Taxation: Case Studies and Rules for Income Tax Assessment

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Author Note

TAXATION1
Case Study One
Part A
Issue
Whether Rachel would be considered a resident of Australia for tax purposes for the
income year ended 30 June 2019. Whether any of her income would be included in tax
assessment under the Australian tax regime.
Rule
Any person who has been rendered as the resident of Australia as per the requirement
provided in ITAA 36, would be permissible to be treated as a for tax purposes as can be
conceived from the ITAA 97, s 995-1. The determination of the residency of a person needs to
be assessed under the tests provided in ITAA 36, s 6(1).
In case a person has an origin located in a foreign country and has arrived within the
precincts of Australia for the purpose of employment, the residency of that person is required to
be assessed as per the application of the 183-day test as provided in the above mentioned
provision. Any person who has arrived in Australia from a foreign country in pursuance of
employment would be required to be treated as a resident for tax purposes if he has been residing
within the precincts of Australia for more than 183 days or half of the year in question. While
applying this test, the intention of a person will not be given any regard. However, the person
should not be in possession of any permanent place of abode outside the boundaries of Australia.
This can be illustrated with the case of Case S19 85 ATC 225.
However, if it can be contended that if the individual has been found to have a permanent
place of abode being located outside Australia, he would not be treated as a resident even if he

TAXATION2
has been residing in Australia for more than half year. All the income of a person that has been
arising from the source located within Australia needs to be taxed under the Australian taxation
law.
Application
In the present case, Rachel is a medical practitioner and has always lived and worked in
her hometown of London. Rachel is a citizen of the United Kingdom. Rachel was offered a full-
time position as a doctor for a hospital in Perth, Australia for a period of 12 months. Rachel
signed the contract of employment before she left London. This makes it evident that Rachel has
been a person having an origin located in a foreign country and has arrived within the precincts
of Australia for the purpose of employment, the residency of that person is required to be
assessed as per the application of the 183-day test as provided in the above mentioned provision.
Any person who has arrived in Australia from a foreign country in pursuance of employment
would be required to be treated as a resident for tax purposes if he has been residing within the
precincts of Australia for more than 183 days or half of the year in question.
Rachel is married and with two young children. Rachel’s spouse and children will join
her in Perth. Rachel’s spouse will not be working while in Perth. Rachel moved out of the
family’s apartment in London and placed all their belongings in storage. Although she has been
owning a permanent place of abode outside Australia, but she has given up that apartment and
settled in Australia. As she has been living in Australia for more than six months she is required
to be treated as a resident in Australia as per the satisfaction of the 183 day test. As Rachel has
been a resident in Australia all his income is to be construed to be assessed under the Australian
tax regime.

TAXATION3
Conclusion
Rachel would be considered a resident of Australia for tax purposes for the income year
ended 30 June 2019. All of her income would be included in tax assessment under the Australian
tax regime.
Part B
Issue
Whether John is an Australian resident for tax purposes during the financial years
2017/18 and 2018/19.
Rule
Any person who has been rendered as the resident of Australia as per the requirement
provided in ITAA 36, would be permissible to be treated as a for tax purposes as can be
conceived from the ITAA 97, s 995-1. The determination of the residency of a person needs to
be assessed under the tests provided in ITAA 36, s 6(1). These tests are residency test, 183 day
test, domicile test and superannuation test. These have been applied in the case of Harding v
Commissioner of Taxation [2019] FCAFC 29.
As per the residency test an individual needs to actually reside in Australia. His intention
to come back to Australia is also to be taken into consideration even when he has not been
present in Australia. Domicile test requires his resident to be located in Australia. 183 day test
requires him to stay in Australia for more than 183 day test. Superannuation is applicable for
employees of the common wealth.