Taxation Law: Implications for Australian Expatriates

Running head: TAXATION LAW
Taxation Law
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TAXATION LAW1
Introduction:
The taxation system of Australia is referred as the residence or territorial based
system. The Australian residents for taxation purpose are usually levied taxes on their
worldwide income made from all the sources while the non-residents are usually levied taxes
by Australia on the income that is sourced from Australia (Morgan et al., 2018). The question
of residency for expatriates has always come down to some specific facts for each of the
circumstances. The problem is that there is no definitive list regarding the facts and
circumstances to be considered not there is any hard or fast rules that are determinative. To
reflect the uncertainty, it is regularly noticed that the taxpayer and commissioner would point
to the identical fact that are evidence of residency and non-residency is dependent on who is
doing the pointing.
With complex taxation laws in Australia, expatriates and business migrants should be
aware regarding the particular concessions and drawbacks for those whose work arrangement
and financial interest results in leaving Australian shores. The decision given in the Harding’s
case yet provides another example of difficulty in implementing the present law on the
Australian expatriates. The decision highlights the needs of modernizing the rules with the
help of legislative changes to offer certainty when it comes to ascertaining the tax residency
for Australian expatriates.
Implications for Australians living as expats in other countries
There is a wide-spread myth that person that departs from Australia for a very short-
time period such as two years will fundamentally suffice for a person to be the non-resident
for the taxation purpose. The myth can be supported due to the “paragraph 25 of IT 2650”
that clarifies that the absence of 2 years would usually be viewed by ATO as considerable
time for the purpose taxpayer’s visit in alternative state (Morgan & Castelyn, 2018). Ever

TAXATION LAW2
since the introduction of the ruling in 1991, the functional restriction of “sec 23AG”
exclusion for overseas employment income in 2009 had led to several individuals making a
claim that they are not the resident of Australia in numerous cases. However, only few
taxpayer have managed to be successful.
The tax implication for Australian expatriates that are living in overseas may have
three likely tax consequences. Firstly, a person may be treated as the tax resident of Australia
and taxes may be imposed on all the worldwide earnings nevertheless, credits will be
available for the foreign taxes paid (Accru, 2019). Secondly, an individual continue to remain
the Australian tax resident under the present Australian laws but may simultaneously become
the resident of foreign state for tax purpose. If there are any kind of Double Taxation Treaty
with that nation, the ability of Australia to impose tax on the income and gains would be
limited. Thirdly, a person might be held as not a resident under the laws of Australia and
taxes may be imposed only on the certain kinds of income and gains from the Australian
sources.
Most notably, it is necessary not to simply ignore the matters that effects the taxation
and requires immediate attention before a person leaves Australia for an overseas expatriate
assignment (Jones, 2018). The discussion that follows states that, it is presumed that when a
person leaves Australia then they are not considered as Australian resident. The non-residents
must be aware that beside the Australian tax liability in regard to the income and gains that
are sourced in Australia, there could be some trailing tax liability in regard to the employee
share plan benefit or deferred bonus plans that are partially in regard to the Australian
employment.
For persons that are leave Australian to move overseas for expatriate assignments,
arrangement regarding the lodging of tax returns during the year must be made (Brydges,