Australian Taxation Law: Residency Tests, Legislation, and Case Law

This report delves into the intricacies of Australian taxation law, specifically focusing on the concept of residency for tax purposes. It explores the significance of determining an individual's or company's residential status, which is crucial for tax obligations and filing. The report outlines the key tests used by the Australian Tax Office (ATO) to ascertain residency, including the Common Law Test, Resides Test, Statutory Test (comprising Domicile Test, 183-day test, and Superannuation Test). It references relevant legislation, such as the Income Tax Act 1997 and 1936, and provides an analysis of each test, including factors considered and examples to illustrate their application. The report also discusses the debates and loopholes within Australian tax residency rules, referencing case law such as Harding v Commissioner of Taxation. The conclusion emphasizes the importance of understanding these tests for both Australian and foreign residents, and the need for professional tax advice due to the complexity of the subject matter. The report includes a reference list and bibliography to support the information provided.

Running Head: AUSTRALIAN TAXATION LAW
Australian taxation law
Name of the Student:
Name of the University:
Author Note

1
AUSTRALIAN TAXATION LAW
Table of Contents
Answer to the Question.....................................................................................................2
Reference list.....................................................................................................................5
Bibliography........................................................................................................................5

2
AUSTRALIAN TAXATION LAW
Answer to the Question
Issues
It is an important process for the income tax department to determine the
residential status of the individual and a company for the purpose of the tax purpose. It
plays an important role in the decision making of person taxability and their tax filing.
Mainly the resident test is done to determine the Australia residence. The Australian
Tax Office or ATO is the prime authority to control the tax matters of the Australia. They
had established many standards and regulation in order to determine the tax. This
standard specifies the rules and regulation that an individual need to follow under the
ATO (Ato.gov.au. 2020).
Rules
According to the Income Tax Act 1997 an individual is considered as the
Australian resident if he or she lives in Australia and is always taxable under the
Australian tax rules. It also applies to all those who staying in Australia for over six
months until they show any intention of leaving Australia on a permanent basis (Anon
2020). An individual is considered as the resident of Australia even if he or she moved to
any overseas for the purpose of work, study or any other purpose. For the purpose of
determining the residential status, ATO has released few tests that are required to be
conducted in order to determine the residential status is as follows:
1) Common law test: According to the income tax act 1936 under subsection 6(1) an
individual is considered as the Australian tax resident if he or she lives in Australia.
This law is based on the intention of the individual presence in Australia, individual
living and social arrangements, location of the individual assets, family and business
or employment within Australia.
 Resides test – Under the Income Tax Act 1997 subsection 6, resides test
determines whether an individual is a resident or non resident of Australia. It is the
first test where an individual residency is determined for the tax purpose. Under this
test an individual lives in Australia are considered to determine the Australian

3
AUSTRALIAN TAXATION LAW
resident and after this test no other test is further done. Factors that are considered
for this test is the physical presence, family, business, employment and living status.
While if the individual does not satisfy reside test than next test is need to be
applied.
2) Statutory test: If an individual does not satisfy the Common law test for residency
than the statutory test are performed. If the individual satisfies the test than he or
she is considered as the resident of Australia.
 Domicile test – This test is known as the statutory test, where the domicile of an
individual is checked to determine the residential status. They require this test to
show a permanent resident or house in Australia in order to pass the test. If an
individual satisfy this test, they are considered as the Australian resident or further
test is conducted.
 183 day test – In this test an individual presence in the Australia is checked to
determine the residential status. If an individual is present in Australia for more than
183 days without a break or not for a particular year than he or she is considered as
the resident of Australia. But this rule is not applicable to the individual who has a
permanent residence in the overseas or does not have any intention to stay in
Australia.
 Superannuation test – It is the last test of the statutory test which covers the
Australian Government employees who are working in the overseas. So the
individual who are working in the overseas as a government employee are
considered as the Australian resident.
Analysis
The ATO has published different online guild lines and the required tools to assist
the individual to determine their Australian residential status for the purpose of the tax. It
also includes different situation where an individual can determine where the individual
has arrived in or determining their departing time. Generally determination of individual
residence is determined by considering the facts and circumstances of all the laws
stated under ATO and residency test that are specified under the ATO rules (Inc, V.
2020).

4
AUSTRALIAN TAXATION LAW
Australian individual tax residency rules are subject to many debates as there are
some vital loop holes. Many Australian experts determined this as the major drawback
of the Australian tax. There are many cases where an individual has moved to overseas
but still they are recognized as the resident of the Australia until and unless they show
the proper documents (Wars, T. 2020). Recently in the case Harding v Commissioner of
Taxation, commissioner of taxation has applied for the leave appeal to the high court
against the Harding case. But the case was refused by the court and given clarity on the
permanent place of abode. In this case Harding lost the case against the ATO as it was
ruled that Harding is deemed to be non-resident under the primary test but he satisfies
the domicile test and considered as the resident of the Australia.
Conclusion
As an Australian resident of every individual is assessed on their world wide
income while a foreign resident is assessed on the income on the Australian income
which is derived from Australia only. To deemed as the Australian tax resident an
individual need to meet the tests as specified by the ATO. Whether it is for resident test
or to establish permanent place of abode taxpayer’s evidence regarding their residence
is always plays an crucial part in convincing the Australian tax. Evidence must be
sufficient to prove the ATO that the individual wants to explain. ATO covers both the
permanent place of abode outside Australia and to them who have stopped residing in
Australia. An individual taxpayer is always considered as the ruling to provide their tax
residential status. Tax residential is always a complex area regarding the taxpayer in
considering moving to the overseas or coming back to the Australia. For the reason of
complexity an individual must always prefers professional tax advice.

5
AUSTRALIAN TAXATION LAW
Reference list
Anon, (2020). [online] Available at: http://shop.wolterskluwer.com.au/ [Accessed 24 Feb. 2020].
Inc, V. (2020). Australian Taxation Law Select 2019 eBook 1st edition | 9780190320485,
9780190320492 | VitalSource. [online] VitalSource. Available at:
https://www.vitalsource.com/en-au/products/australian-taxation-law-select-2019-ebook-oxford-
university-press-v9780190320492 [Accessed 24 Feb. 2020].
Bibliography
Ato.gov.au. (2020). Home page. [online] Available at: https://www.ato.gov.au/ [Accessed 14
Jan. 2020].
Oup.com.au. (2020). Australian Taxation Law 2020 ebook. [online] Available at:
https://www.oup.com.au/books/higher-education/taxation/9780190323745-australian-taxation-
law-2020-ebook [Accessed 24 Feb. 2020].
Wars, T. (2020). Taxing Wars. [online] Global.oup.com. Available at:
https://global.oup.com/academic/product/taxing-wars-9780190865306 [Accessed 24 Feb. 2020].