Lifestyle or Lifecycle Funds and Law †Free Samples to Students

Question: Discuss about the Lifestyle or Lifecycle Funds. Answer: Introduction: A permanent resident is allowed to work in his residential country, but cannot get a job from the government. Permanent resident and citizen are two terms that differentiates the status of a person in a country he or she lives. The difference between these two terms is under the privileges aligned to each. A permanent resident is not allowed to vote during general elections (McMillan, 2017). Other than that, a permanent resident can be deported if he or she commits a serious offense such as terrorism as prohibited in the law. When a person is guilty of committing such grave crimes, they will serve prison (Miller, 2015). On the other hand, it is also possible that the permanent resident status might be stripped off and be deported back to his or her original country. In other words, An Australian permanent resident is a person who can live and work in Australia, and is a holder of a permanent residency visa but is not the citizen of Australia. Consequently, if a person comes from another country and wants to become a citizen, then he has to take a loyalty oath to the country he moved to when he finally applies for citizenship after a certain period. According to Australia, this period is four years while in other countries such as U.S. and Canada it is three years. Additionally, coming to the individual rights and privileges, a citizen has a right to vote in the general election (McMillan, 2017). A citizen can work in any department so long as he has the qualifications. It implies that he can work in a government office. Therefore, in reference to Kit's scenario based on the above clarifications, he is a resident. He can only be allowed to work and live in Australia but he cannot vote in the general election or work in any position in the government. It is because he lacks the privileges of a citizen. On the other hand, he has stayed in Australia for the last four years but he has not applied for citizenship that could make him become a citizen under naturalization Law (McMillan, 2017). Naturalization is a legal process that allows a non-citizen of a country to acquire citizenship. Naturalization can be done in two ways: (1) it can be done by passing a statute that does not require individuals efforts of the applicant for the citizenship to get approved by the legal authorities. The necessary requirement of the naturalization depends on minimum legal residency, which in this case is four years according to Citizenship Act 2007 (McMillan, 2017). Other requirements may include things such as knowledge of the dominant language and culture and promising to obey and follow the rules that country. (2) Naturalization can be done based on whether the country allows dual citizenship or not. If the country accepts a single citizenship, then the permanent resident will lose his original citizenship after applying for the new one. But because Australia allows dual citizenship, and being that Kit and his family have met the minimum legal residency, it means that he can now apply for the citizenship for his family. Besides, if his children are aged below 16 years, then they can be included on the parent's application. Taxation of Kits Salary and Investments When it comes to taxation of a permanent resident, the Australian government tax each and every income received by a resident from any part of the world. However, it is subjected to certain concessions and exemptions. On the other hand, foreign assets, for example, the ones that Kit and his wife have in Chile are taxable in Australia with an offset allowed for any foreign taxes paid by the permanent resident. Additionally, dividends received from Australia and from foreign investments are combined in assessable income. However, being that dividend income from abroad investment is also taxed in a foreign country, there could be a foreign income tax offset. Moreover, Australian statute has got various attribution regulations that aim to tax residents on gains and income that have accumulated in foreign investments, even though there is no actual distribution of gains or income received by the resident. These regulations are referred as the Controlled Foreign Company and Transferor Rules (Manyam, 2011). Simply, these attribution regulations stop resident investors from deferring tax by accruing income derived through controlling and non-controlling benefits in foreign countries. Other than that, interest offshore from bank bonds, deposits among other fixed interest securities will be taxed according to Australian Law. The taxation is based on the employment income, rental income, Australia pensions and amenities, and capital gains on Australia assets. Because Kit is an Australian permanent resident, he will have to pay residency for tax purposes. It is because he is working and living and has taken steps to make Australia his residence by purchasing a home. Moreover, the incomes Kit and his wife receive from their investments from Chile are also taxed because the taxation rule in Australia is that they tax all the income of a resident from any part of the world. Additionally, dividends received from Australia and the foreign investments are combined in assessable income (Okunev, 2014). However, being that the family is receiving interest income from their investments in Chile from which they are taxed by Chilean government, there could be a foreign income tax offset by the Australian government due to double taxation. To conclude with, if an individual from foreign country becomes a resident of Au stralia, all of his capital investments at that point in time becomes subject to the Australian capital gains tax system (Okunev, 2014). The case between Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes) is about taxation of business income. There were two questions that arose: The first was about how to define boundaries of the business activity, and the second was how to determine whether a specific gain comes within the realm of business. The case showed that the plaintiff intention was to invest long-term that was found to be inconsistent with the reason of acquiring the shares to provide cash for insurance division. The court held that all the evidence showed that Westpac Management being the fund manager had been directed to attain and manage so that to achieve the aim of long-term capital growth. Judge Williams J. of the Court of appeal made the following judgment. He said that the appeal was between the Scottish Australian Mining Co. Ltd. as per the Income Tax Assessment Act from the verdict made by the Board of review declining to uphold the corporation objections to getting assessed by its correspondent for income tax for the four accounting years. Judge Williams decided that the question of Law was not involved in the decision of the Board, and for that reason the Federal Court has no jurisdiction to consider the appeal ("BarNet Jade - Find recent Australian legal decisions, judgments, case summaries for legal professionals (Judgments And Decisions Enhanced)", 2007). A group of fishermen owned beachfront shacks in Western Australia and in 1954; they agreed to form a company. They bought 1584 acres of land with an aim of ensuring that they will always access their beachfront shacks. Over ten years later they sold all their shares to other three development companies. The companies wanted to subdivide and resale the land, but they realized that direct purchase of the land would attract taxation under sec 25(1) of the ITAA36 because their intention was to make a profit. So they decided to buy the shares in the company for them to argue that the sale was a simple realization of a capital asset, which is not taxed under the Law. They acquired shares, altered the articles and sold the land in portions within four years and obtained $7 million ("ATO ID 2002/483 (Withdrawn) - Loss from isolated sale of property", 2008). The court decided that the profits were assessable as the acquisition of the original company by the new owners with an aim of making pr ofit meant that the corporation had changed so the land improvement was a trade. Statham Anor v FC of T 89 ATC 4070 In this case, the trustees of the deceased estate were the taxpayers. The deceased had acquired the land with an intention of raising a family and to use some parts for farming. A few years later, the deceased sold half of the land to a company that was controlled by members of the family. The new owners got into a partnership to raise cattle, but they did not perform well and decided to sell the land. The deceased passed on at the time the subdivided portions were being sold and some were sold after his death. The Commissioner argued that land divisions were assessable income, but the court stand was that the profits were not the ordinary benefits because the activities of the partners showed that the owners were not engaging in profit-making business ("ATO ID 2002/483 (Withdrawn) - Loss from isolated sale of property", 2008). In this case, the taxpayer got the farming land from his father and used it for production business for 20 years. But, due to sickness and growing of debt, he decided to subdivide the land and sold a larger portion. He subdivided them into eight portions over a period of 18 years and constructed various infrastructures such as roads, water, sewerage, and fences as parts on the partitions of the land. The Commissioner challenged that the benefits from the sale of each partition were ordinary income; hence, assessable on the grounds that he was running a business of land subdivision ("ATO ID 2002/273 (Withdrawn) - Sale of subdivided farmland - Income or capital gain?", 2004). Conversely, on the appeal, the federal court stand was that the profits from the partitions were the realization of the profits and the taxpayer was not running the business of land partitions. Moana Sand Pty Ltd v FC of T 88 ATC 4897 In this case, a company obtained land in Adelaide. The company acquired the land with an intention of carrying the business of selling sand and operational. When the company received the government application that they wish to do mining on the land, the taxpayer rejected the application through letters in which he stated that the land was be subdivided into building portions. When taxpayer acquired to know about the future of land subdivisions, he realized that the land had been rezoned as rural and the government intends to preserve it. Finally, the government took the land at $500,000 that was paid in two installments ("ATO ID 2002/483 (Withdrawn) - Loss from isolated sale of property", 2008). The court decision was that the amount received by the taxpayer for the land was an ordinary income because it represented the initial intention of the taxpayer to sell sand and at a later day sell the land for profit. In this case, the taxpayer got a loan to buy five blocks of land for a period of ten years. For some time, the land got used for crops farming and grazing purpose, but eventually, it was partitioned. After two years and other years that followed, the taxpayer sold fifty-one blocks making a net profit of $388,288 ("ATO ID 2002/273 (Withdrawn) - Sale of subdivided farm land - Income or capital gain?", 2010). The court ruled that the taxpayer was quantifiable on the benefits as he was operating a business of land development. However, the court recognized that there was a period at the beginning where the land was being used for farming and found that there was enough evidence that taxpayer knew at the beginning, due to the size of the loan he acquired, that at some point he would have to sell some of the lands. McCurry Anor v FC of T 98 ATC 4487 In this case, the taxpayers bought land with an old house build on it. They removed the house and replaced it with three new townhouses. They advertised had advertised their sales before completion but the sale was unsuccessful. They moved into the two of the houses and stayed for one year and sold the one year later making profit of an average of $150,000. After some time they purchased another block of land where they build houses then sold ("ATO ID 2002/483 (Withdrawn) - Loss from isolated sale of property", 2008). The court decided that the sale of the townhouses was ordinary income because they obtained the land for business purposes with a view of obtaining profit. References ATO ID 2002/483 (Withdrawn) - Loss from isolated sale of property. (2008). Law.ato.gov.au. Retrieved 2 May 2017, from https://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2002483/00001 ATO ID 2002/273 (Withdrawn) - Sale of subdivided farm land - Income or capital gain?. (2004). Law.ato.gov.au. Retrieved 2 May 2017, from https://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2002273/00001 BarNet Jade - Find recent Australian legal decisions, judgments, case summaries for legal professionals (Judgments And Decisions Enhanced). (2007). Jade.io. Retrieved 2 May 2017, from https://jade.io/article/64663 Collins, P., Earl, D., Redenbach, G. (2009). foreign source income reforms. Legal database - View: ATO Interpretative Decisions: ATO ID 2001/55 (Withdrawn). (2010). Ato.gov.au. Retrieved 2 May 2017, from https://www.ato.gov.au/law/view/document?docid=AID/AID200155/00001 Manyam, J. (2011). Taxation of Gains from Banking and Insurance Businesses in New Zealand. Revenue Law Journal, 1-31. McMillan, K. (2017). Affective integration and access to the rights of permanent residency: New Zealanders resident in Australia post-2001. Ethnicities, 17(1), 103-127. Miller, M. J. (2015). Treaties. International Tax Journal, 41(4), 11-14. Okunev, J. (2014). Lifestyle or Lifecycle Funds Are They the Answer to Retirement Wealth Creation?. The Journal Of Investing, 141114200145002. https://dx.doi.org/10.3905/joi.2014.2014.1.039 TR 2007/8 - Income tax: registered agricultural managed investment schemes. (2004). Law.ato.gov.au. Retrieved 2 May 2017, from https://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20078/NAT/ATO/00001