Tax Law Assignment: Determining Australian Residency for Tax Purposes

This assignment analyzes John's residency status for Australian taxation purposes in the financial years 2016 and 2017. It examines the application of the four key tests used to determine residency: the ordinary concepts test, the 183-day test, the domicile test, and the superannuation test, as defined by the Income Tax Assessment Act 1936 (ITAA). The analysis considers John's presence in Australia, his accommodation arrangements, his intentions, and the application of relevant tax rulings, including Tax Ruling 98/17. The assignment concludes that John is considered a resident of Australia for tax purposes in both FY2016 and FY2017, based on his continuous presence, establishment of a home, and intention to stay in the country for further studies. The document references key legal precedents like Miller v FCT and Federal Commissioner of Taxation v Applegate, and provides a bibliography of relevant resources.

Running Head: TAX LAW
Tax Law
Name of the Student:
Name of the University:
Author Note

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Issue
Whether John is a resident of Australia for Australian taxation purpose in FY2016
Whether John is a resident of Australia for Australian taxation purpose in FY2017
Rule
There are four test which are applied for the purpose of determining whether a person is
resident of Australia for Australian taxation purpose of not. Where any test provides a positive
result than the person is considered as an Australian Resident for Taxation purpose.
These tests are Ordinary concepts test, 183 days Test, Domicile Test and Superannuation Test
The definition of resident is provided under s 6(1) Income Tax Assessment Act 1936
(ITAA). According to the section a person who resides in Australia includes a person who has a
domicile in Australia unless it is held by the minister that the person permanent place of abode is
not in Australia or the person has been in Australia for a period of more than half a year unless
the commissioner holds that the person does not intend to stay in Australia1.
Ordinary concepts test
In the case of Miller v FCT2 it had been stated by the court that whether a person is a resident or
not is analyzed by matter of “fact and degree”. The meaning of the term reside has not been
provided in any legislation and is determined through a dictionary meaning which is “to dwell
permanently or for a considerable time”. Thus as per the test the court takes into consideration
the time which the person has spent in Australia, the purpose of the visit, having a residence in
Australia, and the person’s social ties.
1 Income Tax Assessment Act 1936 (Cth) s 6(1)
2 Miller v FCT (1946) 73 CLR 93

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As per the test emphasis is put by the commissioner on the intention for stay, location and
maintenance of assets, living and social ties. It has been provided by Tax Ruling 98/17 that
where an individual “resides” in Australia as per the dictionary meaning of the words resides the
other tests which have been provided through the definition do not require consideration.
However where the person is not “residing” in Australia the consideration of other test has to be
done to analyze the residency status of the individual3.
It has also been provided through the ruling that the length of time or period of physical presence
in Australia is not solely decisive while analyzing a person is residing in Australia. However the
behavior of an individual with respect to the time spent in Australia may provide a degree of
habit, routine or continuity which is consistent with the meaning of the word reside. The
commissioner’s view in relation to law is that six months is a considerable time to determine
whether a person is a resident of Australia or not for tax purpose. However merely because a
person is staying in Australia for a period of 6 months he is not an Australia resident for the
purpose of tax as per Tax Ruling 98/17.
Under the domicile Test if a person has a permanent “place of abode in Australia” he is a
resident unless the minister has a finding that his permanent place of abode is outside Australia.
However it had been ruled in the case of Federal Commissioner of Taxation v Applegate4 the
court held that permanent does not mean forever
Under the 183 day test if a person resides in Australia physically, intermittently or continuously
for more than half off the income year he is a resident for tax purpose. However where the
commissioner is satisfied that the usual place of abode of the individual is outside Australia and
3 Legal Database (2018) Ato.gov.au
<https://www.ato.gov.au/law/view/document?Docid=TXR/TR9817/NAT/ATO/00001>
4 Federal Court of Australia in Federal Commissioner of Taxation v Applegate (1978) 9 ATR 899

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there is no intention on the part of the person to take up residence in Australia the person is not a
resident for tax purpose5.
Application
Determination of residency for John in FY2016
It has been provided in the scenario that John Came to Australia first on 3rd April 2016.
The total period for which he has been in Australia in 2016 includes approximately 2 months in
April and May and from June to December 2016. Thus means that he has been in Australia for a
period of more than half a year. Thus one of the elements of the ordinary concept test has been
satisfied. He has also take a home for residing in Sydney for a six month lease as he liked the
place. As per the case of Federal Commissioner of Taxation v Applegate “Permanent place of
abode” does not mean forever. Thus his 6 months lease can be counted as a permanent place of
abode in Australia. In addition according to Tax Ruling 98/17 the behavior of an individual with
respect to the time spent in Australia may provide a degree of habit, routine or continuity which
is consistent with the meaning of the word reside. Thus the continuing nature of John residence
in Australia such as extending his course, taking up a part time job and buying a place to stay in
Australia makes him a residence as per the resides test or ordinary concept test.
Determination of residency for John in FY2017
It has been provided in the scenario that John has also decided to make an application for
PhD studies in November which is to be effective from January 2017. This further signifies that
he is intending to stay for a longer period in Australia. He already has a place of abode of a
permanent nature. It is also provided by the ruling that when behavior is changed by a person and
5 Sharkey, Nolan. "Coming to Australia: Cross border and Australian income tax complexities with a focus on dual
residence and DTAs and those from China, Singapore and Hong Kong-Part 1." Brief 42.10 (2015)

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intention to reside is indicated the person is regarded as a resident. In the given situation it is
clear that John who had come to Australia on a tourist visa and now holds a student visa for four
years there is degree of habit, routine or continuity in his stay and he is also a resident under
FY2017 as per the continuity test. As the test of ordinary concept is successfully applied, the
application of no other test is required.
Conclusions
John is a resident of Australia for Tax Purpose for both FY2016 and FY2017.

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Bibliography
Federal Court of Australia in Federal Commissioner of Taxation v Applegate (1978) 9 ATR 899
Income Tax Assessment Act 1936 (Cth) s 6(1)
Legal Database (2018) Ato.gov.au
<https://www.ato.gov.au/law/view/document?Docid=TXR/TR9817/NAT/ATO/00001>
Miller v FCT (1946) 73 CLR 93
Sharkey, Nolan. "Coming to Australia: Cross border and Australian income tax complexities
with a focus on dual residence and DTAs and those from China, Singapore and Hong Kong-Part
1." Brief 42.10 (2015)