Taxation Law

This document provides expert advice on taxation law and residency status. It explains the four relevant tests for determining residency and provides solutions for net income of partnership and distribution statement. The document also includes a video transcript for further understanding.

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Part A:........................................................................................................................................2
Private and Confidential: Letter of Advice............................................................................2
Part B:.........................................................................................................................................6
Net Income of Partnership:....................................................................................................6
Distribution Statement:..........................................................................................................7
Part C: Video Transcript:...........................................................................................................8
References:.................................................................................................................................9

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Part A:
Private and Confidential: Letter of Advice
To Jack Johnson
From: Roma Tax Consultancy
Date: 6th May 2019
Dear Jack
We have below summarized the opinion in respect of the matters relating to the
residency status. If you feel any facts or assumptions to be incorrect or not as per your
understanding, you can immediately contact us to understand the impact of the advice given.
The advice is based on the tax laws, cases and rulings as we understand their application in
determining your residency status. We have below outlined the responses in relation to each
of the specific events that effects your residency.
Statutory definition:
The word resident implies under “subsection 6 (1), ITAA 1936” that person apart
from the company that are living in Australia and involves the person that has their domicile
in Australia, unless the taxation commissioner is content that his permanent place of
residence is out of Australia (Woellner et al. 2016). It also includes person that has originally
been living in Australia for six months of the income year whether on continuous basis or
intermittently excluding when the commissioner is content that the taxpayer usual abode is
outside Australia and no intention of residing in Australia (Robin and Barkoczy 2019). In
response to your information that is shared we have applied the four relevant test in your
situation. This includes the following;
a. Ordinary concepts test or Resides Test

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b. The Domicile Test
c. The 183-Day Test
d. Superannuation Test
Ordinary concepts Test:
The dictionary meaning explains that to reside here in Australia permanently or for
considerable time. The court in “IRC v Lysaght (1928)” explained that if the person is
visiting Australian, then the frequency, regularity and the duration of visit should be
considered (Barkoczy, 2016). The courts have also considered the factors such as maintaining
the place of home in Australia for use of taxpayers is also relevant. Jack, in your case we
have found that from June 2017 you left Australia for work purpose in Bahrain. You have
sold all the belongings which you held in Australia. Even if you are having the residential
home in Australia and your family is residing there, these factors is not very much
significant. You were also not physically present in Australia for the considerable period of
time in the income year. Though you returned to Bahrain following the short stay in Australia
with the objective of settling with your wife but you cannot be considered as the Australian
resident under the ordinary concept test.
Domicile Test:
To advise you regarding your residency status we have referred to Domicile test as
well. Under the domicile test a person is only considered to be resident of Australia if the
person is having their domicile in Australia (Freudenberg et al. 2017). To determine the
domicile of an individual in accordance with the Domicile Act 1982 an individual’s domicile
of their origin during birth or the domicile of the country of choice is generally considered.
As per the “IT ruling 2650” the taxation commissioner takes into the account numerous
factors whether the person has the permanent place of residence outside Australia (Jones

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2018). This generally involves the intention as well as the actual length of stay in the
overseas country. It also includes the intention of living in the foreign country either on
permanent basis or the temporarily basis. According to the taxation commissioners views
factors such as durability and continuity of the presence in foreign country is necessary as
well. The federal commissioner in “Applegate v FCT (1979)” held that permanent does not
signifies forever and the taxpayer’s objectivity is measured every year (Lam 2018).
With respect to the above explanation it is noticed that you have evidently expressed
that your domicile of choice is out of Australia. The circumstances that has been gathered
states that your permanent place of abode is in Bahrain and you did not intend to return to
Australia for at least indefinitely. Your motive of joining your family following the
completion of your employment contract is not conclusive as well. Furthermore, your actions
of selling all your belongings indicate that you intend to remain absent from Australia for an
indefinite time. You only visited twice to Australia during the last twelve months and this add
up to the weight from the conclusion drawn above. Therefore, you cannot be considered
Australian resident under the domicile test.
183-Day Test:
A person under the 183-day test is observed as the Australian occupant when his or
her physical presence in Australia is for a minimum of six months or a total of 183 days
during the income year (Butler 2019). Certain exception such as the commissioner is satisfied
that the taxpayer has the usual place of residence outside the Australia. In light of the
conclusion that is drawn from the above explained two test, Jack we have noticed that you
were only present in Australia for two months during your visit in November 2017 and April
2018. You have also established your home outside of Australia in Bahrain. Therefore, you
are not an Australian resident under the 183-day test.

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Commonwealth Superannuation Test:
This is entirely an objectivity test. A person is only held to be Australian resident if
the taxpayer is having membership with the fund and the taxpayer is making contribution in
the superannuation fund (Morgan, Mortimer and Pinto 2018). As you do not have any
membership with the superannuation fund. Hence, this test is irrelevant in your situation.
In view of above mentioned analysis none of the residency test is applicable in your
situation. As a result, you will be treated as non-resident of Australian or foreign resident for
the year 2017/18.
Accordingly, once you have gone over the advice and satisfied to move further we
will prepare the response to the ATO based on the points highlighted above. If you wish to
discuss further the above matters, you are free to reach us any time you want.
Yours sincerely
Associate Taxation
Roma Tax Consultancy

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Part B:
Net Income of Partnership:

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Distribution Statement:

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Part C: Video Transcript:
To determine the Jack Residency Status, I have referred to the statutory definition of
resident that is given under “subsection 6 (1), ITAA 1936”. Based on the case facts obtained
I also applied the four relevant test of residential status to ascertain whether Jack was the
resident of Australia or not. I found under the Resides test that Jack not physically present in
Australia for the considerable period of time in the income year.
Later in the Domicile Test I used the famous case of “Applegate v FCT (1979)” to
determine whether Jack was the resident of Australia. By reading the circumstances that has
been gathered states that Jack’s permanent place of abode is in Bahrain and he did not intend
to return to Australia for at least indefinitely. While the 183-day test and superannuation test
were applied in the situation of Jack but the test were irrelevant because neither Jack was
present for six months of income nor he has any membership with superannuation scheme.
So I understood that Jack was non-resident under “subsection 6 (1), ITAA 1936”.
In determining the Net income of Partnership I referred to the “section 90” to
calculate the net income. Whereas to distribute the net income or loss partnership I referred to
“section 92 of ITAA 1936”.

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References:
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Butler, D., 2019. Who can provide taxation advice?. Taxation in Australia, 53(7), p.381.
Freudenberg, B., Chardon, T., Brimble, M. and Isle, M.B., 2017. Tax literacy of Australian
small businesses. J. Austl. Tax'n, 19, p.21.
Jones, D., 2018. Complexity of tax residency attracts review. Taxation in Australia, 53(6),
p.296.
Lam, D., 2018. What you need to know about managing Australian and foreign tax residency
status. Equity, 32(9), p.10.
Morgan, A., Mortimer, C. and Pinto, D., 2018. A practical introduction to Australian
taxation law 2018. Oxford University Press.
Robin and Barkoczy Woellner (Stephen & Murphy, Shirley Et Al.), 2019. Australian
Taxation Law Select 2019: Legislation And Commentary. Oxford University Press.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.

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