Tax Law Solved Assignment

This document presents solved answers to two tax law questions. The first question addresses the tax residency status of Ms. Jenny, a Hong Kong resident working temporarily in Australia. The solution analyzes her situation based on factors like duration of stay, intention, living arrangements, and employment, concluding that she is likely considered a resident for tax purposes in the relevant financial year. The second question concerns the taxability of income received by a TV personality working in Australia. The solution determines that both a lump-sum payment and a monthly salary are assessable income, classifying the lump sum as royalty income and the monthly payment as salary. The solutions reference Australian tax laws and regulations, providing detailed explanations and conclusions for each case.

TAX LAW
Student’s Name:

Table of Contents
Answer to Question No.1......................................................................................................................1
Answer to Question 2............................................................................................................................6
References.............................................................................................................................................8

Answer to Question No.1
Issue: From the background of the scenario it is understood that Mos. Jenny was a resident of
Honking who initially being offered for temporary business travel to Australia in order to give
suggestions to the former residents of Honking who are settled in Melbourne, Sydney, and Brisbane
during April 2016. She went to visit all the three cities and to complete the training by next three
months but the employer further asked her to extend her stay in Australia for nine more months.
Further on July, she leases serviced executive apartment for the tenure of nine months till she stays in
Sydney. Also, Jenny travels once a week to meet clients outside Sydney. Hence the issue vests to the
fact that if Ms Jenny can be considered as the resident of Australia for taxation purpose or not.
(Interactivetaxconsultants, 2017)
Rules: The understanding of an Australia or foreign resident for taxation purpose need to be
understood with the help of the Rules by the national taxation authorities of Australia. The rule says
as under:
a. If one leaves Australia temporarily and do not set up in another country permanently, then
oneself will be continued to be an Australian resident for taxation purpose. The intention is
the key factor which decides the residency status further. Even with short span of time an
individual can be considered as the resident if carries the intention to stay back in Australia
b. If an individual is visiting Australia and he is working and living in a location and has taken
ample steps to make Australia as his home, then he should be considered as an Australia
resident. As it be seen that if somebody is working and staying there it means that he is
permanently residing there and seeing a long term perspective. Employment tenure is yet
another factor. An employee can be sent to visit Australia for work and may extend beyond
the prescribed limit of 183days in an income year but again the intent of keeping the
employee again becomes the driving factor to decide the residential status of Australia.
(atotaxrates, 2017)

c. If an individual is visiting Australia and for most of the time he is travelling across different
locations of Australia, then he will be considered as the foreign resident only. It means that he
is not thinking for a long term perspective and is not trying to settle. She went to visit all the
three cities and to complete the training by next three months but the employer further asked
her to extend her stay in Australia for nine more months. So she had the intention.
d. For the sake of better understanding, the “resides test” is done which is the primary test of tax
for residency of Australia. In case the reside test is not passed out, the individual is classified
as resident of Australia provided the any one of the following statutory criteria is satisfied:
1. 183 days test: if an individual is present for more than half of the financial year whether
continuously or with irregular travelling, he can be considered having a constructive
residency in Australia unless it can be proved that the usual place of adobe is outside
Australia and have no intent to stay back in Australia.
2. Other factors which are a healthy decision maker are as follows :
a. Social and living arrangement: The living arrangement decides whether the resident will
be staying there or not
b. Intention to stay back: The staying back intention is important.
c. Marital Status: If somebody is married then the case is different.
d. Employment tenure
e. Maintenance and location of assets
f. Physical presence in Australia: the physical presence is important to describe the
residency.
g. Frequency and Duration of visit: The duration of visit is very important as it’s the
duration that determines the residency. (ato.gov.au, 2017)
The details of the other rime factors are outlined as under:
a. Social and living arrangement: This is yet another degree of understanding to know about
the social and living arrangement of an individual in Australia. If the same reflects the

daily attribute of staying back long and intended to be the part of Australia, it should be
treated accordingly.
b. Intention to stay back: The intention is the key factor which decides the residency status
further. Even with short span of time an individual can be considered as the resident if
carries the intention to stay back in Australia. If someone ha she intention to stay back
then it will not matter whether he or she will have the intention or no. The physical
presence in Australia cannot be biased with the days of stay or so. The purpose of stay
comes into picture when an individual is having a long physical presence as well.
(humanservices.gov.au, 2017)
c. Marital Status: If an individual is married and his spouse is working in Australia and
carries intent to stay together, this is again considerable to understand the status of the
individual for considering him as resident of Australia from tax point of view. Here
migration and other perspective comes in to picture.
d. Employment Tenure : Employment tenure is can be said as a different term. An
employee can be sent to visit Australia for work and may extend beyond the prescribed
limit of 183days in an income year but again the intent of keeping the employee again
becomes the driving factor to decide the residential status of Australia. SO this can be
considered a different case
e. Maintenance and locations of assets: An individual is attached to its assets which are
their personal effects and hence they try to keep the same safe and to its permanent adobe
in order to prevent the same of wear and tear of travelling.
f. Physical presence in Australia: The physical presence in Australia cannot be biased with
the days of stay or so. The purpose of stay comes into picture when an individual is
having a long physical presence as well. Physical presence is very much required to have
a residency stay.
g. Frequency and duration of visit – The frequency of travel is again taken ahead with the
purpose as well as intent of the travel. The duration of visit can be another factor to
decide the residential status of an individual. If the duration of visit id exceeding the limit

it can be said that the applicant wants to stay permanently. So it will be said that the
resident want to stay permanently. (smh.com.au, 2017)
Application: In the given scenario, Ms Jenny has moved to Sydney for some training related
assignment assigned by his employer and she was supposed to complete the trip by three months
visiting cities like Sydney, Melbourne and Brisbane. The proposal was revisited by the employer and
Ms Jenny was advised to stay back in Sydney for another nine months. She accordingly moved her
clothes and personal effects too to Australia. She started saying at a leasehold property too. Her
parents have visited her twice.
Few parameters can be understood well as under:
1. Initially Ms Jenny was merely a business traveller in Australia with no intent to settle down.
2. Further her employer asks her to extend the stay for another nine month from July 2016.
3. With this extension, he attained the criteria of staying back in Australia for more than
183days in an income year. The employment tenure and movement of personal effect has
triggered the purpose of the presence irrespective of the expiring tenure of nine months of
stay on completion of nine months. (interactivetaxconsultants, 2017)
4. She was settled in Sydney office with rare travelling for official purpose too.
5. Hence she got the property on lease in Sydney itself. The living behaviour and other attributes
as discussed further conclude her presence as resident of Australia
6. Since the extension of tenure is there, the communication and seasonal challenges is also
expected and hence the freight of clothes and personal effects are brought.
7. The visit of their parents twice on two occasions symbolizes the change of intent of M Jenny
or having a connection within local Australia.

8. The intention, living habits, employment tenure and movement of personal effect has
triggered the purpose of the presence irrespective of the expiring tenure of nine months of
stay on completion of nine months.
9. The intention and the days of stay being more than the prescribed limit of 183 days prohibit
Ms Jenny to be foreign residents from the taxation governance of Australia at least for the
period of current financial year of 2016. (Hall, 2017)
Conclusion: Referring to the detailed discussion and applying the rules of taxation of Australia, Ms
Jenny can be concluded as the resident of Australia for the current income year of 2016-17. The living
behaviour and other attributes as discussed further conclude her presence as resident of Australia. Ms
Jenny cannot be considered as resident of Australia for the income year 2015-16 when she visited for
business purpose only and possessing no intent to stay back in Australia.

Answer to Question 2
Issue: A TV personality has been asked to join a television show of a channel based in Australia with
an initial offer of a lump sum amount of USD 400,000 followed by USD 100,000 in addition to the
same as monthly salary. The issue vests on the determining both the receipts of USD 400k as well as
USD 100K per month as recurring salary income are assessable income or not, for a show based in
Australia. (exfin, 2017)
Rule: A special professional is an individual having professionalism in literature, music, artistic work
or a performing artist or a sports person. The concept of income averaging has to be there in order to
derive the special professional income.
The assessable professional income is the income arising directly from the performance of the
professional service by a special professional. Assessable income is taxable under certain laws and
regulation. The following are the incomes included for the calculation of the assessable professional
income: (ato.gov.au, ato.gov.au, 2017)
a. Rewards, prizes and gifts which has been received from some individual or company.
b. Fees or the income earned from Advertisement, endorsement, commentating, interviews and
similar kind of social participation.
c. Any kind of royalty income which is gained through franchise or from other source.
The following are the exclusion for considering it into assessable income for a special professional:
1. A superannuation lump sum payment
2. Net capital gain
3. Payment for unused leave.

Ruling 12 and subsection 6(1) further extends the meaning of royalty to the use of motion picture
films or video tapes for the purpose of TV or other broadcasting. (ato.gov.au, ato.gov.au, 2017)
The lump sum money is dissected then the same will be considered for taxable income.
Application: A special professional is an individual having professionalism in literature, music,
artistic work or a performing artist or a sports person. In the given situation the TV actor has
successfully bagged of USD 40000 as lump sum and a fixed monthly salary component of USD
100000. The following point should be established to concrete the conclusion at the end.
1. The TV actor who has been offered a show based in Australia falls within the definition of
Special Professional.
2. In the first situation the actress earned the lump sum of INR 400,000 USD is the result of her
pre-established brand name which has been created over a period of time. The brand name so
created fetches royalty wherever she has been offered.
3. With the above it can be considered as Royalty income. Royalty income is the income which
arises from the company who are having different franchise. The franchise owners pay
royalty to the company. (atotaxrates, atotaxrates, 2017)
4. The monthly income of USD 100000 paid as salary is a clear income for the year to for part
of the computation of the taxable income.
Conclusion: The income received as Royalty as narrated above amounting to USD 400000 as lump
sum money and USD 100000 per month of Salary both will be considered as assessable income for
the year.

References
ato.gov.au. (2017, September 21st). ato.gov.au. Retrieved from ato.gov.au:
https://www.ato.gov.au/Individuals/Tax-return/2017/In-detail/Publications/Income-
averaging-for-special-professionals-2017/?=redirected
ato.gov.au. (2017, September 21st). ato.gov.au. Retrieved from ato.gov.au:
https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/residency/
residency---the-resides-test/
ato.gov.au. (2017, September 21st). ato.gov.au. Retrieved from ato.gov.au:
https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-
residency/Residency-tests/
atotaxrates. (2017, September 21st). atotaxrates. Retrieved from atotaxrates:
https://atotaxrates.info/individual-tax-rates-resident/income-averaging/income-averaging-
special-professionals/
atotaxrates. (2017, September 21st). atotaxrates. Retrieved from atotaxrates:
https://atotaxrates.info/individual-tax-rates-resident/income-averaging/income-averaging-
special-professionals/
exfin. (2017, September 21st). exfin. Retrieved from exfin: https://www.exfin.com/australian-tax-
residency
Hall, A. (2017). Tax Guide, 20.
humanservices.gov.au. (2017, September 21st). humanservices.gov.au. Retrieved from
humanservices.gov.au: https://www.humanservices.gov.au/individuals/enablers/lump-
sums-while-income-support
Interactivetaxconsultants. (2017, September 21st). interactivetaxconsultants. Retrieved from
interactivetaxconsultants: https://interactivetaxconsultants.com.au/tax/income-averaging-
eligible-works/
interactivetaxconsultants. (2017, September 21st). interactivetaxconsultants.com.au. Retrieved from
interactivetaxconsultants.com.au: https://interactivetaxconsultants.com.au/tax/income-
averaging-eligible-works/
smh.com.au. (2017, September 21st). smh.com.au. Retrieved from smh.com.au:
http://www.smh.com.au/money/tools-and-guides/what-is-income-20100531-wqvb.html