Understanding Residency Status and Business Activities in Taxation Law

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

1TAXATION LAW
Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................3
Residence...............................................................................................................................3
Source:....................................................................................................................................7
Exemption:.............................................................................................................................7
Business:................................................................................................................................8
Conclusion:................................................................................................................................9
References:...............................................................................................................................11

2TAXATION LAW
Introduction:
The present issue is based on understanding the residency status of individual that are
employed in the luxury cruise liner that travels Mediterranean Sea. The purpose of the study
is to ascertain whether the individual that leaves Australia momentarily to reside in foreign
country for instance on the provisional overseas work assignment or for the abroad study
ceases to be the Australian resident for the purpose of income tax during their out of the
country stay. As defined under the “section 6-5 (2), ITAA 1997”, the assessable income of
the Australian occupant comprises of the ordinary income that is derived from all the sources
(Woellner et al. 2014). As a general rule, “section 6-10 (4), ITAA 1997” explains that the
chargeable earnings of the Australian occupant includes of the statutory income that is
sourced from all the sources.
In relation to the foreign resident, “section 6-5 (3)(a)” comprises of the assessable
income that encompasses of the ordinary income derived from the Australian sources.
Similarly, as per “section 6-10 (5)(a)” the statutory earnings from the Australian sources is
regarded as the assessable income derived by the overseas resident (Barkoczy 2016). The
report would apply the different types of residential test on Sierra within the meaning of
“section 6 (1), ITAA 1997” to establish whether is an Australian resident or not.
The study would also take into the account whether the receipts derived by Sierra
from her horses breeding program amounts to business activities under legislative provision
of “section 995-1”. The major tax issues that surrounds the case study of Sierra includes the
gains that is originated from the business activities and whether such gains derived from
carrying on the business constitutes the ordinary income under “section 6-5, ITAA 1997”.

3TAXATION LAW
Discussion:
Residence
As it has been explained under the “section 6 (1), ITAA 1936” the occupant of Australia
is regarded as the Australian resident that are living in Australian and encompasses of the
person that are having their domicile in Australia except the tax authorities are very much
content that the taxpayer did not set up any kind of stable house out of Australia (Graetz,
Michael and Alvin 2016). The definition given under “section 6 (1), ITAA 1936” clearly
explains that a person that is actually living in Australia either constantly or in breaks for at
least six months of the income year and the taxation authorities are very much content that
the person’s permanent place of residence is out of Australia and does not has any kind of
purpose or intention of living in Australia.
In case of Sierra Leone, she is working with the luxury cruise liner that is travels in
Mediterranean Sea. She is also the owner of apartment in Australia which she has rented it
out to her uncle and family. She later bought an apartment in Australia where she has kept all
her personal belongings and spends eighty days in the apartment during the present tax year
while living in Australia. She only spends a total of 40 days in Singapore which was mainly
to visit her twins. To decide the residency position of the Sierra four different residency test
will be applied that are listed below;
a. Resides Test
b. Domicile Test
c. 183-day Test
d. Superannuation Test
Resides Test: