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Taxation Case Study of Jack's Tax Residency

   

Added on  2020-03-16

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TAXATIONSTUDENT ID:[Pick the date]
Taxation Case Study of Jack's Tax Residency_1

TAXATIONQuestion 1IntroductionThe key objective of this discussion is to ascertain the tax residency of Jack for the yearending on June 30, 2016 in wake of the given facts.Comprehensive DiscussionThe responsible statute for ascertaining the tax residency is the s.6(1) ITAA 1936. Theconditions which the taxpayer needs to fulfil in order to be classified as tax resident ofAustralia are outlined. Also, the tax ruling TR 98/17 outlines these tests in detail. It isessential that for the year under consideration the concerned taxpayer must atleast satisfy oneof the tests (ATO, 1998). The various tests are briefly discussed below.1)Domicile testThis tax residency test is applied primarily for those taxpayer who have Australian domicilebut owing to their commitments have to stay away from Australia. For satisfying this test, anindividual taxpayer needs to primarily comply with following two terms (Barkoczy, 2017).The taxpayer under consideration must be an Australian domicile holder.The permanent abode of the taxpayer must be situated within Australia only for thegiven tax year.If any of the terms outlined above are not met, then the concerned taxpayer is not anAustralian resident for tax purposes (Sadiq et.al., 2016).2)Resides test (As per ordinary concept)The concerned statute does not highlight the contours of the word “reside”. Thus, theapplication of this test has to consider the various cases and tax rulings which provide thecritical factors to be considered (Nethercott, Richardson and Devos, 2016).The underlying significance of the motive with which the taxpayer has come toAustralia. A significant purpose would include employment but that should be greaterthan 6 months as outlined in the FC of T v. Pechey 75 ATC 4083; (1975) 5 ATR 322
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TAXATIONcase. In this case, the court ruled that a taxpayer who is shifted for only four weeks foremployment purposes would not be considered as a tax resident of Australia.The strength of the personal and professional ties in Australia as compared to thecountry of origin is also a considerable factor as outlined in Peel v. TheCommissioners of Inland Revenue (1927) 13 TC 443 verdict of declaring the taxpayeras a UK resident for tax purposes. The maintenance and location of assets in Australia is also a factor for considerationsince it is reflective of the intention of the taxpayer to reside in Australia over the longterm (CCH, 2013).Also, the social life that the concerned person has in Australia in comparison to the countryof origin is considered relevant (Deutsch et. al., 2016).3)Superannuation test This is a tax residency test which is only applicable for government officers stationed abroadon Federal government orders. Their tax residency on an annual basis is dependent only onone factor i.e. their continued participation in select superannuation schemes. Continuation ofparticipation leads to Australian tax residency without considering any other factor(Woellner, 2014).4)183 day testThe application of this test is useful for foreign residents only. Complying with this testwould require that the taxpayer must meet both the following conditions (CCH, 2013).A minimum time period of 183 days must be necessarily spent by the taxpayer underconsideration in Australia. It is not mandatory that this stay could be of continuousmanner and hence could be intermittent also. Further, the taxpayer must have intention to make Australia permanent home in thefuture. Only the intention is necessary, the final outcome in this regard does notmatter.If the taxpayer fulfils only one of the above highlighted conditions, then the test would befailed and Australian tax residency would not be conferred as per this test (Gilders et. al.,2016).
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