Taxation Law: Residency Rules and International Tax Avoidance

TAXATION LAW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART A ..........................................................................................................................................1
Issue ............................................................................................................................................1
Rules............................................................................................................................................1
Application ..................................................................................................................................3
Requirements ..................................................................................................................................3
I) Assessable income of Catherine in Australia considering her as Australian resident. ..........3
II) Considering Catherine as Foreign Resident of Australia........................................................4
PART B :International Tax Avoidance ..........................................................................................5
Minimization and tax avoidance by multinational corporations is of significant concern for the
tax administrators and governments............................................................................................5
Methods used by multinational corporations for avoiding the tax in Australia. .........................7
Comparison of Australian Rules with Rules of USA................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Countries earn their revenues through the taxes from individuals and corporates. Incomes
earned by the assessees are chargeable to tax. Income tax of Australia is taxed under the Income
Tax Assessment Act, 1997 and all the applicability of relevant legislations is guided by
Australian Taxation Office. Multinational corporations with their emergence over global level
have increased the tax burdens. Companies began to involve in tax avoidance activities for
reducing their tax liabilities. Companies were shifting their profits to countries with lower tax
jurisdictions. The report is covered in two parts. Part A will cover the understanding about the
residency rules for working holiday makers and their assessable income. Part B will cover the
research assignment on International Tax Avoidance. This will be giving understanding about
the multinational corporations avoiding tax through tax planning and arrangements.
PART A
Issue
In the present case Catherine is a 22 year born in Cardiff, Wales. She arrived Brisbane on
a working holiday. Prior to this she was residing with parents in Wales. She was working in
Cardiff before leaving for Australia. Most of her possessions were left with parents in Cardiff.
She lived in hostel for 2 weeks in Brisbane and visited the tourists locations Sunshine coast,
Gold Coast and Tourists attractions. After that she lived in shared houses with holiday makers.
She also worked in Brisbane in hotel and cafe as casual employee. She went to central
Queensland as she was required to work in rural areas as per the visa requirements. She worked
in cattle station for 2 months. She went bask to Brisbane in same house for living in same shared
house. She returned back to Cardiff on July 16, 2019 and lived with her parents. The case is to
identification of residency rules for Catherine in Australia for year 2019. The assessable income
in Australia and while she worked in Wales. The rulings for foreign resident and taxation rulings.
The case is related to the assessable income of foreign residents working in Australia.
Rules
The rule is related to the taxation laws related to residency. To understand the tax situation it is
important to identify whether individual is considered as foreign resident or Australian resident
for the tax purpose. Rules of Home Affairs are not using the same rules.
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 A person without being permanent resident or Australian citizen could be resident of
Australia for tax purpose.
 A person may have visa to visit Australia, but may not be Australian resident for purpose
of tax (Ingram, 2016).
Checking out the residency status for individuals who visit Australia for working holiday or visit.
Generally who are entering Australia on working visit or holiday are not the residents of
Australia. They are categorised into two that are 462 or 417 visas ( backpackers). They visit
without any intention of staying but to work during their stay (Foreign Resident, 2019).
Income earned in Australia by backpackers are taxed at the rate decided for working
holiday makers of 15% to the level of $ 37000 in the income year without considering any
residency status.
Residential status for tax purpose.
It includes purpose of visit in Australia way of living in Australia and whether have home in
other country.
For being Australian resident one of the conditions should be met.
1. Living & working arrangements should be consistent to make Australia home.
It includes developing habits and routines of lifestyle in Australia is same like before visiting
Australia. Individual is working and living in Australia as settled life and not just as tourist or
visitor.
2. Living in Australia for six months or more in tax year of Australia and also in other
country no have place where individual lives or intends of taking residence in
Australia(McClure, Lanis and Govendir, 2016).
Example : Person visiting Australia on working holiday of 8 months and also have home in other
country where it will be returning than individual will not be resident of Australia for tax
purpose.
Factors to be considered are
 Purpose of being in Australia
 Manner of living life in Australia. Settled and routine habits as before visiting Australia.
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