Residential status for tax purpose

This document provides a detailed explanation of how to determine the residential status of an individual for tax purposes in Australia. It discusses the tests and rules involved, such as the resides test, domicile test, 183-day test, and superannuation tests. The document also includes a case study and concludes that the individual in question is not considered a resident of Australia.

TAXATION LAW

TABLE OF CONTENTS
PART A......................................................................................................................................1
Written letter of advice...........................................................................................................1
PART B......................................................................................................................................4
Determine the net income of partnership and distribution statement of the partners.............4
REFERENCES...........................................................................................................................7
INDEX OF TABLES
Table 1 Net partnership income.................................................................................................6
Table 2 Distribution statement for partners...............................................................................6

PART A
Written letter of advice
To Jack Johnson
Classic Towers, Road No 2417, Manama, Bahrain
Subject: Residential status of client for the tax purpose
This is to inform you that the detailed description of your residency status for
determining the tax applicable in the hands of you or not is given below in the form of the
IRAC method. This method will help in discussing the detailed information about your
residency status as this stands for issue, rule, analysis and conclusion. In the conclusion stage,
you will get to know the final judgement whether you are applying as an Australian resident
during your stay in Australia or not.
Issue
Jack Johnson is having an Australian passport and the citizenship of Australia as he is
born in this nation on 11th September 1964. Along with Australia’s passport, he also holds a
British passport. For many years, Mr Jack worked under BAE systems. He is married and has
two children. In the year 2015, he decides to call their family to live in Australia. But this
move of shifting of his family to Australia is for a temporary purpose as he wanted to wait for
the approval of the Middle East.
But in November 2017, he returned back to Australia and again in April 2018 to stay with his
family members as his house is still in the Tweed heads in the New South Wales Australia.
Mr Jack stayed in Bahrain but worked in the Saudi Arabia as per the employment offer they
got from UK based education and Training Company for handling the post of a training
director. He bought a car in Bahrain to travel from Bahrain to Saudi Arabia for business
purpose and he entered with an employment contract with TQ Education Company for a
period of 12 months before this period, he cannot leave this company and after this period the
period will get extended as per the consent of an employee. He lived in a classic tower
apparent in Bahrain of two bedrooms with an expectation to live their family members in the
future. He stayed in the classic tower apartment in Bahrain from 10 June 2017 till 9 June
2018. His marriage broke down in May 018, when Mr Johnson realised that his wife does not
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want to relocate to Bahrain with his young son so he again moved to one bedroom apartment
with no lease agreement.
Rule
Resides test
This tool says that a person considers as a resident who resides in the Australia and no
other test is requiring in testing a person’s residential status.Certain parameters that will help
in determining the residential status of an individual comprises of the actual presence of a
person in the Australia, purpose to stay, actual stay in the nation, frequency of visit,
maintenance of the house, family living in Australia and its mode of life. As per the case
example of FCT V Miller 7 is the best example of a residency test to determine a person’s
residential status.
Domicile test
Three subcategories of the domicile tests include origin, choice and the dependency to
determine the residential status of an individual. The origin says that a person born in the
nation and will remain according to its own concern (Uddin, 2018). Domicile by choice will
reflect that a person will stay in a place for an indefinite period. Domicile of dependency
shows that homestay of a dependent person will decide by their parent or its caretaker. As per
case law FCT v Applegate, in which a solicitor given its newly established villa to set up its
firm’s branch.
183 day test
A person who spends a total 183 days in Australia during their total stay in the nation is
considering an Australian resident otherwise to be called as a foreign resident.
Two compulsory conditions require to satisfying by an individual to be called as an
Australian resident. This consists of that a place of abode of an individual should not outside
from Australia and the intention of a person to stay in Australia.
The superannuation tests
A person having a legitimate superannuation account which signifies its citizenship of the
nation as a person working under the Australian government outside this nation will get this
account.
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Analysis
Resides test
According to resides tests, Mr Jack does not consider as an Australian resident as he
owns a home in Australia and but do not present in the country for the assessment year as he
travels frequently in Australia but permanently lives in another country. Mr Jack do not
qualify the resides test as he was not present in the year 2018 as he was outside the county so
he is considered as a non-resident. Mr Jack failed this test, so we move to another test in
checking the residential status.
Domicile test
As per the domicile tests, Mr. Jack is not considered as an Australian resident as he born in
this nation and their family that is his wife stays at this place but he permanently lives outside
for the assessment as in this year he wife separated from him and he failed this test. After the
client failed this test, we are going to check the residential status of the client in other tests.
183-day test
Three things to be satisfied by a user to be called as a resident of Australia consist of
spending 183 days in the country, having a pace of abode and permanent intention of living
in this nation. Mr Johnson has a place in the nation but its intention is to live permanently in
Bahrain and do not spend 183 days in the tax assessment. As he does not qualify other two
conditions so he failed these tests and consider as a non-resident.
The superannuation tests
He failed this test as he is not working under the government company to have a
superannuation account.
Conclusion
It is summarized from the case study that Mr Johnson is not considered as a resident of
Australia as per the domicile test its permanent place of abode is not in the nation and he
permanently shifts to another country. He also failed in three if the tests such as resides tests,
183 days test and the superannuation tests as he was not present in the country during the tax
assessment year.
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Thanks and regards
Yours affectionately
Tax consultant
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REFERENCES
Jones, D., 2018. Complexity of tax residency attracts review. Taxation in
Australia.53(6).p.296.
Uddin, M., 2018. Domicile as a Personal Connecting Factor: An Assessment of Judicial
Decision. International Journal of Global Community.1(3, Nov), pp.291-308.
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