Taxation Law Assignment: Assessing Tax Implications of Overseas Income

This taxation law assignment delves into the tax implications of overseas employment for Australian residents. The assignment analyzes the tax treatment of an Australian resident working in India, examining the concept of residency and its impact on tax liability based on the Income Tax Assessment Act 1936 and relevant rulings. It also explores the taxability of income from a golf teacher's private lessons, including the application of accrual accounting, recoverable debts, and assessable income under the Income Tax Assessment Act 1997. The assignment references key legislation and case law, providing a comprehensive understanding of the tax consequences of foreign employment income and professional fees. It considers the determination of assessable income and tax liabilities based on the specific scenarios presented, offering insights into the complexities of Australian taxation law.

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

1TAXATION LAW
Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.........................................................................................................................................2
Legislation:.................................................................................................................................2
Application:................................................................................................................................2
Answer to question2:..................................................................................................................5
Issues:.........................................................................................................................................5
Legislation:.................................................................................................................................5
Application:................................................................................................................................5
Conclusion:................................................................................................................................8
Reference List:...........................................................................................................................9

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Answer to question 1:
Issues:
The following issue is concerned with the evaluation of consequences of tax for salary
or wages derived by an Australian resident working overseas and leaving Australia for
taxation purpose.
Legislation:
a. F.C. of T. v. Jenkins 82 ATC 4098
b. F.C. of T. v. Applegate (1979) 9 ATR 899
c. Henderson v. Henderson [1965] 1 All E.R.179
d. Subsection 6 (1) of income tax assessment act 1936
e. Taxation rulings of IT 2650
Application:
The study considers the tax treatment of salary derived by Can Robyn from India as
an overseas employment for working as a coordinator in Calcutta University. The criterion to
work as a co-ordinator was as long Can Robyn wished to work or as long the course existed
in Calcutta University. As per the taxation rulings of IT 2650 it aims to lay down the
guidelines in determining whether the individual leaves Australia to stay in overseas country
on temporary basis for work assignment cease to be resident of Australia for the purpose of
income tax at the time of their stay out of Australia1.
1 Pinto, Dale. "State taxes." Australian Taxation Law. CCH Australia Limited, 2011. 1763-
1762.

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With reference to the subsection 6 (1) of income tax assessment act 1936 whose
domicile is in Australia given the commissioner is satisfied that their permanent place of
abode is outside of Australia2. As stated under subsection 6 (1) a person living in Australia
either continuously or intermittently for more than half of the income year will be regarded as
Australian resident unless the commissioner is content that the person does not have any
purpose of taking up residence in Australia.
With reference to subsection 6 (1) of the ITAA 1936 Can Robyn will be considered
as an Australian resident since she has resided in Australia for no less than half of the income
year before leaving Australia3. As evident Can Robyn owned a flat in Melbourne and did not
abandoned her place of residence where she lived. Perhaps the flat that was owned by Can
Robyn in Melbourne was mortgaged and paid the mortgage amount from her employment
income received in her Australian bank account.
As stated in Henderson v. Henderson [1965] 1 All E.R.179 a person maintains the
domicile of their own origin unless an individual acquires the domicile of their own choice in
another state or by the operation of law4. It can be ascertained from the present study that Can
Robyn has retained her flat in Melbourne and intends to come back to Australia on an
2 Woellner, R. H., et al. Australian Taxation Law Select: Legislation and Commentary 2016.
Oxford University Press, 2016.
3 ROBIN, H. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press, 2017.
4 Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data
matching." Proctor, The 37.6 (2017): 18.

4TAXATION LAW
evidently clearly foreseen and reasonably expected contingency following the end of her
employment in Calcutta university.
Considering the tax liability for the part of the assessable income received in her
Australian bank account, the liability to tax originates in compliance with the taxation ruling
of IT 2650 the taxpayers residence must be considered in applying the above rulings5. Citing
the reference of F.C. of T. v. Applegate (1979) 9 ATR 899 the most important question that
has originated is the residential status of an individual temporary leaving Australia for the
purpose of tax6. Generally, an individual leaving Australia not on permanent basis would be
regarded to upheld their Australian domicile except the individual obtains a different
residence of their own choice or by the operation of law.
From the present scenario, Can Robyn will be regarded to have retained her
Australian citizen since she maintained her bank account in Australia so that she can pay for
her mortgage flat from the portion of remuneration paid in her Australian bank account.
Therefore, a working visa even for the substantial period would not be considered as the
adequate evidence of acquiring a new domicile for Can Robyn.
Determining the tax consequences of her salary received in her Australian bank
account would be regarded as the foreign employment income. Foreign employment income
can be defined as income by an Australian resident that are working overseas as employee.
An Australian resident are generally taxed based on their income derived every quarter of the
5 Braithwaite, Valerie. "Responsive regulation and taxation: Introduction." Law & Policy 29.1
(2013): 3-10.
6 Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).

5TAXATION LAW
world. In relation to the current situation Can Robyn received in her bank account of
Australia will be considered as an assessable income. It is worth mentioning that a payment
can yet qualify as foreign income even though it was paid in Australia and not derived by the
person working overseas. With reference to F.C. of T. v. Jenkins 82 ATC 4098 the foreign
employment received from India would attract tax liability and will form the part of the
assessable income as the overseas employment income7.
Answer to question2:
Issues:
The current issue is based on determining the taxable income of the taxpayer that has
the personal business of Golf Teacher.
Legislation:
a. Barratt v. FC of T 92 ATC
b. Henderson v. FC of T (1970)
c. Taxation Rulings TR 93/11
d. Subsection 6-5 (2) and (3) of the Income Tax Assessment Act 1997
e. Subsection 25 (1)
Application:
In compliance with subsection 6-5 (2) and (3) of the Income Tax Assessment Act
1997 it is mandatory for each of the taxpayer to take account of the taxable income in the
7 Barkoczy, Stephen. "Foundations of Taxation Law 2016." OUP Catalogue(2016).

6TAXATION LAW
gross income that is generated by them8. As stated in subsections 6-5 (2) and (3) an income
derived during the income year but received in another income year turns out to be the
subject of the taxpayers. It is vital for the taxpayer to apply the appropriate method of
determining the earnings that is applied in an income year9. As defined in taxation rulings of
TR 93/11 it is necessary for each individual to apply either earning process or the receipt
process of tax accounting for ascertaining the assessable income.
According to TR 93/11 receipt of fee income under subsection 25 (1) will be treated
as earnings in accordance with ordinary concepts of the ITAA 1936 for professional or
experts whose income is treated for assessment under the accrual basis10. As evident from the
following scenario that Paul received a fee earnings from the private lesson of golf from his
clients. This introduces the query regarding the treatment of professional fee produced under
subsection 25 (1) of the ITAA11. This must be determined in terms of the facts from the
8 Snape, John, and Jeremy De Souza. Environmental taxation law: policy, contexts and
practice. Routledge, 2016.
9 Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major
Australian taxes." Treasury WP 1 (2015).
10 Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax
avoidance structures: Evidence from Australian firms." Journal of International Accounting,
Auditing and Taxation 22.1 (2013): 12-25.
11 Fry, Martin. "Australian taxation of offshore hubs: an examination of the law on the ability
of Australia to tax economic activity in offshore hubs and the position of the Australian
Taxation Office." The APPEA Journal 57.1 (2017): 49-63.

7TAXATION LAW
present study of Paul with reference to the contract entered into by Paul. It is also found that
Paul received a fee from one of his client, Doreen following five years of golf lesson
imparted. This results in establishment of recoverable debt where the professional person will
not be required to undertake any actions prior to the debt becoming entitled for payment. The
fee shall be recoverable in the applicable sense if the time to reimburse has been sanctioned.
As held in the case of Henderson v. FC of T (1970) income which is assessable in
terms of accrual basis is derived under subsection 25 (1) of the ITAA when a recoverable
debt is created12. Along with this, a professional individual on receiving the fee income in
advance and an arrangement has been created between the professional and client the fee
income that is generated in the income year becomes related either entirely or partially for
which the professional person completes the work. As evident from the current scenario, it
can be ascertained that the fee income derived by Paul is considered as the part of his
assessable income and will be taken into the consideration at the time of determining the tax
liability.
From the present study of Paul, the receipt of fee income by Doreen would be
regarded as the part of assessable income. The fee received by Paul would be treated as
income in the revenue year and such kind of earnings would considered as the assessable
income because the receipt of fee would be considered as recoverable debt for the lesson
provided to his client13. At the time of determining the assessable income of Paul, receipt of
12 Ross, Monique, Jarrod Walker, and John Walker. "Multinationals targeted down
under." Taxation in Australia 52.1 (2017): 22.
13 Anderson, Colin, Jennifer Dickfos, and Catherine Brown. "The Australian Taxation Office-
what role does it play in anti-phoenix activity?." INSOLVENCY LAW JOURNAL 24.2 (2016):
127-140.

8TAXATION LAW
sum $6,000 and $28,000 from the golf lesson taught would be treated as taxable income. As
held in the case of Barratt v. FC of T 92 ATC the federal court of Australia had taken into
the consideration of statutory impediment in beginning the proceedings of recoverable bad
debt14. Nevertheless, this does not put off the time during which the fee income was derived
under subsection 25 (1) by the professional individual whose income shall be treated for the
purpose of tax under the accrual basis.
Conclusion:
To conclude with the present case study, the following scenario of Paul has
considered the consequences of income tax derived during the course of business. With
reference to sub-section 25 (1) of the Income Tax Assessment Act 1936 the earnings of Paul
from his golf lesson will be treated as assessable income and will be taken into the
consideration in the assessable income15.
14 Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting
Review 91.1 (2015): 47-68.
15 Smith, Fiona, et al. "Reforms required to the Australian tax system to improve biodiversity
conservation on private land." Environmental and planning law journal 33.5 (2016): 443-
450.

9TAXATION LAW
Reference List:
Anderson, Colin, Jennifer Dickfos, and Catherine Brown. "The Australian Taxation Office-
what role does it play in anti-phoenix activity?." INSOLVENCY LAW JOURNAL 24.2 (2016):
127-140.
Barkoczy, Stephen. "Foundations of Taxation Law 2016." OUP Catalogue(2016).
Blakelock, Sarah, and Peter King. "Taxation law: The advance of ATO data
matching." Proctor, The 37.6 (2017): 18.
Braithwaite, Valerie. "Responsive regulation and taxation: Introduction." Law & Policy 29.1
(2013): 3-10.
Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major
Australian taxes." Treasury WP 1 (2015).
Davis, Angela K., et al. "Do socially responsible firms pay more taxes?." The Accounting
Review 91.1 (2015): 47-68.
Fry, Martin. "Australian taxation of offshore hubs: an examination of the law on the ability of
Australia to tax economic activity in offshore hubs and the position of the Australian
Taxation Office." The APPEA Journal 57.1 (2017): 49-63.
Pinto, Dale. "State taxes." Australian Taxation Law. CCH Australia Limited, 2011. 1763-
1762.
ROBIN, H. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press, 2017.
Ross, Monique, Jarrod Walker, and John Walker. "Multinationals targeted down
under." Taxation in Australia 52.1 (2017): 22.

10TAXATION LAW
Smith, Fiona, et al. "Reforms required to the Australian tax system to improve biodiversity
conservation on private land." Environmental and planning law journal 33.5 (2016): 443-
450.
Snape, John, and Jeremy De Souza. Environmental taxation law: policy, contexts and
practice. Routledge, 2016.
Tan, Lin Mei, Valerie Braithwaite, and Monika Reinhart. "Why do small business taxpayers
stay with their practitioners? Trust, competence and aggressive advice." International Small
Business Journal 34.3 (2016): 329-344.
Taylor, Grantley, and Grant Richardson. "The determinants of thinly capitalized tax
avoidance structures: Evidence from Australian firms." Journal of International Accounting,
Auditing and Taxation 22.1 (2013): 12-25.
Vann, Richard J. "Hybrid Entities in Australia: Resource Capital Fund III LP Case." (2016).
Woellner, R. H., et al. Australian Taxation Law Select: Legislation and Commentary 2016.
Oxford University Press, 2016.