is taxable. A business was being conducted by McCurry and Anor. This was the business of purchase and selling of land. They bought land and developed them for selling it at a huge profit. The bought a piece of land and developed a building over it for selling it under huge profit. However, much before they completed the work an extra effort was put by them for the purpose of selling the land. Due to the fact that they failed in selling the flats, they used the flats for the purpose of personal residence. After a year has passed the got a deal to sell the flat. The court stated that the sales of the flat were taxable under section 25 (1) as the prior motive of the development of the flat was for the purpose of the business.


Snape, J., & De Souza, J. (2016). Environmental taxation law: policy, contexts and practice. Routledge.

Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., … & Wende, S. (2015). Understanding the economy-wide efficiency and incidence of major Australian taxes. Treasury WP1.

Carpenter, D. (2014). Reputation and power: organizational image and pharmaceutical regulation at the FDA. Princeton University Press.

Clarke, R. (2014). The regulation of civilian drones’ impacts on behavioural privacy. Computer Law & Security Review30(3), 286-305.

Deeming, C. (2014). Social democracy and social policy in neoliberal times. Journal of Sociology50(4), 577-600.

Fox, K. J. (Ed.). (2013). Efficiency in the public sector (Vol. 1). Springer Science & Business Media.

Parker, C. (2013). Twenty years of responsive regulation: An appreciation and appraisal. Regulation & Governance7(1), 2-13.

Prestridge, S. J. (2014). Reflective blogging as part of ICT professional development to support pedagogical change. Australian Journal of Teacher Education (Online)39(2), 70.;dn=501553503962835;res=IELAPA

Storey, D. J. (Ed.). (2016). The small firm: an international survey. Routledge.

Subedi, S. P. (2016). International investment law: reconciling policy and principle. Bloomsbury Publishing.

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