Australian Tax Law for Expats

This assignment explores various aspects of Australian tax law as they pertain to individuals who are residing overseas. It delves into the criteria used to determine Australian tax residency, analyzes how income earned both within and outside Australia is taxed, and examines the rules surrounding capital gains from property sales. The document also discusses the impact of private health insurance contributions on Australian taxes for expats.

Introduction
In the given case, Mandy Johnson was born and was residing in Sydney. She studied commerce
and worked in several accounting firms in Sydney. Mandy apart from meeting is professional
goals how interest in growing organic vegetables. She purchased semi urban land in Sydney in
order to meet out her interest. The organic vegetables and fruits that have been produced in the
land have been sold to small vegetables and fruits stores.
In the year 2016, Mandy decided to leave Australia for certain years and started working United
States. She signed a contract for working in United States and sold her semi urban land which is
used to utilize for growing organic vegetables. In order to make out the sale of the semi urban
land, Mandy was required to make certain additional expenditures in terms of legal fees and
agent cost worth $15,000. August 2016, Mandy started living in California I was working with
PWC San Francisco office. She was intending to return to Australia in the year 2020. In order to
continue her working in PWC, she took an apartment for 3 years lease in San Francisco city.
Her house in occupied by her niece and nephew during her stay in San Francisco. Mandy was not
charging any interest from her niece and nephew during their stay in his house at Sydney. In the
year 2009, Mandy was inherited an apartment from her grandmother. Since year 2016, the
apartment was let out to a tenant for a rent worth $700 per week. In order to maintain the
property at Sydney she has hired an agent who received 5% Commission on the rent received.
Apart from the commission amount, Mandy is required to bear council rates fees and body
corporate fees worth $1100 every Quarter.

In the year 2016-17, Mandy acquired certain shares listed in Australian Stock Exchange. She told
to share during the year and earned income. The profit that has been on buy her from trading of
shares during the year will be taxable as per the provision of Australian tax laws.
Answer 1
In order to determine the taxability in Australia it is important to determine the residential status
of a person in the country. Through the help of the Residential status of an individual we can
determine the personal tax liability in his hand. The residential status test has the following
points that need to consider:
1. The person has been staying for the entire year in the country, Australia. If the person
clears this test, he would not be required to pass any other residential status test in the
country.
2. If the person fails to meet out the above condition he would require to meet out any of the
following three conditions to pass the residential status test in the country:
 The person should be staying for at least 183 days in the country Australia. This can be in
continuation or can be in parts.
 The permanent residence of the individual has been proved to be there in Australia.
 If the person has been employed by the Australian government and due to his/her
employment he/she has been deputed in some other country outside Australia, he would
be considered as a resident of Australia.
If an individual is able to meet any of the above three conditions he would be considered as a
residence of Australia for the purpose of tax computation.

In the given case, Mandy for the year 2016-17, was doing living in San Francisco and was doing
job in PWC San Francisco office. Considering the provision of residential status, she was not
staying in the country Australia for 183 days during the financial year. However, she has a
permanent residence in Australia where her niece and nephew were staying during her stay in
San Francisco. Thus, considering the provision of Australian tax laws, for the purpose of
determining residential status, Mandy been holding a permanent residence in Sydney Australia,
is considered to be a resident in Australia for the purpose of tax calculations for the financial
year 2016-17. Being, in the above case, Mandy has been declared as a resident in Australia, all
income that has been earned by her either in Australia or in any part of the world will be taxed as
per the provision of Australian tax laws. However all the special threshold benefits those are
applicable on a resident for the purpose of tax calculation will be provided to her.
Conclusion
In light to the above provision, all the income earned by a resident in Australia will be taxed with
in the country itself. Thus all the income i.e. salary and dividend income of Mandy will be taxed
in Australia. Along with the above taxes, Mandy is liable to pay Medicare levy amount on the
income. This amount is required to be paid by a resident to the Australian government. (ATO)
Answer 2
As per the provision of Australian tax laws, any income that has been earned by resident in
Australia or outside Australia will be taxed as per the provision of Australian tax laws. In the
given case, Mandy being holding a permanent residence in Australia will be considered as a

resident of Australia does any income that she is on in United States while working in PWC San
Francisco office will be considered as income earned in Australia and will be taxed accordingly.
The financial year 2016-17 will begin from 1st July 2016 and will end on 30th June 2017. Thus
any income that has been earned by Mandy before 1sy July 2016 will not be considered will
computing the income for the financial year 2016-17. Mandy was engaged in the business of
selling organic vegetables. The last batch of vegetables was sold in May 2016. Thus, any income
that has been generated from the sale of organic vegetables in not be considered while computing
the income for the financial year 2016-17, being the same was pertaining to last year. During the
financial year 2016-17, Mandy earned salary worth $180,000 while working in United States for
PWC San Francisco office. Further, on 1st July 2016, she sold the semi rural land which she
purchased in the year 2009. The profit that has been made from sale of land will be considered as
capital gain and will be taxable in the hands of Mandy. During the same financial year, she
earned rental income from the apartment which has been inherited to her from her grandmother.
Further, during the year, Mandy was engaged in trading of securities and shares. She made
considerable amount of profit while doing the trading activities. Any income that has been
generated from trading of securities will be considered as taxable income in will be taxable as
per the provision of Australian tax laws.
Thus, considering the provision Australian tax laws, salary which Mandy has earned in United
States worth $180,000 will be taxable in Australia. Thus $225,000 ($180,000 US Dollars * 1.25)
will be taxable in Australia.
Any income that has been made by a person from sale of shares will be considered as capital
gain when will be taxed as per the provision of Australian tax laws. However if a person is doing

a business of selling and buying of shares then in that case the profit that has been cost will be
considered as ordinary income and will be taxed accordingly. In the given case, Mandy was
dealing in buying and selling of shares, in this scenario the selling of shares will be considered as
a capital gain or loss activity and profit and loss from such transaction will be eligible for capital
gain tax.
Date of
Purcha
se Company
Numb
er of
Shares
Purcha
se
Price
Amou
nt
Numb
er of
Shares
Sold
Sales
price
Amou
nt
Profit/
(Loss)
April
17
Sirtex Medical
Ltd 500 32 16000 500 16 8000 -8000
June
17
A2 Milk
Company Ltd 5000 1.75 8750 5000 3.5 17500 8750
Aug 15 CSL Ltd 100 92 9200 100 135 13500 4300
5050
Any capital loss it has been booked by Mandy in the previous year can be set off from capital
gain made in coming years. Any brokerage that has been paid on buying and selling of shares
will also be allowed as deduction. In the given case, Mandy as in curd capital loss worth $3,000
in the previous year, the loss will be carried forward and will be set off from the capital gain
made in the current year. Further, she incurred brokerage worth $100 in the current year on the

sale and purchase of shares. It will be considered as allowable deduction and will be deducted
from the capital gain so made
As per the working, Mandy has made a profit of $5050 in the current financial year; the profit so
made will be considered as capital gain and will be kept separate from the ordinary income. The
capital loss of $3000 and brokerage worth $100 will be deducted from this amount making the
net capital gain worth $1,950.
Mandy in the year 2009 in order to meet out her interest in growing organic vegetables has
acquired or semi rural land worth $400,000. She spent additional $20,000 on stamp duty and on
other charges. She sold the parcel of land for $650,000 incurred additional $15,000 charges on
legal fees in relation to the sale. The profit that has been made by her on sale of land will be
considered as captain again and will be tax accordingly. The indexation benefit will be provided
to Mandy up on the capital gain made on sale of land which is subject to 50% of the capital gain
made by her.
Particular Amount
Purchase price of land $ 400,000
Add: Stamp duty and legal cost $ 20,000
Total cost $ 420,000
Sales price of the land $ 650,000
Less: Legal cost $ (15,000)
$ 635,000
Capital gain $ 215,000
50% discount indexation $ 107,500

Net capital gain $ 107,500
The house that has been inherited to Mandy from her grandmother has been let out for $700 per
month. She pays 5% of the rent received as Commission to the broker. Further she is required to
pay $300 per quarter on Council rates and $800 for quarter as corporate fees. The rental amount
so received is taxable in the hands of Mandy. However she will be entitled to claim deduction for
the council rates and corporate fees along with the commission that she is paid to the agent.
Particular Amount
Rental Income $8,400
Less: Commission paid ($420)
Less: Council rates ($1,200)
Less: Corporate rates ($3,200)
Capital gain on sale of shares $3,580
Answer 3
The final tax liability of Mandy will be calculated keeping the ordinary income separate from the
capital gain income. The ordinary income will be taxed as per the Tax slab. There is no specific
capital gain tax rate. The capital gain so calculated as per the above method will be added to the
taxable income and will be taxed accordingly as per the marginal rate applicable on the
individual.
The taxation rates applicable on Australian residents are as follows:
Taxable income Tax on this income
$18,201 – $37,000 19c for each $1 over $18,200

$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000
Particular Amount
Salary received by Mandy in United
States $225,000
Capital gain on sale of land $107,500
Capital gain on sale of shares $1,950
Rental income $3,580
Total income $338,030
Taxable income Tax on this income Tax
$18,201 – $37,000 19c for each $1 over $18,200
$
-
$37,001 – $87,000
$3,572 plus 32.5c for each $1 over
$37,000 $3,572
$87,001 – $180,000
$19,822 plus 37c for each $1 over
$87,000 $19,822
$180,001 and over
$54,232 plus 45c for each $1 over
$180,000 $125,346
Tax $148,740
Medical levy $6,761
Total tax $155,500
While Mandy was staying overseas, she continued to pay her Australian Private Health Insurance
Premium. The amount so contributed by Mandy will be considered as eligible for a rebate
irrespective of her residential status in Australia if the policy that she has taken is covered under
the insurance policies which are registered with the Australian government, are eligible for

Medicare. In this case it is required that the salary of the taxpayer should be less than the
threshold provided in tier 3 income threshold.
Answer 4
Mandy was holding the residential status of Australia because of her permanent residence in the
country. If after her return she decides to sell the permanent residence, there might be a
probability that she might not hold the residential status of Australia. This will impact the
taxability provisions of Mandy in Australia in the financial year in which she returns back to the
country. In normal scenario, by any means, Mandy was able to maintain the residential status in
Australia; she would capital gain on sale of her permanent residence and would be taxable as per
the provision of Australian tax laws.
In case Mandy, during her stay in United States decides to leave out the house two tenants at
market rate rather than giving it to her niece and nephew, rental income that she would have won
would be considered as other income and will be added to her taxable income. The computation
of tax will be calculated considering the provision of Australian tax law.

References
Ato.gov.au_ working out tax residency, viewed on 27th Aug 2017, Retrieved from
https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-
residency/residency-tests/
ATO.gov.au, Shares, units and similar investments, viewed on 27th Aug 2017, Retrieved from
https://www.ato.gov.au/general/capital-gains-tax/shares,-units-and-similar-investments/
ATO.gov.au, Your home and other real estate, viewed on 27th Aug 2017, Retrieved from
https://www.ato.gov.au/General/Capital-gains-tax/Your-home-and-other-real-estate/
ATO.gov.au, working out your capital gain, viewed on 27th Aug 2017, Retrieved from
https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/
Working-out-your-capital-gain/
ATO tax rates, Capital Gains Tax, viewed on 27th Aug 2017, Retrieved from
https://atotaxrates.info/capital-gains-tax/
ATO.gov.au, Private health insurance rebate eligibility, viewed on 27th Aug 2017, Retrieved
from https://www.ato.gov.au/individuals/medicare-levy/private-health-insurance-rebate/private-
health-insurance-rebate-eligibility/