Taxation

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

1TAXATION
Part A
Letter of Advice
To
Mr. Johnson,
Issue
The issue that can be conceived through the given circumstance is whether Mr Johnson will
be rendered an Australian resident for taxation in the year of income 2018.
Rule
The provisions regarding the evaluation of residency of an individual in Australia for taxation
is contained in the ITAA 36. As provided u/s 6(1) of the ITAA 36, an individual will only be
rendered an Australian resident if he can satisfy the fourth test provided in this provision. The
determination of a person's residency in Australia is to be carried out in accordance with the
fourth test provided under ITAA 36.
The resides test is the first test as provided in Tax Ruling 98/17, in assessing and individual’s
residency. This test is mostly applicable for the person entering Australia from a foreign land
to reside in Australia. This test requires every person residing within Australia for a particular
year of income year in question to be resident for imposing taxation. This can be discussed
under the principles established in the case of FC of T v. Miller (1946) 73 CLR 93.
The domicile test is the second test in this context that assist in the assessment of residency of
a taxpayer in Australia. The individuals of Australian origin who has been residing in other
territories for employment purposes will be applied with this test for determination of the

2TAXATION
residency. The Tax Ruling IT 2650 covers this test. An individual needs to have a domicile in
Australia for being rendered resident here. Again for being eligible to be applied with this
test, the commissioner of taxation should be satisfied that the person in question does not
have any permanent place of abode situated outside of Australia. This can be explained with
the case of FC of T v. Applegate 79 ATC 4307.
The 183 day test is yet another test of evaluation of residency of an individual in Australia.
Any person who has been living in Australia for a period equalling or exceeding 183 days
will be conferred with the residency of Australia.
Another test that has been provided under the ITAA 36 for the purpose of determining
residency is the superannuation test. Under this test certain government employees of
Australia enclosed by the Superannuation Act 1976 will be treated as resident along with
their members of family.
Application
In the instant scenario Mr Johnson was living in Bahrain for employment purposes. He has
also been residing in Australia. He has been visiting Australia for a 12 months contract
relating to his employment. During this time he has sold all his belongings in Australia to
permanently shift in Bahrain. However he has been owning a family home that is a
permanent place of abode in Australia. Although this points towards the domicile test being
satisfied but it needs to be notice that Mr Johnson has no intention of staying in Australia and
he has further sold his belongings to live Australia permanently and start living in Bahrain.
Again his stay within Australia was for 2 months only. Therefore, he failed to satisfy the
resides test as his visit in Australia was for a short period.
Again Mr Johnson had a permanent place of a boat in Australia but it is very clear from his
activities that he has been buying a permanent place of abode in Bahrain and has been selling