Taxation Law: Assessment of Mr. Nguyen's Residency and Tax Obligations

This report analyzes the tax residency status and tax liabilities of Mr. Nguyen, an Australian engineer working in Saudi Arabia. The report addresses the key issue of determining Mr. Nguyen's residency under the Income Tax Assessment Act 1997 (ITAA 1997), focusing on whether his income from Saudi Arabia is subject to Australian taxation. The analysis applies the residency tests outlined in the ITAA 1936, including the resides test, domicile test, 183-day test, and superannuation test, to Mr. Nguyen's specific circumstances. The report examines his physical presence in Australia, his domicile, and his connections to Australia, such as maintaining his primary residence, bank accounts, and other ties. Based on the application of these tests, the report concludes that Mr. Nguyen is considered an Australian resident for tax purposes and therefore his income is subject to Australian taxation. The report also provides a letter of advice to Mr. Nguyen, summarizing the findings and recommendations regarding his tax obligations. The report references relevant case law such as FCT v Iyengar (2011), Sneddon v FCT (2012) and Boer v FCT (2012), and provides references to relevant legislation and scholarly articles to support the analysis. The report emphasizes the importance of considering all relevant facts and circumstances when determining an individual's residency status for tax purposes.

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

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Letter of Advice: Private and Confidential
Regal Tax Solution & Co
20 Queen St
Marksville VIC 3207
Mr Nguyen
14 Queen St
Marksville VIC 3207
Dear Nguyen
With respect to our recent conversation, telephonic discussion and correspondence,
we are attaching the advice below in respect of the residential related matters as requested.
Summary of Advice:
In summary our advice includes that your residential status has been a subject of
concern of late and in this letter we are recommending possible structuring options regarding
your status with ATO relating to tax liability of your income and residential status. If any of
the facts appears to you that they are incorrect or not in agreement with your understanding
then we would request you to immediately contact us as this may effect on the advice given
to you. We have further outlined the responses in respect of the ach of the particular area
raised by the ATO in the position paper that are as follows;
a. The Residential status for 2017
b. The residential status for 2018
c. Tax liability of income paid into your Australian bank account

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d. Frequency and regularity of your movement both inside and outside of Australia.
Issues:
The issue surrounding this case involves ascertaining the residential status of Nguyen
under the meaning of “sec 995-1, ITAA 1997”. The issue will also address the tax liability of
his employment income derived from Saudi Arabia and paid into his Australian bank
account.
Rule:
Under “sec 6-5 (2), ITAA 1997”, the assessable earnings of Australian occupant
generally takes into account the ordinary income which is earned from all the sources.
Similarly for the overseas dweller, the assessable income under “section 6-5 (3)(a)” contains
the ordinary income derived from Australian sources1. An overseas dweller stated under the
“sec 995-1, ITAA 1997” comprises of individuals that are not the Australian dweller inside
the sense of “ITAA 1936”. Residency is regarded as the means through which Australia
enforces tax.
An Australian occupant is usually explained under the “section 995-1, ITAA 1997” as
an individual that is dweller of Australia for the tax purpose under “ITAA 1936”2. According
to “sec 6 (1), ITAA 1936,” clarifies that a person that an Australian occupant generally
comprises of person that lives in Australia and has the fixed house in Australia, exclusive of
when the taxpayer satisfies the commissioner that he or she has the fixed dwelling in foreign.
1 Sharkey, Nolan. “Reinventing Administrative Leadership in Australian Taxation: Beware the Fine Balance of Social
Psychological and Rule of Law Principles.” AUSTRALIAN TAX FORUM, vol. 31, no. 1, 2016, pp. 63–97.
2 Wickramasuriya, Thilini. "Dempsey: Don't call Australia home." Taxation in Australia 49.3 (2014): 138.

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The definition given under the “sec 6 (1), ITAA 1936,” includes of four different test and the
last test is completely an objective test3. The test are as follows;
Resides Test:
Under this test, whether the taxpayer is residing in Australia is viewed as the prime
test for deciding the residential position and it is held as common law test. A person is held as
Australian occupant for tax purpose if the taxpayer is eventually living in Australia,
regardless of their nationality, citizen or the site of their fixed home4. Accordingly, an
individual whether a person is or not the resident of Australia is dependent on the specific
factors. This includes;
a. Physically present in Australia
b. Time of physical presence
c. Term of any contract relating to employment
d. Frequency and regularity of the taxpayer’s movement
The factors that is given above should be ascertained and controlling indicators must
be weighed up to ascertain whether an individual is existent in Australia and therefore an
Australian resident for the purpose of tax. In the recent example of “FCT v Iyengar (2011)”
[AATA 856], the taxpayer was the engineer and was appointed for overseas employment for
more than two years5. The taxpayer kept his family home in Australia and ties in Australia
3 Pert, Alison, et al. “'Federal Commissioner of Taxation v Jayasinghe' (2016) 247 FCR 40.” Australian Year Book of
International Law, vol. 35, 2017, pp. 260–262.
4 Sharkey, Nolan. "Departing Australia: a complex tax situation with possible benefits and hidden traps." Tax Specialist 19.5
(2016): 180.
5 Lam, Dung, and Whitney, Alex. “Taxation and Property: Practical Aspects of the New Foreign Resident CGT Witholding
Tax.” LSJ: Law Society of NSW Journal, vol. 3, no. 3, 2016, pp. 84–85.

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where he returned ultimately. The taxpayer was held to be Australian occupant in respect to
the ordinary concepts.
An identical outcome was also reached in the case of “Sneddon v FCT (2012)”
[AATA 516], where the taxpayer was hired to work in Qatar for a time span of two years.
The taxpayer maintained the Australian residence, garaged the car, and maintained the
internet, telephone accounts, bank accounts as well as the membership of the commonwealth
super fund6. While in “Murray v FCT (2012)” [AATA 557], an acquisition of the residential
property by the taxpayer was not considered to be adequate factor to not treat the taxpayer as
Australian resident. The highlighted cases indicate the significance of taking a detailed
analysis of circumstances and facts to ascertain the residency position of an individual.
Domicile Test:
As per this test, an individual’s home or their “domicile” represent the legitimate
association with the state based on which a person is capable enough to invoke the laws of
the country as their own. A person’s domicile constitute the place where the taxpayer has
their perpetual home, instead of where the person is residing. As given under the “sec 6 (1),
ITAA 1936,”, an individual would be held as the Australian occupant given they have the
domicile in Australia excluding when the taxpayer can ascertain that they have set up the
permanent place of residence out of Australia7. The word permanent has been explained in
the case of “Applegate v FCT (1979)”. The court of law discovered that even though
Applegate has retained his residence in Australia, he has set up the fixed place of dwelling
somewhere else.
6 Nethercott, et al. Australian Taxation Study Manual : Questions and Suggested Solutions. 26th ed., Oxford University
Press, 2016
7 Nethercott, Les., and G. L. Shaw. Australian Taxation Study Manual : Questions and Suggested Solutions. 10th ed., CCH
Australia, 2000.

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A person’s purpose to live enduringly, rather than of their stay being transitory is
considered vital, however, it cannot be held as the only factor to take into account. These
factors comprises of actual length and the intention of staying in the overseas country,
whether the taxpayer has set up any kind of fixed home outside Australia along with the
durability of a person’s relationship with the place in Australia is held important factors.
Similarly, a decision was reached by court in “Boer v FCT (2012)” [AATA 574] where the
taxpayer was treated to be Australian resident all through his stay in overseas country since
the taxpayer did not set up any permanent place of habitat out of Australia8.
183-Day Test:
An person who is held to be living in Australia for at least 183 days in the relevant
income year, then the person will be held to be as Australian dweller excluding when the
taxpayer sufficiently proves the tax commissioner that their normal place of residence is out
of Australia and they do not have any kind of motive or intention of taking the residency in
Australia9.
Superannuation Test:
The superannuation test is simply regarded as the objective test and simply wants the
membership of the identified superannuation scheme10. The purpose of designing the test is to
take into the account the locally involved commission staff inside the Australian tax field.
8 Jones, Daryl. "Complexity of tax residency attracts review." Taxation in Australia 53.6 (2018): 296.
9 Sadiq, Kerrie, et al. Principles of Taxation Law 2016. Ninth ed., Thomson Reuters, 2016.
10 Kenny, Paul, et al. Australian Tax 2016. 2016.

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Application:
Corresponding to the above stated laws, Nguyen left Australia on 1st July 2016 to
work in Saudi Arabia. The evidences gained from the case facts suggest that Nguyen do not
have any intention of resigning in future. However, to determine the residency position,
relevant test are applied;
Resides Test:
Nguyen has not been present in Australia ever since 1st July 2016 and this sums a
considerable period for the relevant income years. However, he has maintained his primary
residence in Australia, but this factor alone cannot be believed sufficient in determining the
residential status. The evidences obtained suggest that despite your stay in Saudi Arabia, you
have continuously maintained your primary residence, parked your car in the garage. You
also did not change the address of your driving license or your gun license. You have also
maintained your Australian bank account in which your salary is being paid. Referring to
“Sneddon v FCT (2012)[AATA 516]” the fact that you were given with a self-furnished unit
in Saudi Arabia cannot be considered sufficient enough that you are not an Australian
resident under the meaning of “sec 6 (1), ITAA 1936”11.
Domicile Test:
Gathered circumstances that has been obtained clearly indicates that you have a
permanent place of abode in Australia. You have been provided a furnished home by your
employer at no cost. It can arguably state that you have not abandoned your home in
Australia during your overseas stay. Your permanent residency in Australia clearly represents
that you have a dwelling in Australia, despite the length of time you have committed to spend
in Saudi Arabia. Referring to “Boer v FCT (2012) [AATA 574]”, Nguyen will be treated as
11 Kenny, Paul. LexisNexis Concise Tax Legislation 2016. 2015.

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Australian resident all through his stay in overseas because he did not set up or established
any fixed place of abode out of Australia12. The house which was provided to Nguyen should
be viewed as temporary or transitory in nature. The fact that Nguyen has not sold the home in
Australia should be considered relevant factor based on the findings of the case. Therefore,
Nguyen will be treated as Australian resident under “sec 6 (1), ITAA 1936,” since he has
satisfied the domicile Test.
The 183-Day Test:
Nguyen has left Australia on 1st July 2016, therefore he has been absent from
Australia or in other words he has not been present in Australia in the relevant income year13.
Nguyen cannot be treated as Australian resident under this test since as he does not satisfies
this test.
Commonwealth superannuation Test:
The commonwealth superannuation test cannot be applied in the case of Nguyen
because he does not has any kind of membership with the specified superannuation fund or
scheme in Australia.
Conclusion:
On a conclusive note, it can be stated that Nguyen is an Australian resident within the
meaning of “sec 6 (1), ITAA 1936,” Nguyen has clearly satisfied the Domicile Test because
he has the primary residence in Australia and during the course of his employment in Saudi
Arabia, Nguyen has not abandoned his house. To further support this advice, Nguyen has also
12 Clark, William, and Regan Maas. “Spatial Mobility and Opportunity in Australia: Residential Selection and
Neighbourhood Connections.” Urban Studies, vol. 53, no. 6, 2016, pp. 1317–1331.
13 Anderson, Colin, et al. “The Australian Taxation Office - What Role Does It Play in Anti-Phoenix Activity?” Insolvency
Law Journal, vol. 24, no. 2, 2016, pp. 127–140.

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maintained his garage where his car is kept. He neither changed the address of his driving
license or nor his gun license.
The fact that you were given with a self-furnished unit in Saudi Arabia cannot be
considered sufficient enough that you are not an Australian resident under the meaning of
“sec 6 (1), ITAA 1936” as he came back to live in his house to visit sons during his leave14.
For the purpose of Tax, Nguyen will be treated as Australian resident within the meaning of
“sec 6 (1), ITAA 1936” as his fixed place of abode is in Australia. It is recommended that,
Nguyen should accept the offer of self-amendment because the income derived and paid into
his Australian bank account will be treated as assessable ordinary income.
The ATO have correctly implemented the law in respect to the necessary provision to
the affairs of your residency status. The amounts received from your employment are
subjected to tax under “section 6-5, ITAA 1997”. Accordingly, after reviewing your advice
and you are happy to move further, we will be preparing the response to the ATO in respect
of the points raised above.
If you request to further discuss the matters stated overhead in more detail then please
feel free to connect with our office.
Yours sincerely,
Associate – Taxation
Regal Tax Solution & Co
14 Trakman, Leon. "Domicile of choice in English law: an Achilles heel?." Journal of Private International Law 11.2 (2015):
317-343.

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References:
Anderson, Colin, et al. “The Australian Taxation Office - What Role Does It Play in Anti-
Phoenix Activity?” Insolvency Law Journal, vol. 24, no. 2, 2016, pp. 127–140.
Clark, William, and Regan Maas. “Spatial Mobility and Opportunity in Australia: Residential
Selection and Neighbourhood Connections.” Urban Studies, vol. 53, no. 6, 2016, pp. 1317–
1331.
Jones, Daryl. "Complexity of tax residency attracts review." Taxation in Australia 53.6
(2018): 296.
Kenny, Paul, et al. Australian Tax 2016. 2016.
Kenny, Paul. LexisNexis Concise Tax Legislation 2016. 2015.
Lam, Dung, and Whitney, Alex. “Taxation and Property: Practical Aspects of the New
Foreign Resident CGT Witholding Tax.” LSJ: Law Society of NSW Journal, vol. 3, no. 3,
2016, pp. 84–85.
Nethercott, et al. Australian Taxation Study Manual : Questions and Suggested Solutions.
26th ed., Oxford University Press, 2016.
Nethercott, Les., and G. L. Shaw. Australian Taxation Study Manual : Questions and
Suggested Solutions. 10th ed., CCH Australia, 2000.
Pert, Alison, et al. “'Federal Commissioner of Taxation v Jayasinghe' (2016) 247 FCR 40.”
Australian Year Book of International Law, vol. 35, 2017, pp. 260–262.
Sadiq, Kerrie, et al. Principles of Taxation Law 2016. Ninth ed., Thomson Reuters, 2016.
Sharkey, Nolan. "Departing Australia: a complex tax situation with possible benefits and
hidden traps." Tax Specialist 19.5 (2016): 180.

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Sharkey, Nolan. “Reinventing Administrative Leadership in Australian Taxation: Beware the
Fine Balance of Social Psychological and Rule of Law Principles.” AUSTRALIAN TAX
FORUM, vol. 31, no. 1, 2016, pp. 63–97.
Trakman, Leon. "Domicile of choice in English law: an Achilles heel?." Journal of Private
International Law 11.2 (2015): 317-343.
Wickramasuriya, Thilini. "Dempsey: Don't call Australia home." Taxation in Australia 49.3
(2014): 138.