Taxation of Income in Australia
Added on 2020-03-23
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BLO2206 AUSTRALIAN TAXATIONLAW ASSIGNMENTTRIMESTER 2, 2017
TABLE OF CONTENTSQuestion 1..................................................................................................................................3Issue........................................................................................................................................3Legal provisions.....................................................................................................................3Applicability of the cited provisions in the given case situation...........................................4Conclusion..............................................................................................................................5Question 2..................................................................................................................................5Issue........................................................................................................................................5Legal provisions.....................................................................................................................5Relevant case laws.................................................................................................................6Applicability...........................................................................................................................7Conclusion..............................................................................................................................8References..................................................................................................................................9
QUESTION 1IssueIn the given case situation; Jenny is working as an accountant in Hong Kong. She got aproposal from her employer to provide business advice for the establishment of business to avarious former resident of Hong Kong residing in Australia. She entered in the frontiers ofAustralia on 25th April 2016. Her prior intention was to stay there for three months, andduring these three months, she stayed in various motels. At the end of the three-month, heremployer asked her to stay there for further 9 months. Due to this aspect; she leased anexecutive apartment near her workplace. During these 9 months, her parents visited twice. Inthe present case situation, the issue arises from the view of taxation that whether Jenny is aresident of Australia or not in accordance with the provisions of Income Tax Assessment Act1936 and 1997.Legal provisionsIn accordance with the provisions of Ordinary Income (Section 6-5) and Statutory Income(Section 6-10) of the Income Tax Assessment Act 1997 (ITAA 1997), if individual is anAustralian resident than their sources of ordinary & statutory income will be inclusive of allincome derived whether in direct or indirect manner and consider Australian as well asforeign earnings (Thampapillai, 2016). In this provision; it is also stated that in a situationwhere the individual is a foreign resident then the source of ordinary & statutory income willbe inclusive of only s income derived in the direct or indirect manner in Australia. In thisaspect; provisions of Section 7 of the Income Tax Rates Act 1986 (ITRA 1986) describes thedifferential tax rates depending on the fact that whether the individual is a resident or non-resident. Thus it is important to determine residential status as per provisions of Income TaxAssessment Act 1997.An individual is considered to be a resident of Australia for tax purposes when it comeswithin the purview of the word “resident” which is defined in subsection 6(1) of the IncomeTax Assessment Act 1936 (Jones, 2017). Further, the definition is covered in section 995-1 ofITAA 1997. Provisions of section 6(1) of the ITAA 1936 covers four distinct tests in order todetermine whether an individual is a resident in Australia for the purpose of Taxation.Initially individual has to satisfy common law test according to which individual is said to beresident if following cited aspects are satisfied1:1 (subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936))
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