Income Tax Law: Letter of Advice on Australian Residency

This letter of advice, written by a student, addresses the Australian tax residency status of a client, Monique Paik, an electrical engineer. The letter analyzes her situation, considering her birth in South Korea, Australian citizenship, and a new job offer in the USA. It explores the implications of being considered an Australian resident versus a non-resident for taxation purposes. The advice highlights the 'ordinary concepts' test and the domicile test, referencing the case of Mr. Dempsey to illustrate residency determination. The letter concludes that the client will likely be considered a non-resident for tax purposes during her time in the US, focusing on factors like her intention to reside abroad and the location of her income-generating activities. The document includes a bibliography with relevant legal sources.

Running head: LETTER OF ADVICE
Letter of Advice
Name of the Student
Name of the University
Author Note

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LETTER OF ADVICE
David Jones Consultants
SGC Tower 161 Pink Harbour Street
Sydney NSW 2000
Australia.
101 Ascot Road, Our ref: 786
Greenslopes 21st March 2020.
Brisbane QLD 4000
Australia.
.
Dear Mrs Paik,
After considering the previous notes and your requirements from our previous meeting,
this letter of advice is being sent to you on the basis of the requirements of the meetings.
The main aspects which needed to be taken into consideration to determine your situation
have to be analysed thoroughly. These will help in determining your residency for the relevant
financial years. Even though you were born in South Korea, you have immigrated to Australia
almost 20 years ago. In the present day, you have an Australian passport and also have an
Australian citizenship. Hence, you will be considered as an ordinary resident for taxation
purposes if you continued residing in a similar manner. However, this has changed recently in
the year 2019. You have received a new job offer which requires you to move to the United
States of America on a contractual basis for two years up to 2022. This may even be extended to
2024. Even though this requires you to travel across the world, you will still be based in the
Phoenix Office in USA. Your information suggests that your wife and daughter will be moving
to the USA once your daughter’s school finishes in December 2020. Even though you will be
visiting Australia in the meantime, these will only be as a visitor and not with the intention of
relocating to Australia. While you are maintaining some of the assets in Australia, they will be
not be used for earning any income. In case your wife and child do not move to the US in
December 2020, you will still continue to reside there and not return to Australia. In your

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LETTER OF ADVICE
situation, you will be considered as an Australian expat for the purpose of taxation. The amount
of tax paid by you will depend on whether you are considered as a resident for taxation purposes
in Australia or not.
The main difference between the Australian residents and non-Australian residents for
the taxation purposes is the amount of tax charged on them. Australian residents have to pay
taxes on the income earned by them on a worldwide level. However, the non-Australian residents
will be required to pay taxes only on the income earned by them in Australia. Hence, this
suggests that the main aspect to determine is to determine is your Australian residency for the
period between 2020 and 2022. In case of any individual, their Australian residency is
determined on the basis of the ‘ordinary concepts’ test. This test suggests that anyone who has
lived in Australia for a period of 183 days or more is considered as a resident of Australia. The
other tests include the residency test and the Commonwealth Superannuation test are also
relatively simple in nature. However, as it is clear that you will not be assessed on the basis of
the above three tests, the domicile test will become applicable in your case. This test suggests
that any person who has a domicile or a permanent place of abode in Australia will be considered
as an Australian resident unless they are able to prove otherwise. This can be done by proving
that you do not have any intention of continuing your residency in Australia for the period you
are employed in the US.
Your situation is similar to the one faced by an individual called Mr Dempsey, in his
legal battle against the Federal Commissioner of Taxation. In this case, Mr Dempsey had moved
to Saudi Arabia for a project which lasted for three years. After which, he thought that he would
move on to a new project after the completion of the old project. However, it did not happen and
he returned to Australia. In between, he continued making visits to Australia but only as a visitor.
He did not intend to remain back in Australia after coming back here. Hence, the course held that
Mr Dempsey could not be considered as an Australian resident for taxation purposes. This was
because the income earned by him was done by using the resources of Saudi Arabia. There are
no indications to suggest that he intended to continue living in Australia during that period.
Hence, your situation is similar to that of Mr Dempsey. Your visits to Australia will be to see
your family and to take care of your old parents but not to earn income from the country.
Another critical aspect to be taken into consideration is your family, who will be moving to USA
in December. This may also not happen but it would not affect your taxation situation. There is

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LETTER OF ADVICE
no indication to suggest that you will return to Australia or not maintain your place of abode in
USA if your family does not arrive at the country. As you will continue to reside in the particular
country, the income earned by you will not be assessed for taxation purposes in Australia.
In order to conclude the above discussion, it can be suggested that you will not be
considered as an Australian resident for taxation purposes for the period you work in the US.
Even if you are coming back to Australia, you are only doing so as a visitor and not to make your
living from the country. Hence, you cannot be considered as an Australian resident in the
existing state of things. Some other issues which may be relevant to your case include the period
for which you will be working in the US and whether you will return to the country after the
completion of the contract. The time for which you will be residing in Australia is also an
important factor.

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LETTER OF ADVICE
Bibliography
Ato.gov.au. (2020). Legal Database. [Online] Available at:
https://www.ato.gov.au/law/view/view.htm?docid=EV/7925123987916&PiT=99991231235958
[Accessed 27 March. 2020].
Dempsey and FCT [2014] AATA 335; 2014 ATC 10-363
Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1
Federal Commissioner of Taxation v Miller [(1946) 73 CLR 93]
Kenny, P., Blissenden, M. and Villios, S. (2015). Residency and Australians working overseas:
can be an expensive lesson in tax Law.
Price v. West London Investment Building Society Ltd. (1964) 1 W.L.R. 616
Subrahmanyam v Commissioner of Taxation [2002] ATC 2303