Determining Tax Residency Status under ITAA 1997

Running head: TAXATION LAW
Taxation Law
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1TAXATION LAW
Table of Contents
Issues:......................................................................................................................................2
Rule:.........................................................................................................................................2
Application:...............................................................................................................................3
Conclusion:..............................................................................................................................4
References:..............................................................................................................................5

2TAXATION LAW
Issues:
Will the taxpayer be considered as the Australian resident under “section 995-1 or
subsection 6 (1)” of the “ITAA 1997”?
Rule:
The “Taxation Ruling IT 2650” is concerned with determining the residential status
of a person whose permanent place of abode outside Australia1. The statutory definition of
“subsection 6 (1) of the ITAA 1936” states that a person is an Australian occupant whose
place of residence is in Australia lest the taxation officer is satisfied that the perpetual place
of residence is outside of Australia. To determine the residential status based on the above
stated definition there are certain test that help in ascertaining whether a person is a
resident. This includes, residence based on normal conceptions, domicile or permanent
place of residence test and 183 days’ test.
Under the “Resides Test” the word resides represents to dwell permanently or for
the considerable time period. The period of physical presence in Australia and maintenance
& location of taxpayer’s assets are also relevant2. The court in “FCT v Miller (1946)” held
that tax residency of a person rests on question of fact and degree.
Domicile is held as the lawful theory of ascertaining the residential status under the
“Domicile Act 1982”. Under domicile test, a person is held as the Australian occupant if
their home is in Australia unless the taxation official is content that an individual has the
permanent place of residence out of Australia. In “Applegate v FCT (1979)” the taxation
commissioner argued that the taxpayer domicile was in Australia failed to meet the
requirement as the taxpayer place of abode was out of Australia3. The court apprehended
that the permanent place of residence do not represent forever and the same is assessed
objectively every year.
In ascertaining a person’s residence within the definition of resident under the
“subsection 6(1)” it is crucial to understand the intent of an individual as to the nation in
1 Barkoczy, Stephen, Foundations Of Taxation Law 2014
2 Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of
Business Taxation
3 Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)