PACC6006 Taxation Law Report: Residency, Tax Treaties, and Taxation

This report, prepared for an international investor, delves into the complexities of Australian taxation laws. It begins by analyzing the concept of tax residency, outlining the various tests used to determine an individual's residency status, including the resides test, domicile test, 183-day test, and commonwealth superannuation test, referencing relevant case laws and sections of the ITAA 1936 and ITAA 1997. The report then examines the impact of international taxation policies, with a specific focus on double taxation agreements (DTA) and how they mitigate the risk of double taxation. The report also discusses the DTA between India and Australia, exploring how salary income is taxed in both countries and how taxpayers can utilize DTA benefits to claim credits and avoid double taxation. Finally, the report concludes by highlighting the significance of residency status in determining tax liabilities and the advantages of DTAs for taxpayers. The report is available on Desklib, a platform offering AI-based study tools for students.

Running head: TAXATION LAWS
Taxation Laws
Name of the Student;
Name of the University:
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Residency.........................................................................................................................................2
Resides Tests...............................................................................................................................3
The Domicile Test.......................................................................................................................4
The 183-day test..........................................................................................................................5
Commonwealth Superannuation Test..........................................................................................5
Sources of levying taxes on income............................................................................................5
Tax Treaties.....................................................................................................................................6
Double Taxation Agreement........................................................................................................6
International Tax Legislation India and Australia DTA..................................................................6
Suitable Jurisdiction of Tax.............................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
The main purpose of the assessment is to analyze the residency status rulings which are
applicable in Australia. It is also to be noted that international polices of taxations have an
impact on the trade and flow of capital (Saad, 2014). The important reasons for considering
international taxation is to effectively understand when a person’s income is taxable within the
Australia dominion and how such kinds if claims which would be considered along with taxation
rulebooks of other countries.
The treatment of income is to be treated as substances of Australian would be depended
on whether the taxpayer is an Australian resident or if the income which is generated has its roots
in Australia. The income which is generated in Australia by a resident would be considered if all
the income is generated in Australia (Braithwaite & Reinhart, 2019). In case a taxpayer is a non-
resident then the income which is derived from Australia would e held for the purpose of
taxation.
Residency
As per the provisions of “section 6-5 (2), ITAA 1997”, an Australian resident’s income
which is considered to be assessable includes the income which is generated from ordinary
sources and the income must be generated in Australia. The provisions of “section 6-10, ITAA
1997” that the assessable income of the Australian Resident would be commonly including
taxable incime which is earned in Australia. In addition to this, statutory income which is having
its source in Australia earned by a foreign resident would also be held taxable. Therefore, it is to
be noted that ordinary and statutory income would be included in taxable income if the source
from which the same is generated are of Australian origin (Kirchler & Hoelzl, 2018). The

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assessable income from Australian sources for a non-resident of Australia would be held for tax
under the provisions of “section 6-5 (3)(b)” and “section 6-10 (5)(b)” accordingly.
The concept of a non-resident is stated under “section 995-1, ITAA 1997” which
provides non-residents are those persons who are not held as residents of Australia under the
judicial concept of ITAA 1997. The provisions of “section 6 (1), ITAA 1936” states that a
foreign resident is a person who would not be residing in the country (Butler, 2019). It is to be
noted that the residency status is vital part of the tax assessment process and its allows the
jurisdiction of Australia to impose taxes on individuals. Even the rates of taxation differ in
accordance with the residency status of the person. There are four types of tests which can help
in assessment of residency status of an individual. The tests are listed below:
 Resides Test
 Permanent Place of abode or Domicile Test
 183 days Test
 Superannuation Test.
There are several case laws that are associated with giving appropriate interpretations of the
three types of test. The terms which are stated in “section 6 (1)” can provide assistance in better
understanding of the terms (Liu, 2018). The residency of an individual is generally decided based
on the case and it considers specific facts with circumstances for analysis.
Resides Tests
A person would be considered as a resident of Australia under the reside test if they are
staying in Australia notwithstanding citizenship, nationality and their location of fixed home. As
per the case of “Applegate v FCT (1979)” the federal court gave the opinion that the definition

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of residing included reside permanently or for a significant time (Morgan & Castelyn, 2018). The
above stated case showed the necessary factors which needs to be considered in regards to
Australian residents. This includes
 The amount of time spent in Australia physically.
 If a person is a visitor then the duration of visit, frequency of visit.
 The purpose of visiting Australia
 Work engagement of the individual.
The factors which are stated above, are considered so that the same is helpful for
assessing whether a person is an Australian resident or not.
The Domicile Test
As per “Domicile Act 1982” a person would be considered as a resident of Australia
provided their given fixed place of abode is in Australia. This excludes situation where the tax
commissioner is satisfied that the taxpayer has residency which is situated outside Australia. The
domicile test is more applicable on individuals which are moving out to other countries however
not altering their domicile (Jones, 2018). As per the “taxation ruling of IT 2650” there are
several factors namely the amount of time which a person stays in a country, place of their
established home and span of stay in other country. This would also be helpful in determining
residency status of the individual.
As per the case of “Boer v FCT (2012)” the permanent residence of the taxpayer which
was situated in Australia would make the taxpayer as resident of Australia even though the
taxpayers have moved to another country (Fleurbaey & Maniquet, 2018). The reason for this was
as the tax payer did not change the permanent residency. It is also to be that the intention of the

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individual is also considered to be an important element in determining whether the residency is
on temporary basis or permanent basis.
The 183-day test
As per this rule, a person would be treated as a resident of Australia if the person has
been present in the country for more than 6 months or 183 days of the commissioner. The
assessment of 183 days excludes the decision where the commissioner of taxation is convinced
that the taxpayer has a residency outside Australia.
Commonwealth Superannuation Test
This test is subjective in nature and the only consideration of this test is that the
membership of commonwealth superannuation scheme needs to be there. As per the case of
“FCT v Baker (2012)” where the verdict was given that even though the taxpayer stopped living
in the country but still maintained superannuation scheme and therefore, he would be held as a
resident even though he stopped contributing to the fund.
Sources of levying taxes on income
The provisions of “subsection 6-5 (3)(a)” and “section 6-5 (5)(a), ITAA 1997” an
Australian resident is liable to pay taxes on the income made by him notwithstanding where the
income is generated while a non-resident would be liable to pay taxes on the income which is
from Australian Sources.

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Tax Treaties
Double Taxation Agreement
The double taxation agreement is set up between companies for the purpose of effectively
administering the way in which income of residents of other nations are considered for the
purpose of taxation (Alt, 2018). The main purpose of setting up such an agreement is to ensure
that there is no double taxation and ensure that there is no incidence of tax avoidance. The
guidelines for understanding the DTA of Australia are stated under “Taxation Ruling of TR
2001/13”.
International Tax Legislation India and Australia DTA
The situation of double taxation can take place when income which is generated by a
taxpayer is taxable in India as well as Australia. The source of income and residency status is
considered in such a situation. As per the applicability of residency status in India is determined
by considering whether the tax payer was physically present in the country during the financial
year and in the last 10 years. As per the DTA agreement which is established, salary income
which is generated by a person in India and Australia would be held liable for taxes in India in
current year. To avoid a situation of double taxation of salary, an individual can claim benefits
under DTA agreements if the salary is derived from Australia (Jones & Rhoades-Catanach,
2015). The taxpayers would be eligible for claiming income tax credits for the amount which is
paid in Australia against the tax which is payable in India on the income which is liable for taxes
twice.

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Suitable Jurisdiction of Tax
As per the double taxation agreement which is established between Australia and India,
an individual which derives income from Australia can avail facility of paying tax in Australia
and at the same time also take tax credit for the amount which is paid in Australia. The
individual would be able to claim deductions under Indian Taxation system for an amount which
is already charged under the Australian Tax system (Miller & Oats, 2016). A person who is
staying in Australia can claim credits on the income which is generated from India due to the
DTA agreement which is established between the nations. Thus, it can be stated that the same is
beneficial for the taxpayers and it helps the taxpayers to avoid a situation of double taxation in
between the two countries.
Conclusion
The main discussion above shows that the residency status plays a vital role in the
determination of the tax for an individual tax payer for a period. In addition to this, there are four
test which are mostly used for determining the residency status of an individual. In addition to
this, the role of DTA is also shown to be important as the same appropriately allocates the rights
of imposing taxes.

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References
Alt, J. (2018). Tax Justice-Justice of Taxation. Ethics Discussion Paper III of the" Tax Justice &
Poverty” Research Project.
Braithwaite, V., & Reinhart, M. (2019). The Taxpayers' Charter: Does the Australian Tax Office
comply and who benefits?. Centre for Tax System Integrity (CTSI), Research School of
Social Sciences, The Australian National University.
Butler, D. (2019). Who can provide taxation advice?. Taxation in Australia, 53(7), 381.
Fleurbaey, M., & Maniquet, F. (2018). Optimal income taxation theory and principles of
fairness. Journal of Economic Literature, 56(3), 1029-79.
Jones, D. (2018). Complexity of tax residency attracts review. Taxation in Australia, 53(6), 296.
Jones, S., & Rhoades-Catanach, S. (2015). Principles of Taxation for Business and Investment
Planning 2016 Edition. McGraw-Hill Education.
Kirchler, E., & Hoelzl, E. (2018). 16 Tax Behaviour. CENTRE FOR DECISION RESEARCH,
UNIVERSITY OF LEEDS, UK, 255.
Liu, J. (2018). Understanding Australian commercial law. Taxation in Australia, 53(6), 300.
Miller, A., & Oats, L. (2016). Principles of international taxation. Bloomsbury Publishing.
Morgan, A., & Castelyn, D. (2018). Taxation Education in Secondary Schools. J. Australasian
Tax Tchrs. Ass'n, 13, 307.

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Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-107.