Taxation Law Advisory Letter of Advice

This document is an advisory letter of advice on residency status and taxation matters for Australians. It provides guidance on determining residency status for income tax purposes, lodging tax returns, understanding the Medicare levy, and managing superannuation. The letter also includes references to relevant laws and rulings. The document is suitable for students studying Taxation Law or anyone seeking expert advice on taxation matters.

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

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Table of Contents
Advisory Letter of Advice.........................................................................................................2
Summary of Advice:..................................................................................................................2
Residency Status:.......................................................................................................................3
Residency status for income tax purposes:................................................................................3
Lodging tax returns:...................................................................................................................6
Medicare levy:............................................................................................................................7
Superannuation:..........................................................................................................................7
References:.................................................................................................................................9

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Advisory Letter of Advice
3rd April 2019
Private & Confidential
Mrs Meghan Windsor
Majestic Enterprise UK
Dear Meghan and Majestic Enterprise
To further our recent meetings, in correspondence to the discussion, we provide you
the advice in respect of numerous matters as requested.
Scope
To advise the company and Meghan how they should respond to the position of
residency status and taxation matters for Australians.
Note: Please note that these letter of advice does not take into the consideration the
consequences of tax for the company.
Facts:
The advice is made on the basis of relevant laws relating to taxation, cases and rulings
as we understand their application from 2018 onwards. If you find any of our advice or
assumption inappropriate or not in compliance with your understanding, then please interact
with us directly as this may create an impact on the guidance given.
Summary of Advice:
We have below précised our opinion in respect to the each of the substances that are
outlined above with thorough conversation on numerous issues that is related to our letter of

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advice for your perusal. We would strongly encourage you to read the below stated
discussion in combination with the advice provided below.
Residency Status:
According to the “taxation ruling of IT 2681” a business migrant that are holding the
VISA 457 are treated as the occupant of Australia for the purpose of taxation under the below
stated test that are enclosed inside the description of “resident” under “subsection 6 (1) of
the ITAA 1936”;
a. Resident based on the ordinary concepts
b. The domicile Test; and
c. The 183 day’s test
The ruling effectively provides guidance in determining the residency status for the
taxation purpose of an individual that arrives in Australia under the business skill category1.
Residency status for income tax purposes:
As per the ATO’s view migrants that are entering into the Australia with the pre-
arranged contracts of employment will be treated as Australian resident2. In correspondence
with the information shared by you, it is understood that Meghan arrived in Australia with the
sub-class 457 visa. The holder of the Sub-Class Visa may be working for a period of four
years and may be qualified for bringing any of her family members3. As Meghan is the holder
of Sub-Class 457 visa she would have the unrestricted work and study rights in Australia.
1 Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business Taxation
2 "Work Out Your Tax Residency", Ato.Gov.Au (Webpage, 2019) <https://www.ato.gov.au/individuals/international-tax-for-
individuals/work-out-your-tax-residency/>
3 Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)

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Furthermore, she would not be having any restriction on the number of times she comes and
goes out of Australia.
As Majestic Enterprises Australia is the employer of Meghan, the employer here
should obtain the approval from the Department of Immigration and obtain Border Protection
as the approved sponsor. We would also like to put forward that Meghan being the holder of
Sub-Class 457 visa would be restricted to work only for their sponsor and would not be
permitted to work for any other organization apart from her associate entities in UK that is
defined under the Corporation Act4. It is very much common that the holder of Sub-Class 457
visa would be able to apply for the permanent residency in Australia with the objective of
perpetually settle in Australia and turn into the Australian inhabitants.
The non-resident workers that are entering Australia with the 457 skilled immigration
visa would now be able to change their permanent residency provided that they have been
sponsored by the employer for the period of two years and the employers provide the
employee with the nominated visa for the full time position in the nominated occupation.5
The residency status is regarded as the question of fact and it is observed as the chief
principles that helps in ascertaining the obligation of an individual to the Australian income
tax. The ATO states that the liability for taxation arises each year. As held in “FC of T v
Applegate (1979)” Events that happen subsequent to the year of income may help in
establishing the residential status of an individual6. A well settled purpose namely
employment might support the purpose of an individual to live in Australia. Furthermore, a
4 Barkoczy, Stephen, Foundations Of Taxation Law 2019 Ebook (OUPANZ, 2018)
5 Krever, Richard E, Australian Taxation Law Cases 2015
6 James, Simon, The Economics Of Taxation (2014).

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person’s intention or the purpose for living in Australia helps in establishing whether the
person is living in Australia.
Persons that enter Australia to take up the pre-arranged work prospects will be treated
as Australian residents living in Australia. The court in “Miesegaes v Commissioners of
Inland Revenue (1957)” take into the consideration a person who resided in UK for
education purpose7. The notation of Visa on the passport is regarded as the indicator of an
individual’s objective of coming to Australia.
Ordinary Concepts Test:
To help in ascertaining for the year of income whether a person whether the business
migrants is the resident under the ordinary concept tests. There are certain factors that needs
to be taken to into the consideration8. If the person is returning back to nation of origin along
with the regularity, frequency and duration of return and the purpose of those trips can be
considered as the decisive factor. The fact that Meghan came to Australia as the successful
hold of business skill applicant visa is regarded as the strong indicator in its own that she
intends to reside in Australia. A successful business skill migrant is generally given a
permanent resident status based on the migration law upon arriving in Australia.
The domicile Test:
Under the Domicile Test a business skill migrant is treated as the Australian resident
based on this test if an individual has the domicile in Australia except when the commissioner
7 Kenny, Paul, Australian Tax 2013 (LexisNexis Butterworths, 2013)
8 Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian Taxation Law (CCH Australia,
2013)

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is content that the person’s permanent place of residence is out of Australia9. Meghan being
the business migrant is an Australian resident under this test.
The 183 day’s test:
With respect to the conditions of business skill migrant, a person holding the visa of
business skill migrant and has spent or been present in Australia for more than 183 days is
treated as the Australian resident under the 183 day’s test10. Meghan therefore, will be treated
as resident under this test.
On the basis of facts established above Meghan will be considered as a Temporary
Australian resident for taxation purpose under “section 6 (1), ITAA 1936” as she holds
temporary visa11.
Lodging tax returns:
Australia has the system of foreign tax credit and certain kinds of exemption to offer
relief to an individual from the double taxation12. As Australia has formed a double taxation
agreement with the UK, Meghan can avoid the double taxation by allocating the rights of
taxation of the bilateral income that is flowing between the treaty parties. Meghan during her
employment with Majestic Enterprise Australia received an annual salary of $250,000. She
also received a share of profit from the Majestic Enterprise UK that amounted $750,000. As
Meghan is a temporary resident, she will be required to declare income that she has derived
by working Majestic Enterprise Australia plus the income that she has earned from the
9 Sadiq, Kerrie, Principles Of Taxation Law 2014
10 Woellner, R. H et al, Australian Taxation Law 2014
11 Robin, H. Australian Taxation Law 2019. Oxford University Press, 2019.
12 Sadiq, Kerrie and Cynthia Coleman, Principles Of Taxation Law 2013 (Lawbook Co./Thomson Reuters, 2013)

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employment with the company in UK13. She will be required to include the interest derived
from Australia while the dividends and interest made from UK, Malaysia and Indonesia does
not need to be declared by Meghan while lodging tax returns in Australia.
As Meghan under the definition of “section 6 (1), ITAA 1936” is considered as the
Australian resident, she will be required to lodge tax returns in Australia.
Medicare levy:
Medicare levy provides the Australian residents with the access to the health care. It is
partially funded by the Medicare levy that is 2% of an individual’s taxable earnings14. An
individual pays the Medicare levy along with the tax they pay on their taxable earnings. We
would like to extend our discussion based on the facts obtained that your taxable income
from Australian sources is greater than the individual threshold limit. Furthermore, Meghan is
also held as the resident of Australia within the meaning of “section 6 (1) of the ITAA
1936”15. As a result of this, a Medicare levy of 2% will be applicable on Meghan taxable
income. Meghan will be required to pay Medicare levy along with the tax that she pays on
her taxable income.
Superannuation:
The ATO states that, superannuation forms the future of an individual.
Superannuation represents the money that is set aside during the working life of an individual
when they retire16. For Meghan, superannuation begins when she commenced working with
13 Robin & barkoczy woellner (stephen & murphy, shirley et al.). Australian taxation law select 2019: Legislation and
Commentary. OXFORD University Press, 2019.
14 "Medicare Levy", Ato.Gov.Au (Webpage, 2019) <https://www.ato.gov.au/Individuals/Medicare-levy/>
15 Woellner, R. H, Australian Taxation Law Select 2013 (CCH Australia, 2013)
16 "Super", Ato.Gov.Au (Webpage, 2019) <https://www.ato.gov.au/Individuals/Super/>

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the Majestic Enterprise Australia. The employer here Majestic Enterprise Australia is
required to pay a portion of Meghan salary in the super fund for her. The payments made by
the employer here would be treated as the super guarantee contributions or the concessional
pre-tax contributions.
Accordingly, once you have reviewed the advice that is enclosed above and are
content to proceed further, we would prepare your response to the ATO in agreement with the
points that are raised above. If you also wish to discuss the above stated matters with more
details, we would welcome you without any hesitation to contact our office.
Thanking You
Yours sincerely
Associate – Taxation
ABC Partners Pty Ltd.
Disclaimer:
The letter of advice has been prepared only for the use of addresses. The letter states
that no other individual should remain dependent on the advice given. The letter is not for the
general circulation or for any other type of use without obtaining any approval from the ABC
Partners Pty Ltd.

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References:
"Medicare Levy", Ato.Gov.Au (Webpage, 2019)
<https://www.ato.gov.au/Individuals/Medicare-levy/>
"Super", Ato.Gov.Au (Webpage, 2019) <https://www.ato.gov.au/Individuals/Super/>
"Work Out Your Tax Residency", Ato.Gov.Au (Webpage, 2019)
<https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-
residency/>
Barkoczy, Stephen, Foundations Of Taxation Law 2019 Ebook (OUPANZ, 2018)
Grange, Janet, Geralyn A Jover-Ledesma and Gary L Maydew, 2014 Principles Of Business
Taxation
James, Simon, The Economics Of Taxation (2014).
Jover-Ledesma, Geralyn, Principles Of Business Taxation 2015 (Cch Incorporated, 2014)
Kenny, Paul, Australian Tax 2013 (LexisNexis Butterworths, 2013)
Krever, Richard E, Australian Taxation Law Cases 2015
Morgan, Annette, Colleen Mortimer and Dale Pinto, A Practical Introduction To Australian
Taxation Law (CCH Australia, 2013)
Robin & barkoczy woellner (stephen & murphy, shirley et al.). Australian taxation law select
2019: Legislation and Commentary. OXFORD University Press, 2019.
Robin, H. Australian Taxation Law 2019. Oxford University Press, 2019.
Sadiq, Kerrie and Cynthia Coleman, Principles Of Taxation Law 2013 (Lawbook
Co./Thomson Reuters, 2013)

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Sadiq, Kerrie, Principles Of Taxation Law 2014
Woellner, R. H et al, Australian Taxation Law 2014
Woellner, R. H, Australian Taxation Law Select 2013 (CCH Australia, 2013)