Tax Residency and Lump Sum Payment of $400,000

A resident individual is provided with a salary of $100,000 and an additional lump sum amount of $400,000. Under section 6-5 of the ITAA97, ordinary income is taxable, and the evaluation of cases such as Woite, Jarrold v Boustead, and Brent v FCT can help identify whether the lump sum income is assessable. The individual's residency status will also impact their tax liability, with two tests - domicile test and 183-day test - helping to determine if they are a resident for taxation purposes.

Running head: TAXATION LAW
Taxation Law
Name of the Student:
Name of the University:
Author’s Note:

TAXATION LAW 2
Table of Contents
Introduction:....................................................................................................................................3
Question 1: Detecting whether Jenny is resident of Australia or not..............................................3
Question 2: Mentioning about the lump sum amount of $400,000 and the salary of $100,000....10
Conclusion:....................................................................................................................................11
References:....................................................................................................................................12

TAXATION LAW 3
Introduction:
The report mainly focuses in identifying the residential condition of Jenny in both 2015-
2016 and 2016-2017 fiscal years. Therefore, the overall staying condition and decisions that is
made by Jenny in Australia during the period of the state is evaluated, which could help in
determining whether she is a resident of Australia or not. This determination of the overall
residential condition is mainly essential, as Australian taxation authority takes relevant tax from
residents residing in Australia. Furthermore, lump sum amount is also evaluated, which could
help in determining whether the income is assessable income or not.
Question 1: Detecting whether Jenny is resident of Australia or not
The situation mainly arises when relevant residential condition of Jenny needs to be
evaluated, which is essential for identifying her current residential condition. Furthermore, Jenny
was staying hotels for 3 months, after which she rented house near the office for joining it
Australian division. Moreover, under section 995-1 of ITAA 1997, Australian residence that
resides in the country are liable to pay the relevant Income Tax on the income generated in the
current fiscal year1. According to the Australian taxation authority, residential condition of an
individual could be identified in three distinct ways. This determination of the residential
condition is essential for imposing the relevant Income Tax, which needs to be imposed on
individuals working and residing in Australia. There are different types of residential test
1 Ato.gov.au. (2017). Work out your tax residency. [online] Available at:
https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-
residency/ [Accessed 12 Sep. 2017].

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mentioned Under Residency test section 6(1) of ITAA 1936, which could help in identifying
residential status of Jenny in Australia2.
Relevant facts of Jenny could be analysed, which could help in identifying her residential
condition.
 Jenny's singer and has no dependent
 Jenny is originally working in Hong Kong
 Jenny has temporarily travelled in Australia for 3 months staying in different hotels
 Jenny has entered in Australia on 25th April 2016
 For the work related purpose Jenny has been travelling to different cities in Australia
 Currently Jenny has accepted for working in Australia for 9 months
 Jenny has rented a flat near the office for the purpose are staying in Australia for 9 months
 Jenny has been transferring all the personal belongings to Australia
 Jenny has a limited travel plan, where She goes out every week from Sydney due to work
related measure
Residential Test for fiscal year 2015-2016
Ordinary residence test:
Ordinary residence test is mainly considered to be one of the first primary tests that need
to be conducted for determining residential condition of an individual. With the help of ordinary
residence test, it is determined whether an individual is liable to pay all the relevant Income Tax
2 Mytaxresidency.com. (2015). Australian Tax Residency: a rare win for the taxpayer` |
MyTaxResidency.com. [online] Available at: http://mytaxresidency.com/Recent-ruling-provides-
Australian-expats-with-hope-for-non-residency-claims [Accessed 12 Sep. 2017].

TAXATION LAW 5
to the Australian government. Evaluation of the situation mainly states that journey in the first
half of 2016 was mainly travelling in hotels for 3 months period. This does not consider that
Jenny is an ordinary residence of Australia, which states that different residential test could be
used to identify the residential condition of Jenny3.
183-day rule:
The other residential identification method is the 183-day rule, which is mainly used in
identifying the relevant residential condition of an individual living in Australia for conducting
business in Australia. The main criteria of the test is to determine whether an individual have
decided in Australia for more than 183 days. This rule is mainly essential as it allows the
Australian government to tax individual who stay in the country throughout the year for business
purposes. Currently, Jenny is staying only for 3 months that is 90 days, which does not comply
with the 183-day rule test, which is used in identifying residential condition of an individual.
Therefore, under the 183-day rule overall residential condition of Jenny is not confirmed as an
Australian citizen for the year 2015-20164.
Domicile Test:
3 Robertson, S., 2017. Infrastructures of insecurity: Housing and language testing in Asia-
Australia migration. Geoforum, 82, pp.13-20.
4 Doherty, P.D., Baxter, J.M., Godley, B.J., Graham, R.T., Hall, G., Hall, J., Hawkes, L.A.,
Henderson, S.M., Johnson, L., Speedie, C. and Witt, M.J., 2017. Testing the boundaries:
Seasonal residency and inter-annual site fidelity of basking sharks in a proposed Marine
Protected Area. Biological Conservation, 209, pp.68-75.

TAXATION LAW 6
Under the Domicile Test individuals, residential condition is evaluated, and their
intention for residing in the country is estimated. Therefore, under the domicile test if an
individual is considered positive then he/she needs to be relevant taxes to the Australian
government. The evaluation of Jenny’s case mainly indicates that she does not have any kind of
residence place for the first 3 months. This mainly indicates that the domicile test is negative for
Jenny's case and she is considered a non-resident of Australia5.
Superannuation Test:
Superannuation test is mainly considered one of the last tests that need to be conducted
by the Australian government to consider whether the individual comes under the Australian
taxation bracket. The super animation test is mainly used for individuals that have been
employed by the government and working outside the country. Therefore, this test mainly helps
in identifying the relevant residence that needs to pay the income tax to the Australian
government. However, Jenny is not considered to be under any kind of Government
Employment, which exempts her from the superannuation test6.
From the evaluation of the entire relevant residential test that is used in Australia, Jenny
is not considered to be a resident of Australia under any circumstances for the year 2015-2016.
5 Ferguson, S., Giuseppi, C. and Australia, T.A., 2017. Submission to the Department of
Immigration & Border Protection.
6 McNamara, T., Khan, K. and Frost, K., 2015. Language tests for residency and citizenship and
the conferring of individuality. Challenges for language education and policy: Making space for
people, pp.11-22.

TAXATION LAW 7
Therefore, it could be understood that no relevant Income Tax needs to be paid by Jenny to the
Australian government, as she is not considered a resident of the country7.
Residential Test for fiscal year 2016-2017
Ordinary residence test:
The relevant evaluation is mainly conducted for the fiscal year 2016-2017, where the
residential condition of Jenny is mainly identified. The ordinary residence test mainly indicates
that Jenny is not considered a permanent residence of Australia, which directly nullifies the
ordinary residence test. Hence, other measures of calculating the residential status of Jenny needs
to be evaluated, which would help in determining whether adequate Income Tax needs to be paid
by Jenny or not. Under the Australian taxation office TR 98/17 the different factors that need to
be evaluated for identifying the residential condition. Moreover, different cases such as IRC v
Lysaght [1928] AC 234 and Levene v IRC [1928] AC 217 could be used in evaluating the
residential condition of an individual8. The cases could be used in evaluating the residential
condition of Jenny and whether she should relevant Income Tax according to the ordinary
residence test.
183-day rule:
7 Zanardo, N., Parra, G.J. and Möller, L.M., 2016. Site fidelity, residency, and abundance of
bottlenose dolphins (Tursiops sp.) in Adelaide's coastal waters, South Australia. Marine Mammal
Science, 32(4), pp.1381-1401.
8 Rumsey, M., Thiessen, J., Buchan, J. and Daly, J., 2016. The consequences of English language
testing for international health professionals and students: An Australian case
study. International journal of nursing studies, 54, pp.95-103.

TAXATION LAW 8
The evaluation of jenny’s case under the 183-day rule could help in identifying her actual
residential position. Therefore, the evaluation would mainly help in identifying whether Jenny is
liable to pay the income tax to the Australian government for the fiscal year 2016-2017. Jenny
from July 2016 as rented residential plot for staying in Australia for 9 months, which is required
by the company where she works9. This directly indicates that Jenny is going to live more than
183 days in Australia with certain gaps that will be conducted by short trips. In addition, relevant
cases such as Dempsey and Commissioner of Taxation (2014) AATA 335 and the Engineering
Manager and Commissioner of Taxation (2014) AATA 969 mainly states the actions that need to
be taken by individuals that comply with in 183 days. Therefore, it could be understood that
under the 183-day rule Jenny is considered resident of Australia, where she needs to be relevant
income tax to the Australian government. There are certain exemptions 183 day test results,
exemption is if Jenny states that she does not want to stay in Australia then new 183 day test is
nullified. In addition, there is no confirmation from Jenny that she wants to reside in Australia
not, where it is assume that Jenny is considered a resident of Australia and needs to be all the
relevant income tax imposed by the Australian government10.
9 McKinley, D.W., Hess, B.J., Boulet, J.R. and Lipner, R.S., 2014. Changes in certification
requirements and examinee characteristics are likely to influence the validity of the evidence
associated with interpretations made based on test data. We examined whether changes in
Educational Commission for Foreign Medical Graduates (ECFMG) certification requirements
over time were associated with changes in internal medicine (IM) residency program director
ratings and... Advances in Health Sciences Education, 19(1), pp.129-142.
10 Tizi, S. and Nixon, R.L., 2016. Patch testing in Australia: Is it adequate?. Australasian Journal
of Dermatology, 57(3), pp.192-198.

TAXATION LAW 9
Domicile Test:
Under the Domicile test, it is considered that Jenny has rented one of the apartments near
the office, which directly States no intentions of staying in Australia for longer duration. The
Domicile test mainly evaluates whether an individual is willing to stay in Australia for more
period and intense to become resident of that country11. Therefore, under the domicile text Jenny
has complying with the requirements, as she is rented one of the apartments for living in
Australia for a short duration.
Superannuation Test:
Jenny is not considered under the superannuation test, and she does not work for
Australian government and is residing outside the Australian premises12.
Thus, from the evaluation it could be identified that Jenny for the first three month is not
considered a resident of Australia, as she does not fulfil any kind of residential test. However,
under the Domicile test and 183 day test, for the next 9 months Jenny is considered a resident of
Australia. This mainly indicates that relevant income tax needs to be paid on the incomes that are
generated on the stipulated period13.
11 Knoch, U., 2017. Research in language assessment. Language Teaching, 50(1), pp.138-142.
12 McMillan, K., 2017. ‘Affective integration’and access to the rights of permanent residency:
New Zealanders resident in Australia post-2001. Ethnicities, 17(1), pp.103-127.
13 Chomik, R. and Piggott, J., 2014. Means testing pensions: The case of Australia. Michigan
Retirement Research Centre Policy Brief, Michigan Retirement Research Centre, University of
Michigan.

TAXATION LAW 10
Question 2: Mentioning about the lump sum amount of $400,000 and the salary of $100,000
Under s 6-5 of ITAA97, relevant income is mainly identified as ordinary income, which
is taxable under the income tax method. Moreover, certain cases are there which could be used in
identifying the accessible income of an individual. Under FCTv Woite (1982) 13 ATR 579,
individuals over on income identified. In the current scenario the individual is provided with
100,000 salaries which directly come under the assessable income, where relevant Income Tax
needs to be paid to the Australian government14. The individual for changing the job position
receives certain other incomes. The income of 400,000 is the main issue it needs to be evaluated
and identified whether it comes under assessable income or not.
The evaluation of cases such as Woite and Jarrold v Boustead (1963) 41 TC 701, and
Brent v FCT (1971) 125 CLR 418 could mainly be helpful in identifying whether the lump sum
income is a part of assessable income or not15. There is no exclusive right that is provided to the
person handing over 400,000, which directly states that the amount comes under ordinary
income. Before it could be understood that the overall payment of 400,000 directly comes under
assessable Income, where relevant Income Tax needs to be paid by the individual. The
evaluation of case Smith v FCT (1987) 19 ATR 274 mainly states that relevant test could be
14 Graham, M., McKenzie, H., Lamaro, G. and Klein, R., 2016. Women’s reproductive choices in
Australia: Mapping federal and state/territory policy instruments governing choice. Gender
issues, 33(4), pp.335-349.
15 Chomik, R., Piggott, J., Woodland, A.D., Kudrna, G. and Kumru, C.S., 2015. Means testing
social security: Modeling and policy analysis.

TAXATION LAW 11
conducted to identify whether an income taxable income or not. Therefore, both the annual
salary and lump sum amount is considered under section 6-5 of the assessable income16.
Conclusion:
From the valuation of the overall assignment, relevant residential test can be identified
which can help individuals to detect whether they are liable to pay income tax in Australia.
However, Jenny is mainly considered a resident of Australia by using two test such as domicile
test and 183-day test. This is mainly helps in identifying a residential condition of Jenny for the
next 9 months starting from July. Therefore, the lump sum amount that is identified assignment
also needs to be considered under assessable Income, as individual is not providing any kind of
valuable goods of the money. Hence, the overall lump sum amount will be considered under
Income Tax, where relevant taxes need to be paid for that income.
16 Creagh, S., 2014. National standardised testing and the diluting of English as a second
language (ESL) in Australia. English Teaching, 13(1), p.24.

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References:
Ato.gov.au. (2017). Work out your tax residency. [online] Available at:
https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-
residency/ [Accessed 12 Sep. 2017].
Chomik, R. and Piggott, J., 2014. Means testing pensions: The case of Australia. Michigan
Retirement Research Centre Policy Brief, Michigan Retirement Research Centre, University of
Michigan.
Chomik, R., Piggott, J., Woodland, A.D., Kudrna, G. and Kumru, C.S., 2015. Means testing
social security: Modeling and policy analysis.
Creagh, S., 2014. National standardised testing and the diluting of English as a second language
(ESL) in Australia. English Teaching, 13(1), p.24.
Doherty, P.D., Baxter, J.M., Godley, B.J., Graham, R.T., Hall, G., Hall, J., Hawkes, L.A.,
Henderson, S.M., Johnson, L., Speedie, C. and Witt, M.J., 2017. Testing the boundaries:
Seasonal residency and inter-annual site fidelity of basking sharks in a proposed Marine
Protected Area. Biological Conservation, 209, pp.68-75.
Ferguson, S., Giuseppi, C. and Australia, T.A., 2017. Submission to the Department of
Immigration & Border Protection.
Graham, M., McKenzie, H., Lamaro, G. and Klein, R., 2016. Women’s reproductive choices in
Australia: Mapping federal and state/territory policy instruments governing choice. Gender
issues, 33(4), pp.335-349.

TAXATION LAW 13
Knoch, U., 2017. Research in language assessment. Language Teaching, 50(1), pp.138-142.
McKinley, D.W., Hess, B.J., Boulet, J.R. and Lipner, R.S., 2014. Changes in certification
requirements and examinee characteristics are likely to influence the validity of the evidence
associated with interpretations made based on test data. We examined whether changes in
Educational Commission for Foreign Medical Graduates (ECFMG) certification requirements
over time were associated with changes in internal medicine (IM) residency program director
ratings and... Advances in Health Sciences Education, 19(1), pp.129-142.
McMillan, K., 2017. ‘Affective integration’and access to the rights of permanent residency: New
Zealanders resident in Australia post-2001. Ethnicities, 17(1), pp.103-127.
McNamara, T., Khan, K. and Frost, K., 2015. Language tests for residency and citizenship and
the conferring of individuality. Challenges for language education and policy: Making space for
people, pp.11-22.
Mytaxresidency.com. (2015). Australian Tax Residency: a rare win for the taxpayer` |
MyTaxResidency.com. [online] Available at: http://mytaxresidency.com/Recent-ruling-provides-
Australian-expats-with-hope-for-non-residency-claims [Accessed 12 Sep. 2017].
Robertson, S., 2017. Infrastructures of insecurity: Housing and language testing in Asia-
Australia migration. Geoforum, 82, pp.13-20.
Rumsey, M., Thiessen, J., Buchan, J. and Daly, J., 2016. The consequences of English language
testing for international health professionals and students: An Australian case
study. International journal of nursing studies, 54, pp.95-103.

TAXATION LAW 14
Tizi, S. and Nixon, R.L., 2016. Patch testing in Australia: Is it adequate?. Australasian Journal
of Dermatology, 57(3), pp.192-198.
Zanardo, N., Parra, G.J. and Möller, L.M., 2016. Site fidelity, residency, and abundance of
bottlenose dolphins (Tursiops sp.) in Adelaide's coastal waters, South Australia. Marine Mammal
Science, 32(4), pp.1381-1401.