BLO5509: Australia Income Tax Law - Residency Advice for Mr. Nguyen

This report analyzes the tax residency of Mr. Nguyen in Australia for the years 2017 and 2018, addressing a dispute with the ATO. It examines whether Mr. Nguyen qualifies as an Australian resident based on the Income Tax Assessment Act 1936 (ITAA36) and relevant tests, including the resides test, domicile test, 183-day test, and superannuation test, referencing key case law such as FC of T v Applegate and FC of T v Jenkins. The report considers Mr. Nguyen's employment in Saudi Arabia after his divorce, his family ties, asset locations, and living arrangements. The analysis explores the application of these tests to Mr. Nguyen's circumstances, evaluating his intentions and connections to Australia. Furthermore, the report evaluates the options of self-amendment versus audit to resolve the ATO's concerns. The report concludes that, based on the evidence, Mr. Nguyen likely remained an Australian resident for tax purposes during the period in question.

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

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LETTER OF ADVICE
Private and Confidential
Xyz and Co.
14 Smith St
Smithville VIC 3207
Mr. Nguyen
20 Smith St
Smithville VIC 3207
In the furtherance of the recent meeting, conversations over the phone and communications in
other forms, we would like you to find the letter attached with respect to the concerns arising in relation
to your residency for tax purposes.
Summary of Advice
This letter would strive to provide you with the advice regarding your residency in Australia for
taxation purposes that has been recently disputed by the ATO and would assist you to make a choice
regarding the most viable option that you should opt for in the given situation. This advice would strive to
identify the legal issue that has been arising from the present situation. It would mention the relevant legal
principles relating to the connected with the identified issues. The advice would contain a section
applying the legal principles with the facts of the situation. It would also provide for a conclusion that
would be arrived upon under the light of the given discussion. The concerns that would be addressed in
the instant letter is the residency of Nguyen in Australia in the year 2017 and in the year 2019. It would
also analyze the aptness of both the options relating to self-amendment and audit for the purpose of
resolving the issue relating to Nguyen.

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Issue
Whether Mr. Nguyen is a resident of Australia for the purpose of taxation in the year 2017 and
2018. Whether he should accept the ATO offer of self-amendment or should enter into audit for the
purpose of defending his case.
Rule
There has been a definition provided under the ITAA97, s 995-11 any person who can be brought
under the purview of the ITAA362 as a resident would be rendered as a resident in Australia. The
definition of resident in Australia as provided in ITAA36, s 6-13, mentions for four assessments that are to
be satisfied for the purpose of considering a person an Australian resident for the purpose of taxation. The
included assessments are the resides test, the domicile test, the 183-day test and the superannuation test.
The individuals needs to actually reside in Australia for the purpose being assessed as a resident
in Australia for the tax purposes. The expression resides has no clear definition in the legislation and is
required to be taken with respect to its normal concepts. This implies the person to be living in Australia.
As per Tax Ruling 98/174, there are certain factors that a person is required to satisfy to be assessed as a
resident in Australia for the purpose of taxation. The first factor is the extent of time for which the
individual has been present. The second factor is the family and employment bonds of the individual. The
third factor is the location of the assets belonging to the taxpayer and the maintenance of the same. And
the fourth factor is the living arrangement and the social surroundings of the tax payer. As per the extent
of residency is concerned, it has been contended in that FC of T v Applegate 79 ATC 43075, the duration
of the stay of a person should not necessarily be forever but it needs to be considerably long. In this
proceeding, any period beyond three years of stay overseas is enough to render a person non-resident in
Australia given he has an intention to not return to Australia.
1 The Income Tax Assessment Act 1997, s 995.1
2 The Income Tax Assessment Act 1936
3 The Income Tax Assessment Act 1936, s 6.1
4 Tax Ruling 98/17
5 FC of T v Applegate 79 ATC 4307

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The residency of a person also depends upon the domicile of that person in Australia. This
requires a person to have an origin or a dwelling house within the precincts of Australia. As per the
definition provided in the case of R v Hammond (1852) 117 ER 14776, a domicile depicts a place where
an individual dwells. For this purpose, it needs to be established to the commissioner of taxation that the
individual is expected to not have any permanent place of abode located outside the boundaries of
Australia. Again, it has been contended in the case of FC of T v Jenkins 82 ATC 40987, that a person does
not have to completely reside in Australia for the purpose of being rendered as a resident in Australia. His
permanent place of abode or an attachment located within Australia with a clear intention of his
maintaining association with Australia is enough to render the person to be a resident in Australia.
Moreover, there are certain factors in addition to the ones mentioned the resides test that are
being inserted with the Taxation Ruling IT 26508. This include the establishment of a dwelling place in
Australia and the intention of the person to return to Australia within the foreseeable future. In the case of
Case T28 86 ATC 276; 29 CTBR (NS) Case 319 as mentioned in para 36 of the Taxation Ruling IT 2650,10
it has been held by the court that even rented accommodation would be treated as a permanent place of
abode after giving due consideration to the intention that the individual holds in mind.
There are other two tests for the determination of residency of a person as provided in the ITAA
3611. The first of them namely, the 183day test requires a person to be existing within the precincts of
Australia for the purpose being rendered as the for a period of atleast six months for the purpose of being
rendered as the resident in Australia. However, the application of this test is to be applied upon the person
who are entering Australia for a stay or visit for certain purposes. However, the resides and the domicile
test requires a person to have origin in Australia and leaving the same for the purpose of employment or
other reason to visit overseas. Another test relating to the residency of an individual in Australia as
6 FC of T v Applegate 79 ATC 4307
7 FC of T v Jenkins 82 ATC 4098
8 Taxation Ruling IT 2650
9 Case T28 86 ATC 276; 29 CTBR (NS) Case 31
10 Taxation Ruling IT 2650, para 36
11 The Income Tax Assessment Act 1936

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provided in the Act is superannuation test. Under this test, any individual who has been covered by the
Superannuation Act 197612 or a person being a spouse or child of that person.
Any person who has been declared to be a resident in Australia is required to include all the
incomes he earns irrespective of the source to be subjected to taxation under the Australian tax regime.
However, the foreign residents are only liable for including the income arising from the Australian
sources and not from other sources. This can be illustrated with the case of FCT v Efstathakis [1979] 9
ATR 86713.
Application
The facts of the situation, presents that Nguyen has his origin in Australia and has taken up
employment in a company located in Saudi Arab after the breakdown of his marriage after 15years to
escape the devastation that has been following the divorce. In this furtherance, his spouse retained the
rental property and Nguyen has been left with his primary residence. As he was the person who has been
leaving Australia with the view of pursuing an employment, needs to be applied with the resides test and
the domicile test for the purpose determining his residential status in Australia.
For the purpose of applying the taste test it needs to be ensured that Nguyen has been residing in
Australia. This needs to be analysed under the factors provided under the Tax Ruling 98/1714. As to the
factor relating to the extent of time for which the individual has been present within Australia, Nguyen
has left Australia for the purpose of employment in Saudi Arabia on 1st July 2016 and has been still
residing there on July 2019. This adds towards his non-residency but the intention for which he has went
to Saudi Arabia for pursuant to employment was to avoid the devastation of his broken marriage. As to
the bonding he had with his family and employment, it can be stated that he visited Australia every your
in the month of January for the purpose of visiting his son. Although he never talked to his siblings or
developed any relationship or any family ties but visiting his son points towards his being attached to a
12 The Superannuation Act 1976
13 FCT v Efstathakis [1979] 9 ATR 867
14 Tax Ruling 98/17

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family member who stays with Australia. Again, as to the maintenance of assets and location of the same
concerns, Nguyen has been maintaining his bank account in Australia and received his salary in it. The
registered car he owned has always been parked within the garage at his house located in Australia.
Moreover, the house he has in Australia was never been went out. As to the living arrangements, Nguyen
has been provided with furnished self-contained unit by his employer at Saudi Arabia and no cost has
been charged to him for the same. This cannot be treated as an establishment of permanent residence.
This is because Nguyen never established the self-contained unit with the intention of treating it as a
permanent residence. It was provided to him by the employer for the purpose of his stay in Australia in
relation to the employment. As to his stay in Australia is concerned, he has been living in Australia for a
period of 3 years.
However, applying the principles established in the case of FC of T v Applegate 79 ATC 430715 it
can be said that due consideration need to be given to his intention to permanently stay overseas for the
purpose of treating him as a non residents. Moreover as per the decision in the case of FC of T v Jenkins
82 ATC 409816, he does not have to completely reside in Australia for being rendered as a resident in
Australia. His permanent place of abode all his association with any place in Australia odd even his
intention of maintaining bonds with person's present in Australia would point towards his being regarded
as a resident in Australia.
Moreover, the domicile test is also required to be applied upon the situation for the purpose of
determining the residency of Nguyen in Australia. This requires the domicile of a person to be in
Australia for the purpose of declaring him to be an Australian resident. Nguyen has kept his residence in
Australia and never rented out or sold it. This depicts towards his intention to retain the property as his
primary residence. Moreover, during his visits in Australia, he used to stay in that house only. This
depicts his domicile to be present within the precincts of Australia as can be supported with the case of R
15 FC of T v Applegate 79 ATC 4307
16 FC of T v Jenkins 82 ATC 4098

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v Hammond (1852) 117 ER 147717. Moreover, the place where he has been living in Saudi Arabia cannot
be treated as its permanent domicile as he has not created the same with that intention and the same has
been provided to him by his employer for the purpose of his stay person to his employment.
Moreover, as to his intention to return to Australia in the near future, it can be stated that he has
his son living in Australia whom he used to visit every year points towards his intention of returning back
to Australia as he never took his son to Saudi Arabia. In addition, he did not change his address in the
driving licence and retained his gun licence. He even feel to inform the Australian authorities of his
ceasing to be an Australian residence. Moreover, he never abandoned the place of a boat he has been
owning within the presence of Australia. From all these above discussions, it can be inferred that Nguyen
has been a resident in Australia for the purpose of taxation in the year 2017 and 2018.
However, he has lost his tax return through a local agent as a non-resident in Australia and only
declared his Australian sourced interest income to be accessible in Australia. This has been disputed by
the ATO and an audit has been propose to be carried out against him for the purpose of dismiss statement
in tax returns. However, Nguyen has been given a chance to submit self-amendment of his tax return to
the ATO and they promise not to apply him with any penalty. Although for foreign residence only
Australian source income are to be assessed under Australian taxation as per the principles established in
the case of FCT v Efstathakis [1979] 9 ATR 86718, but Nguyen was resident in Australia, which requires
him to be e subject to the taxation as an Australian resident and his assessable income would include all
his income irrespective of the source. Hence, as the dispute brought by the ATO was valid, it would be
best for Nguyen to agree with the self-amendment as in case of audit he has no merit in his situation to
defend himself against the claim of ATO.
17 R v Hammond (1852) 117 ER 1477
18 FCT v Efstathakis [1979] 9 ATR 867

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Conclusion
Hence, the conclusion that can be arrived at from the above discussion is that Nguyen has been a
resident in Australia for the tax year 2017 and 2018. However, he has depicted him as a non-resident in
his tax return which has been disputed by the ATO. This requires him to opt for self-amendment instead
of audit as suggested by the ATO.
Yours Sincerely,
Mr ABC
Partner
Xyz and Co.