The resides test | Assignment - 1

Running head: TAXATION
TAXATION
Name of the Student
Name of the University
Author note

1
TAXATION
Table of Contents
PART A...........................................................................................................................................2
PART B...........................................................................................................................................5
Bibliography..................................................................................................................................14

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TAXATION
PART A
The objective of this part of the analysis is to determine the residential status of Rachel
for the period 1st July to 30th June 2019. The residential status will be determined on the basis of
four residency test as prescribed by Section 6(1) of ITAA 36 1 –
(i) The resides test
(ii) The domicile test
(iii) The 183 days test
(iv) The superannuation test
Residency – The resides test assists in determining whether individual resides in Australia as per
the ordinary meaning of the word. Taxation Ruling TR 98/17 Income Tax, summarizes the
situations in which the individuals are entering Australia will be considered as residing in
Australia like for employment, tourist, and migrants2. This ruling suggests few factors that will
help in determining the status of the individual like – (a) Individual’s behavior in Australia –
such as intention of stay, family and business ties, employment ties, social and living
arrangements, and maintenance and location of assets. (b) Physical Presence in Australia –
Usually as a practice six months are a considerable amount of time along with other behavior and
practices of individual. (c) Nationality – One can be a dual resident at the same time. This is the
common law test.
The other three tests that are statutory tests are discussed as below –
1 Www5.austlii.edu.au, "INCOME TAX ASSESSMENT ACT 1936 - SECT
6Interpretation", Www5.Austlii.Edu.Au (Webpage, 2020)
<http://www5.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s6.html>.
2 Ato.gov.au, "Legal Database", Ato.Gov.Au (Webpage, 2020)
<https://www.ato.gov.au/law/view/document?Docid=TXR/TR9817/NAT/ATO/00001>.

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TAXATION
Domicile test – It is the first statutory test it implies that a person will be resident of Australia if
their domicile is in Australia unless permanent place is outside. Domicile means permanent
house or something more than just a residence. It can be determined in two steps and both the
steps must be fulfilled –
(i) Determine if domicile is in Australia, if yes then determine then determine the next
step.
(ii) Determine the permanent place of abode and if it is in Australia, then only individual
will be considered as a resident.
183 days test - The second statutory test is 183 days rule, it implies that if an individual has
stayed here for more than half the year (Income Year) then they will be considered as resident
unless-
 Usual place of adobe is outside
 No intention to take up residence here.
The superannuation test is not applicable.
As per the above test rules, residency status of Rachel will be decided. She entered
Australia for employment purpose, hence it falls under the one of the criteria and fulfills one
factor in residency resides test. There was no intention or purpose to reside in Australia in the
taxable period, though her family stayed in Australia for a considerable amount of time and held
bank account that is held assets for a considerable amount of time. But Rachel was not there for a
considerable amount of time. She just visited there for one month and then they shifted back.
They had a permanent place of adobe in Australia for six months and then sold it. It can be
concluded that Rachel does not pass the 183 days test, but passes the domicile test since they had