Australian Taxation Law: Analysis of John's Residential Status

This report provides an analysis of Australian taxation law, specifically focusing on the determination of residency status for tax purposes. The case study revolves around a student, John, who arrives in Australia on a student visa. The report examines John's residential status for the financial years 2016 and 2017, applying the Domicile Test and the 183-day Test as defined by the Australian Taxation Office (ATO). It also considers the Taxation Ruling of TR 98/17. The analysis incorporates relevant case law, including Henderson v Henderson, Federal Commissioner of Taxation v Miller, and Inland Revenue Commission v Levene, to assess John's intentions, behavior, and societal preparations. The report concludes that John meets the criteria of the 183-day test and the guidelines of TR 98/17, thereby establishing his residency status for both financial years.

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

1AUSTRALIAN TAXATION LAW
Table of Contents
Issue:..................................................................................................................................... 2
Rule:....................................................................................................................................... 2
Application:............................................................................................................................. 3
Conclusion:............................................................................................................................ 4
References:............................................................................................................................ 5

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Issue:
The present issue ascertains the residential status of John for the financial year of
2016. The case study revolves around the issue whether or not John has the intention of
staying in Australia for the financial year of 2017.
Rule:
Domicile Test: The Australian taxation office defines under the Domicile test that an
individual will be regarded as the Australian resident if he or she has the permanent place of
abode in Australia. An exception to this rule is that unless it is noticed that an individual have
their normal place of abode is out of Australia and does not have any intention of taking up
the residency in Australia. Citing the reference of “Henderson v Henderson (1965)” an
individual retains the domicile of their origin unless the person acquires another domicile of
their own choice1.
183 days Test: The Australian taxation office under the 183 days test defines that if an
individual is physically present in Australia for no less than six months of one half of the
income year either continuously or in breaks will be regarded as the Australian resident2.
However, if the commissioner established that the person does not intends to take up the
residence in Australia and has their place of residence out of Australia.
The taxation ruling of TR 98/17 is associated with the determination of residency
status of persons that are entering Australia. The ruling is applicable to most the person that
enter Australia as migrant, academics teachers, students staying in Australia or visitors on
holiday.
Section 995-1 of the Act 1936, defines Australian resident as the person who is the
resident of Australian. There are events after the year of income may help in ascertaining the
residential status of the person3. The ordinary concept of the term reside is broad enough to
encompass a person that arrives in Australia permanently as the migrant and a person who
is residing here for a considerable period of time. The quality and the character of the
person’s behaviour in Australia helps in ascertaining whether the person has resided in
Australia.
The judgement of commissioner in “Federal Commissioner of Taxation v Miller
(1946)” stated that the nature of an individual’s behaviour in Australia reflects the way
through which an individual arranges the domestic and economic affairs as the element of
1 Bell v. Kennedy [1868]
2 Reid v. The Commissioners of Inland Revenue (1926) 10 TC 673
3 FC of T v. Applegate 79 ATC 4307

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regular order of life. Where there is a regularity of an individual’s behaviour before coming to
Australia is similar to that of living in Australia will be regarded as the Australian resident
even though their existence reflects a routine of commencing their living in Australia.
The commissioner in “Levene v Inland Revenue Commission (1928)” stated that
the intention and purpose for being in Australia assist in ascertaining whether the person is
living in Australia4. A recognized objective such as employment and education may support
the objective of living in Australia.
In determining the societal and living preparations made by the individual entering in
Australia is stated in “Inland Revenue Commission v Lysaght (1928)”. The arrangements
reflect the intention or the purpose of existence such as committing to residential lease. The
commissioner views of the law that the period of physical presence for a six months
represents a considerable time period in ascertaining whether the person behaviour is
consistent with residing in Australia.
Application:
The situations from the case study provides that John arrives Australia on 3rd April
holding a visa to study Mechanical Engineering in Sydney University. In respect of Domicile
Act 1982 John could be considered as the Australian resident as he has the permanent
place of abode outside Australia in UK and holds a UK passport. Citing the reference of
“Henderson v Henderson (1965)” John has retained the domicile of their origin and
therefore under Domicile Test cannot be considered as Australian resident5.
As evident John entered Australia on 3rd April and with respect to 183 days’ test John
has been physically present and residing in Australia constantly or with breaks more than
one half of the income year. Because of this John under the 183 days’ test will be
considered as the Australian resident since he has successfully met the criteria.
Beside the above test the “Taxation ruling of TR 98/17” is also applied to
determine the residential status of John. With respect to subsection, 6-1 of the ITAA 1937
John has shifted to Australia with the student visa however; the intention and nature of
behaviour signified a manner where John has settled his domestic and economic activities6.
With reference to “Federal Commissioner of Taxation v Miller (1946)” an assertion can
be bought forward by stating that John will be considered as the resident of Australia since
John has expressed the intention of residing in Australia when he undertook a rented
apartment and entered into a lease agreement of six months.
4 Buswell v. I.R.C (1974)
5 Gregory v. DFC of T (1937) 57 CLR 774
6 Miesegaes v. Commissioners of Inland Revenue (1957) 37 TC 493

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Following the commencement of semester John landed in a part time job which
further reflected the behaviour that are consistent with residing in Australia over the
considerable time period. Referring to the case of “Inland Revenue Commission v Levene
(1928)” the period of physical presence demonstrates John behaviour has the necessary
continuity, routine or habit that supported the intention of living in Australia7.
Supporting the evidences from the preceding paragraph a reference to “Lysaght v
Inland Revenue of Commission (1928)” is made where the societal and living preparation
undertaken by John concluded his residential status as Australian8.
The “taxation ruling of 98/17” states that no single factor can be necessarily
considered decisive since they are interrelated. John arrived in Australia on 3rd April and
expressed the interest of living in Australia for the later part of the year. Similarly for the
financial year of 2017, as long as John demonstrate the character of living here over the
entire period he would be regarded as the Australia resident.
Conclusion:
To conclude with the discussion from the preceding paragraph an assertion can be
stated that John has met the criteria of 183 days Test specified by the ATO and has met the
criteria of “Taxation ruling to TR 98/17”. Hence, John is an Australian resident for both FY
of 2016 and 2017.
7 FC of T v. Pechey 75 ATC 4083; (1975)
8 Udny v. Udny [1869]

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References:
Bell v. Kennedy [1868]
Buswell v. I.R.C (1974)
FC of T v. Applegate 79 ATC 4307
FC of T v. Pechey 75 ATC 4083; (1975)
Gregory v. DFC of T (1937) 57 CLR 774
Miesegaes v. Commissioners of Inland Revenue (1957) 37 TC 493
Reid v. The Commissioners of Inland Revenue (1926) 10 TC 673
Udny v. Udny [1869]