Sample Assignment on Taxation Law (docs)

TAXATION LAW
STUDENT ID:
[Pick the date]

Issue
The key objective in the given case is to offer advice to Jacinta with regards to tax
assessability of the amounts that are received by her in 2016/17 and 2017/18
Determination of tax residency
The determination of tax residency is imperative owing to the different tax treatment being
extended to Australian tax residents and foreign tax residents. In accordance with s.6-5(2), for
Australian tax residents, income derived from Australian as well foreign sources would be
taxable. However, as per s. 6-(5)(3), for foreign tax residents, only income derived from
Australian sources during the assessment year would be considered (Barkoczy, 2017). The
various tests for determining tax residency are highlighted in s.6(1) ITAA 1936 along with
tax ruling TR 98/17. The relevant tests are as follows (Gilders et. al., 2016).
 Residency Test – Applicable for foreign residents
 183 day Test – Applicable for foreign residents
 Domicile Test – Applicable for Australian residents
 Superannuation Test – Applicable for government servants serving abroad
Considering that Jacinta has an Australian domicile, thus the only valid test for her would be
domicile test.
Domicile test
For satisfying this test for tax residency, it is imperative that the following two conditions
must be fulfilled (CCH, 2013).
 The underlying taxpayer must be Australian domicile holders
 The permanent abode of the taxpayer must be located on Australian territory even
though for professional reasons the taxpayer may be staying out. This is in
accordance with Levene v, I.R.C. (1928) A.C.2017 case
Determining the domicile is rather easy and objective but the same cannot be said about
location of permanent abode especially when the given taxpayer has intentions to return back
to Australia. The various factors that the Tax Commissioner considers in such cases are
outlined in IT 2650 and includes the following factors (Sadiq et. al., 2016).
 Taxpayer’s intent to return to Australia

 Difference between the expected period of stay and actual stay along with
contributory reason
 Level of personal and professional lies in Australia and also the place where the
taxpayer is living
 Setting up of a house abroad
Further, in accordance with the decision in the Applegate per Franki J 79 ATC at 4314 case,
if an Australian domicile holder leaves Australia for professional purposes for a period
greater than two years, then it can be assumed that the permanent abode has shifted out of
Australia and the concerned person would not be tax resident of Australia (Deutsch et. al.,
2016).
In wake of the above, the tax residency of Jacinta needs to be outlined. It is noticeable that on
September 1, 2016, the taxpayer Jacinta accepted the offer made by EZI as per which she was
required to permanently relocate to Singapore for a period of three years. Hence, in
accordance with the case law (Applegate per Franki J 79 ATC at 4314 ), it is apparent from
September 1, 2016 to the time, Jacinta returns to Australia permanently, she would be
considered a foreign tax resident. Thus, for the whole of tax assessment year 2017/2018
Jacinta would be a foreign tax resident (CCH, 2013). However, it is essential to consider the
tax residency for the time period between July1. 2016 and August 31, 2016. It is apparent
that the Singapore tender began only in May 2016 and it was supposed to last only for a
month but for subsequently extended by another two months. Also, while her work was
finished in July 2016, she was on vacation for a month. Thus, from these facts, it is apparent
that before shifting to Singapore, Jacinta’s permanent abode was in Melbourne only where
she resided. Thus, for the period between July 1, 2016 to August 31, 2016, Jacinta would be
an Australian tax resident (Woellner, 2014).
Accessibility of income
In line with s.6-5(3), post September 1, 2016, only income derived from Australian sources
would be considered as assessable income. However, there is no income which is derived
from Australian sources, hence there would be no assessable income during this period based
on the given data (Barkoczy, 2017).
Monthly Salary of $ 8,000 would be considered as assessable income under s. 6(5)
irrespective of whether it is deposited in Melbourne or Singapore based bank account

(Woellner, 2014). Also, the air tickets and holiday voucher would be considered as
assessable income under s.6(10) since non-cash benefits are being provided which would be
considered as statutory income since these are linked to the employment only (Gilders et. al.,
2016).
Further, the compensation for moving to Singapore to the extent of $ 20,000 would be
considered as assessable income as the company has provided relocation allowance and is not
reimbursing the actual expenses. As a result, the taxpayer can potentially derive benefit out of
the same without producing any supporting evidence for the same (CCH, 2013).
References

Barkoczy, S. (2017) Foundation of Taxation Law 2017. 9th ed. Sydney: Oxford University
Press.
CCH (2013), Australian Master Tax Guide 2013, 51st ed., Sydney: Wolters Kluwer
Deutsch, R., Freizer, M., Fullerton, I., Hanley, P., & Snape, T. (2016) Australian tax
handbook. 8th ed. Pymont: Thomson Reuters.
Gilders, F., Taylor, J., Walpole, M., Burton, M. & Ciro, T. (2016) Understanding taxation
law 2016. 9th ed. Sydney: LexisNexis/Butterworths.
Sadiq, K, Coleman, C, Hanegbi, R, Jogarajan, S, Krever, R, Obst, W, & Ting, A
(2016) , Principles of Taxation Law 2016, 8th ed., Pymont: Thomson Reuters
Woellner, R (2014), Australian taxation law 2014 7th ed. North Ryde: CCH Australia