Taxation Law

This document provides a letter of advice regarding the residential status of an individual for tax purposes under the Australian taxation law. It explains the different tests used to determine residency and analyzes the case of the individual in question. Additionally, it includes a distribution statement for a partnership's net income and provides references for further reading on Australian taxation law.

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Part A:........................................................................................................................................2
Letter of Advice.........................................................................................................................2
Part B:.........................................................................................................................................6
Net Income of Partnership:........................................................................................................6
Distribution Statement:..............................................................................................................6
References..................................................................................................................................8

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Part A:
Letter of Advice
To Jack
From: XYZ Tax Consultancy Agency
Date: 8th May 2019
Dear Jack
The letter seeks to inform you that we would considering your residence status in
accordance with the relevant test that are applicable in your situation. We would like to
inform you that an Australian resident for the purpose of tax is generally held for taxation
purpose relating to income earned from all the sources. The definition of Australian resident
under “section 6 (1), ITAA 1997” explains that a person is held to be an Australian resident if
they are living in Australia and have their domicile here except on the conditions that the
commissioner is content that the person has fixed location of home outside Australia (Krever
2014). The taxpayers are only required to meet one of the four test to be held as the
Australian resident.
We will be applying the residential test in your case based on the facts established by
you to consider your residential status within the meaning of “section 6 (1), ITAA 1997”.
Resides Test:
This test is also known as residence as per the ordinary concept. It implies to live
permanently in Australia or for the considerable period of time. The court in “IRC v Lysaght
(1928)” considered relevant factors such as the frequency, regularity and duration of visit by

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a person who is a visitor (Morgan, Mortimer and Pinto 2018). It also includes the
maintenance of place of abode in Australia for the use of taxpayer.
As per the information obtained in your case Jack, it is understood that you have
moved to overseas in Saudi Arabia for work purpose. You have also maintained the place of
abode outside Australia and even though you have the residential home in Australia and your
family including your children resides here, these factors does not alone considered
significant. Referring to “IRC v Lysaght (1928)” even though you return to Australia to visit
your family but you have not been present in Australia physically for a significant period of
time. You also intended to return back to Saudi Arabia following a short stay in Australia for
the purpose of employment. Therefore, you are not the Australian resident under the Reside
Test.
Domicile Test:
The domicile of a person is determined in accordance with the “Domicile Act 1982”.
This includes the domicile of origin by birth or the domicile of choice where the taxpayer has
the intention of making their home indefinitely (Barkoczy 2014). Under this test, a person is
regarded as Australian resident if their domicile is in Australia except when the commissioner
is contend that the person has the fixed location of home outside Australia. As held in “FCT
v Applegate (1979)” the commissioner held that taxpayer domicile was in Australia however
he failed to satisfy the requirement that his fixed place of home was in overseas.
We evidenced that following the separation with your wife you sold all your
belongings in Australia and permanently moved to single bedroom apartment in Bahrain.
Jack, you have failed to conclusively prove that your domicile of choice is in Australia. In
light of decision made in “FCT v Applegate (1979)” you have failed to satisfy the
requirement of Domicile Test and that your fixed location is out of Australia in Bahrain. Even

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though you return to visit your children for good but this alone cannot be considered
conclusive in treating you as an Australian resident. Your actions of moving into single
bedroom apartment indicate your absence from Australia is for indefinite period. Your only
single visit to Australia further adds weightage to the conclusion that is drawn above.
Therefore, you ceases to be an Australian resident under the Domicile Test because you have
adopted the domicile of your choice in Bahrain by moving overseas and your permanent
place of abode is now outside Australia.
183-day Test:
As stated under the 183-day test, a person is regarded as the resident of Australian for
tax purpose when he or she has presence in Australia either on a constant basis or irregularly
for at least one half of the income year (Woellner et al. 2016). Under the 183-day test, during
the income year of 2017-18 commencing from June, you were physically not been present in
Australia at least for one-half of the income year. In addition to this, you have also satisfied
that your usual fixed place of home is not in Australia. In other words, you have set up your
usual place of abode in Bahrain and you do not have any intention of taking up the residency
in Australia.
Superannuation Test:
The superannuation test is generally applicable in relation to the Commonwealth
Superannuation funds. According to this test, the member of the commonwealth
superannuation fund and the member of the family are treated to the Australian resident for
the purpose tax. Jack, we would like to inform you that as you do not have the membership to
commonwealth superannuation fund you will not be treated as Australian resident for tax
purpose.

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Therefore, in light of the above analysis conducted on the basis of the information
submitted by you it is understood that you are not the Australian resident under the meaning
of “section 6 (1), ITAA 1997”. You have also satisfied that your usual fixed place of home is
not in Australia and you do not have any intention of taking up the residency in Australia.
We anticipate that the advice that is provided to you are confidential and not for any
third party use. The advice enclosed in this letter has helped you in serving your purpose
regarding your residence. We look to hear from you soon and do feel free to reach us
anytime.
Thank You

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Part B:
Net Income of Partnership:
Distribution Statement:
Tax Distribution Statement
For the Year Ended 30 June 2018
Particulars
Amount
($)
Amount
($)
Net Income - (Section 90) 167024
Less: Partners Salaries
Salary of Jared 35000
Salary of Judy 60000 95000
Less: Interest on Capital
Interest of Jared 1000
Interest of Judy 1000 2000

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Residual After Subtracting 70024
Add: Interest on Drawings
Interest on Drawings - Jared 500
Interest on Drawings - Judy 750 1250
71274
Therefore:
Jared: 35000 + (50% x 71274) 35637
Judy: $60,000 + $1000 - $750 + (50% x
71274) 95887

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References
Barkoczy, S. 2014. Foundations of taxation law.
Krever, R. 2014. Australian taxation law cases.
Morgan, A., Mortimer, C. and Pinto, D. 2018. A Practical Introduction to Australian
Taxation Law.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. 2016. Australian taxation
law.