Australi An Australian Resident

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According to S. (6) of ITAA 1936, an Australian resident is a person who resides in Australia and whose home or domicile is in Australia, or a person who has been in Australia continuously or from time to time for more than one half of the income year, unless of course the person can prove that their usual place of abode is situated outside of Australia and the person does not have any intension of taking up residence in Australia. The cases like Levene vs. IRC and Lysaght vs. IRC suggest that there are many other factors to be considered while determining a person’s residency rather than just seeing the duration of a person’s stay in Australia. Such factors include the purpose of a person to visit Australia, the individual’s behavior…show more content…
Section 8-1 provides a deduction when assessable income is produced with the help of borrowed funds or when a business is carried on with these funds.
In Steele’s case 1999, High court considered that the interest is deductible before the commencement of income generating activities.
In this case, the interest of Carl and Jill is not private or domestic in nature. The purpose of incurring the income for both of them is only one.
Hence, Carl and Jill are carrying on a business for generating income so they are allowed certain deductions under Section 8-1.

2.) Issue: Which method will be applied; cash or accrual basis of accounting if Carl and Jill are carrying on a business for taxation law purpose.
Law and application: The decision of choosing the most appropriate method i.e. cash or accrual depends upon the circumstances of the entity/business as well as its relative income. The case clearly says that Carl and Jill are carrying on a trading business. The accrual method of accounting is considered to be the most appropriate method of accounting for income earned from trading activities. Carl and Jill are into the business of buying and selling of gardening tools which is trading and should therefore account for income under the accrual method. Moreover the facts of this case appear to be close to the facts in the case of J.Rowe V FCT.
Conclusion:Thus, accrual method of accounting will be the most appropriate for Carl and Jill’s business.

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