Taxation Law: Residency Determination, Rental Income, Business Income, and CGT Computation

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

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Answer 1
Issue
Whether Adam Collins can be rendered a resident in Australia for the tax year 2017/18
and tax year 2018/19 from the facts of the given case.
Rule
The determination of the residency of a person in Australia needs to be assessed as per the
provision contained u/s 6-1 of the ITAA 361. This section provides for three tests:
Firstly, the resides test needs to be applied under which the individual needs to have lived
or have been dwelling in the territory of Australia for an adequate time.
Secondly, the domicile test requires the individual to have a domicile, which is a
permanent place abode including a rented accommodation within Australia and not located
beyond the territory of Australia.
Both the tests need certain factors to be satisfied by the individual:
 Span of intended stay overseas.
 Intention to return to Australia in a reasonable time.
 Acquiring permanent home beyond the territory of Australia.
 Relinquishing the permanent house located in Australia.
 Permanence and extent of presence overseas.
 Duration of association with a place in Australia.
1 The Income Tax Assessment Act 1936 (Cth), s 6.1

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Thirdly, the 183 day test requires a person to stay in Australia continuously for a period of
6 months and for applying this test the satisfaction that the individual does not hold any
permanent place of abode beyond Australia needs to be ensured.
As per the principle established in the case of Applegate v FC of T (1978) 8 ATR 3722,
permanent stay does require indefinite stay, but a stay which cannot be rendered temporary.
Application
Tax year 2017/18:
 Span of intended stay in Dubai pertaining to Adam is within the extent of six
months.
 The stay of Adam in Australia is temporary with his motive of returning to
Australia.
 The accommodation of Adam in Dubai was a rented temporary for the purpose of
employment.
 He did not abandon his place of abode in Australia.
 Stay in Dubai was not permanent and for less than a period of six months.
 All through this time his family and permanent place of abode has been within
Australia establishing his association with Australia.
Therefore, all these are favouring his residency in Australia.
Tax year 2018/19:
 Adam relocated to Dubai with his wife and transferred his kids to boarding.
 Bought an apartment and opened a bank account with his wife in Dubai depicting
permanent house.
2 Applegate v FC of T (1978) 8 ATR 372

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 A permanent place of abode has been bought in Dubai.
 He did not abandon his place of abode in Australia.
 His intention to indefinitely stay in Dubai is evident from the situation.
 Intended to visit Australia for six weeks on a leave to inspect house and has been
keeping the bank account as well as private health insurance within Australia.
Therefore, all these are favouring his non-residency in Australia.
Conclusion
Hence, it can be stated that he will be a resident for tax year 2017/18 and a non-resident
for the tax year Tax year 2018/19 in Australia.
Answer 2
Issue
Whether the rental income produced by virtue of the usage of the townhouse by Orpheus
Parker would yield any tax consequences in the year 2018-19.
Rule
The income earned by virtue of exploitation or usage of an asset of capital nature will be an
income of ordinary nature as for the principles established in the case of Adelaide Fruit and
Produce Exchange Co Ltd v DCT 1932 SASR 1163. Rental income in this case has been
considered as a fruit of the three namely the land and is required to be assessed as a taxable
income.
3 Adelaide Fruit and Produce Exchange Co Ltd v DCT 1932 SASR 116