Taxation Law: Australian Residency and Tax Computation Analysis

This report analyzes the taxation law in the context of Jack Jones, a Canadian citizen working in Australia. It begins by determining Jack's residency status, examining the 'resides' test, domicile test, and the 183-day test according to Australian taxation law. The report then computes Jack's assessable income for the year ending June 30, 2016, including gross salary, one-off payments, rental income, allowances, and fees. It details allowable deductions such as membership fees, tax advice fees, and course fees. Finally, the report calculates the total taxable income, tax payable, Medicare levy, and foreign income tax offset, concluding with a comprehensive assessment of Jack's tax liability, supported by relevant case law and legislative references.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to requirement 1:...........................................................................................................2
Residency according to ordinary concepts:................................................................................2
Domicile Test:............................................................................................................................3
183 days test:..............................................................................................................................4
Answer to question 2:.................................................................................................................4
Reference List:...........................................................................................................................6

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Answer to requirement 1:
The present scenario is associated with the issue of determining the status of
residency for Jack Jones along with the determination of tax liability for the income derived
in Australia. As evident from the current situation it is found that Jack holding a Canadian
passport entered into Australia for work purpose. Jack additionally held the visa for Australia
that allowed to work and visit in Australia. In order to understand the taxation situation it is
necessary to work out the residential status to determine whether Jack was an Australian
resident for taxation purpose.
According to the Australian taxation office an individual entering in Australia for the
purpose of work and living in a location and have taken steps of making Australia their home
would be treated as the Australian resident for the purpose of taxation (Barkoczy, 2016). As
defined under the “Taxation ruling of TR 98/17”, a person entering in Australia for the
purpose of work and residing in Australia for more than six months having pre-arranged
terms of employment contract would be considered as the resident of Australia (Saad, 2014).
To understand the residential status of Jack Jones below listed are the three test that is
performed;
a. Residence according to the ordinary concepts
b. Domicile test
c. 183 days test
Residency according to ordinary concepts:
The principal assessment of ascertaining the status of residency for Jack is
understanding the resides test. To effectively determine the residential status of Jack it is vital
to take account of “section 995-1 of the ITAA 1936” where an individual is considered to be
an Australian resident (Woellner et al., 2016). From the current case study of Jack it assertion

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can be bought forward that he does not qualifies to be resident of Australia since he was not
the resident of Australia under the ordinary concept of the work “Resides”. However, the
period of physical presence is an important criteria in ascertaining the residential status
(Robin, 2017).
As held in the case of “Miesegaes v. Commissioners of Inland Revenue (1957)”
person entering in Australia for the purpose of employment will be considered as the
Australian resident given the stay is consistent for residing in Australia (Barkoczy et al.,
2016). As evident from the current situation Jack will be considered as Australian resident
because his physical presence and the length of stay has been long for more than half of the
income year and reflects a degree of continuity which is consistent with residing in Australia.
Domicile Test:
The “Taxation rulings of 2650” is associated with the determination of domicile an
person residing in Australia for more than six months in the form of continuously or in
breakdowns, they will be treated as Australian residents. As held in the case of “Henderson
v. Henderson (1965)” the intention of an individual must be in the direction of making their
home indeterminately (Tran-Nam, & Walpole, 2016). Concerning the contemporary situation
of Jack, an assertion can be bought forward that he has been occupant of Australian since he
has been holding the work visa of Australia and has been living there since 2nd December
2012.
Additionally, it was found that he went to work in Canada however after the period of
nine months he decided to terminate the contract and return Australia to live for the rest of
the income year. As held in the case of “Federal Commissioner of Taxation v. Applegate
(1979)” the taxpayer having an Australian domicile was sent to establish branch office in
New Hebrides however, the return of taxpayer to Australia would be treated as the Australian

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resident since the taxpayer had the permanent place of abode in Australia (James, 2016). In
the present situation it can be stated that Jack will be treated as the Australian resident since
he has been living in Australian an intended to make his place of residence indeterminately in
Australia.
183 days test:
The 183 days is considered to be another method of determining the residential status.
The test is generally applied in those circumstances when the taxpayer has the physical
presence in Australia for no less than one-half of the income year (Coleman & Sadiq, 2013).
Jack in the present context has been present in Australia for more than six months with clear
intention of taking up the domicile in Australia. Therefore, in considering the above-defined
test an assertion can be bought forward that Jack will be treated as the resident of Australia
under the 183 days test.
Answer to question 2:
Computations of Assessable Income of Jack
For the Year ended 30 June 2016
Particulars Reference
Amount
($)
Amount
($)
Assessable Income
Gross Salary
Section 6-5 of the ITAA
1997 250000
Receipt of One off payment
Section 6-5 of the ITAA
1997 100000
Australia Sourced Rental Income
Section 6-5 of the ITAA
1997 30000
Receipt of Allowance
Section 6-5 of the ITAA
1997 5000
Receipt of accommodation
Section 6-5 of the ITAA
1997 7000
Receipt of Fees from Lawn Mowing
Clients
Section 6-5 of the ITAA
1997 2000
Total Assessable Income 394000
Allowable Deductions
Membership fees Section 8-1 of the ITAA 600

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1997
Allowable deductions as per income
statement 10000
Tax Advice Fees
Section 8-1 of the ITAA
1997 2000
Registration Fees
Section 8-1 of the ITAA
1997 2000
Course fees for horticulture
Section 8-1 of the ITAA
1997 1500
Total Allowable Deductions 16100
Total Taxable Income 377900
Tax on Taxable Income 143602
Medicare Levy 7558
Less: Foreign income tax offset 75000
Total Tax Payable 76160
As held in the case of “FC of T v. Applegate (1979)” residential status of Jack becomes
the most vital part of imposing tax (Harris et al., 2013). The below stated are following
assumptions of including and deductions the relevant transactions;
a. Gross salary is regarded as the part of the assessable revenue of the taxpayer and it
will be counted in the taxable return of the taxpayer under “section 6-5 of the ITAA
1997”.
b. The one off payments and Australian source rental income are considered to be
income in terms of the usual concepts and will be liable for tax under “section 6-5 of
the ITAA 1997” (Kenny et al., 2017).
c. Jack will be able to claim allowable deductions in respect of “section 6-5 of the
ITAA 1997” in respect of membership fees and tax advice fees
d. Jack will be able to claim allowable deductions for the expense incurred in
horticulture under “section 6-5 of the ITAA 1997”. This is because the fees incurred
is directly related to the income producing activities of the taxpayer (Kenny, 2013).

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Reference List:
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Barkoczy, S., Nethercott, L., Devos, K., & Richardson, G. (2016). Foundations Student Tax
Pack 3 2016. Oxford University Press Australia & New Zealand.
Coleman, C., & Sadiq, K. Principles of taxation law (2013).
Harris, J., Graw, S., Gilders, F., Kenny, P., & Van der Waarden, N. (2013) Theory and law in
the regulation of business.
James, K. (2016). The Australian Taxation Office perspective on work-related travel expense
deductions for academics. International Journal of Critical Accounting, 8(5-6), 345-
362.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Kenny, P., Blissenden, M., & Villios, S. (2017) Australian tax.
ROBIN, H. (2017). AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.
Tran-Nam, B., & Walpole, M. (2016). Tax disputes, litigation costs and access to tax
justice. eJournal of Tax Research, 14(2), 319.
Woellner, R. H., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian
Taxation Law Select: Legislation and Commentary 2016. Oxford University Press.

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