Taxation Law: Deductions and Residency Status

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
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1TAXATION LAW
Table of Contents
Part A:........................................................................................................................................2
Letter of Advice.........................................................................................................................2
Part B: Deductions:....................................................................................................................6
Introduction:...............................................................................................................................6
Concerns regarding present arrangements:................................................................................7
Burden of Complaisance:...........................................................................................................7
Level of Deductions:..................................................................................................................8
Technological improvements and wider reformations:..............................................................9
International comparisons: New Zealand.................................................................................11
Tax system in New Zealand:................................................................................................12
Conclusion:..............................................................................................................................13
References:...............................................................................................................................14

2TAXATION LAW
Part A:
Letter of Advice
To Jenny and John
From ABC Tax Consultants
Date: 30-3-2019
Dear Jenny and John
We would like to draw your kind attention toward our letter of advice to address the
residency status and also provide you valuable advice regarding the taxability of receipts
made during the year. We would like to inform you that the resident of Australia is held for
taxation purpose for income derived from all the sources. There are four test that determines
the residency status of an individual. Only one out of the four test is required to be met for a
person to be treated as Australian resident under “section 6 (1), ITAA 1936”.
Whether a person is residing in Australia is regarded as the primary test for residency.
A person is held as the Australian dweller for the taxation purpose if they are actually
residing in Australia, irrespective of their nationality, citizenship or the location of their fixed
home. The court in “FCT v Miller (1946)” stated that determining the residency is a question
of fact and degree. Factors such as time spent and purpose of visit is important.
While the Domicile Test states that a person will be held as Australian occupant if
their residence is in Australia, only when the commissioner is satisfied that a taxpayer’s
domicile is out of Australia. The Federal Court in “Applegate v FCT (1979)” saw that despite
the taxpayer has retained the residence of Australia, he has proven that the permanent place
of resident is somewhere else. Conclusively, permanent does not mean forever and it is
evaluated every year.

3TAXATION LAW
As per the 183 day’s test an individual that is physically present in Australia for more than
six months will be treated as Australian resident. Finally, the superannuation test is applicable
to the eligible employee of commonwealth public servants.
As evident in your situation you and your wife Jenny arrived in Australia with a pre-
arranged eighteen-month employment contract. With respect to ordinary concepts you and
Jane have not been residing in Australia. Additionally, under the Domicile Test your
permanent place of abode is out of Australia. However, under the 183 day’s you will be
considered as the Australian resident because you have been physically presently in Australia
from 1st December 2018. The purpose of visit to Australia and the time that you and your
wife Jenny has spent in Australia can be considered to be consistent with that of residing in
Australia.
A receipt from the employment and rendering personal services would be subjected to
taxation for the employee. A connection with the receipt derived as a result of taxpayer’s
personal service would be subject to ordinary income under “section 6-5, ITAA 1997”. For
Jenny, the salary of $130,000 from your employment with Total Financial Service Pty Ltd
would be subjected to income tax as ordinary income.
Later John earns a salary of $38,000 in Australia for taking up the accounting contract
work in Australia. A nexus has been established for John here for the personal services
salaries and wages received. The amount will be included in your assessment which would
attract tax liability within the ordinary concepts of “section 6-5, ITAA 1997”.
During the year income year of 2018 Jenny and John held a number of investment in
the US stock markets. You both derived dividends that amounted to $5,000 AUD in October
2018 and $6,000 in March 2019. We would like to inform your dividends and gains arising
from the shares are treated as statutory income under the legislative provision of “section 6