Determining Tax Residency Status and Taxation of Income

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
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1TAXATION LAW
Table of Contents
Part A:........................................................................................................................................2
Introduction:...........................................................................................................................2
Determination of Residential Status:.........................................................................................2
Ordinary concepts Test:.........................................................................................................3
Domicile Test:........................................................................................................................4
The 183 days Test:.................................................................................................................5
Superannuation Test:..............................................................................................................5
Taxation of Income:...................................................................................................................6
Conclusion:............................................................................................................................6
Part 2: Time Sheet......................................................................................................................7
Part 3: Reflective Writing..........................................................................................................7
Answer to question 1:.............................................................................................................7
Answer to question 2:.............................................................................................................8
Answer to question 3:.............................................................................................................8
Answer to question 4:.............................................................................................................8
Answer to question 5:.............................................................................................................9
References:...............................................................................................................................10

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Part A:
Introduction:
As defined under “section 6 (1), ITAA 1936” the resident of Australian represents the
person that are living in Australia and also comprises of the person that have the domicile in
Australia, excluding the circumstances when the commissioner is content that the person’s
permanent place of abode is out of Australia (Woellner et al., 2016). For the foreign resident
under “section 6-5, (3)(a), ITAA 1997” it includes in the assessable income the ordinary
income that is obtained from the Australian sources. According to the “section 995-1, ITAA
1997” a foreign resident refers to the person that are not the resident of Australia within the
meaning of “ITAA 1936”. A non-resident is explained under “section 6 (1), ITAA 1936” that
includes person that are not the resident of Australia (Blakelock & King, 2017). Residency is
regarded as the means through which Australia exerts its authority to impose tax. For
individuals, there are four test that helps in determining the residential status namely;
a. Ordinary concepts test
b. Domicile Test
c. 183 day’s Test
d. Superannuation Test
The present report is based on determining the tax residency status for Dave’s and issues
related to the taxation during the relevant year.
Determination of Residential Status:
The definition related to the resident of Australia comprises of four distinct test and
the last test is clearly considered as objective. There are several number of cases that is
associated with the understanding of the first three test. The case laws provide an
understanding relating to the meaning of the terms that are used under “section 6 (1), ITAA

3TAXATION LAW
1997” (Barkoczy, 2016). This is due the residency status of a person is ascertained through
case basis and relies on the particular facts and situations of the separate.
As evident in the current case of Dave he is an Australian citizen however moved to
Paris for structural engineering role where he married Olivia in 2007 and moved to Nepal in
2007. Dave regularly returned to Australia and returned temporarily to look after his ill
mother. To determine the residency status of Dave the following test are performed;
Ordinary concepts Test:
Whether a person is living in Australia is regarded as the main test to determine the
residency status. An individual would be treated as the Australian resident for the purpose of
tax if they usually lived in Australia, irrespective of their nationality, citizenship or their
location of permanent home (Fry, 2017). The court of law in “Applegate v FCT (1979)”
stated that permanent does not indicates endless and it is assessed every year. The taxpayer
here was treated as non-resident because he had the permanent place of abode out of
Australia.
A person is treated as Australian resident when their behaviour over the period
portrays a degree of continuousness, routine or habit which is in accordance with residing in
Australia. In the case of “Iyengar v FC of T (2011)” an engineer that took up the 2 year plus
overseas appointment, however maintained his family home and ties in Australia to which the
taxpayer ultimately returned and was held to be the Australian resident based on the ordinary
concepts (James, 2016). Within the ordinary concepts test Dave cannot be treated as the
Australian resident because has been living in Nepal from 2007 and holds no such ties with
Australia. The taxpayer here Dave has maintained his location and personal assets in Nepal
where he lives in a fully furnished home. Even though he returned to Australia 2016 his