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Australian Tax Legislation - PDF

   

Added on  2021-04-21

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Australian Tax Legislation - PDF_1

Question 1The individual tax residency is dealt with as per ss. 6-1 ITAA 1936. This subsectionhighlights the various statutory tests available to ascertain the tax residency status besides thegeneral residency test. These tests have been discussed in detail in the tax ruling TR98/17.The tax residency becomes pivotal owing to the differential tax treatment that is applicablefor Australian tax residents and foreign tax residents (Barkoczy, 2017). In accordance withTR 98/17, the following tests may be applicable with regards to determine tax residency ofindividual taxpayers (Coleman, 2016).The Residency Test – This is applicable for foreign residents who come to Australiafor various reasonsThe 183 Day Test - This is applicable for foreign residents who come to Australia forvarious reasonsDomicile Test – This is applicable to determine the tax residency of Australiandomicile holders or Australian residentsSuperannuation Test – This is applicable for government employees of Australia whoare serving abroadConsidering the given scenario, it would be fair to assume that Amity is an Australianresident since she has been working with a company in their Adelaide office for 7 years.Further, it is known that Amity is not employed by the government and works for a privatefirm. As a result, the only test which would be relevant for the taxpayer in the given scenariowould be Domicile Test (Krever, 2017).Domicile Test – In order to pass this test, it is imperative that two conditions ought to besatisfied by the underlying taxpayer. These conditions are outlined below (Reuters, 2017).The taxpayer would to be a domicile holder of Australia in accordance with DomicileAct 1982.Another requirement for the taxpayer is that the permanent abode must still be inAustralia even though the taxpayers may be physically in foreign territory.For the taxpayer to be recognised as an Australian tax resident, it is pivotal that both theabove conditions ought to be fulfilled. While domicile holding can be determinedobjectively, the determination of permanent abode location is little more complex andmultiple factors need to be considered (Sadiq et. al., 2015).
Australian Tax Legislation - PDF_2

A relevant case that needs to be cited is F.C. of T. v. Applegate (1979) 9 ATR 899. In thiscase, an Australian resident was sent abroad to establish the office of an Australian companyand was expected to return back to Australia after the branch is set which would requiresubstantial time. The taxpayer finally returned home after two years owing to an illness. Inthis case, the court held the taxpayer as a foreign tax resident as shifting of permanent abodedoes not imply permanent intention to stay abroad. A similar case which led to the sameverdict is F.C. of T. v. Jenkins (1982) 12 ATR 745 in which a bank officer was sent abroadfor three years but had to return to Australia within 18 months (Deutsch, Freizer, Fullerton,Hanley & Snape, 2015).Considering the verdict in above case laws, the given situation seems quite similar sinceAmity was sent abroad for a substantial period of time with an option to extend the stay byfurther period of three years. Also, her husband also shifted with her and thereby her personalties to Australia were limited to parents also. Besides, the health insurance was discontinuedin Australia. Additionally, they purchased a house initially in Kiribati which was later sold.Clearly, it would be appropriate to conclude in the wake of given case facts that thepermanent abode has shifted from Australia to Karabati and hence Amity would not beconsidered as an Australian tax resident for the year ending on June 30, 2016. Question 2a) In the given situation it is apparent that a barter transaction is being executed between thedentist and client. A relevant case with regards to these transactions is F.C. of T. v. Cooke &Sherden 80 ATC 4140. This case highlights that if the consideration arising from the barterwould fall in the definition of income as per s. 25-1 ITAA 1936, then the considerationreceived on account of this transaction would also have income character and would betaxable (Reuters, 2017). Besides, it is apparent from Henderson v FCT 70 ATC 4016 thatwhen a professional tends to offer services to a client, then the revenue becomes receivablewhich may be received in cash or kind (Krever, 2017). Considering the above cases, it wouldbe fair to conclude despite the barter, on the part of the dentist $ 550 would be recorded asordinary income as toy of market value $ 550 is accepted for the service rendered.b) Any prize would lead to ordinary income under s. 6-5 ITAA 1997 if it is linked to theemployment where it might be a common practice or related to skills as an employee. Thishas been highlighted in the verdict of the Scott v. Federal Commissioner of Taxation(1966)117 CLR 514 case (Sadiq et. al., 2015). Another relevant case to consider in the given
Australian Tax Legislation - PDF_3

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