Taxation Law: Analysis of Tax Treatments for Foreigners and Residents

This report examines the complexities of taxation law in Australia, specifically focusing on the varying tax treatments applied to foreign residents versus Australian residents. It begins by defining residency based on the 's995-1 ITAA97, s6(1) ITAA36' and explores the implications of being a foreign resident. The report details the different tax treatments for foreigners, including taxation on income sourced in Australia, and compares them to the tax obligations of Australian residents. It covers income types such as annuities, employment income, dividends, interest, royalties, and capital gains, highlighting the differences in tax rates, exemptions, and liabilities. The report also discusses tax treaties and the impact of tax treatment, including the Medicare levy and CGT. Finally, it includes a table summarizing the taxable income for both foreign and resident individuals. The report is a comparative analysis that aids in understanding the Australian taxation system.

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Introduction......................................................................................................................................2
Varying nature of tax treatments and consequences for foreigners.................................................2
Recognizing the tax treatment which differs for foreigners and residents......................................4
Impact of tax treatment for foreigners.............................................................................................9
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

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Introduction
In general, a residence is identified as any person which is seen to be assessed under the
“s995 -1 ITAA97, s6(1) ITAA36”. As per this section residence is identified as a person who has
a domicile in Australia unless there is a significant satisfaction of a person’s permanent place of
abode outside the country. In addition to this, the residence of a person is also identified with an
individual who has been residing in Australia for more than half of the income year. The
application of the similar conceit is also applicable to businesses which has a place of
incorporation, control for voting power and central management control1.
The main extent of the study has covered various types of the aspects which are seen to
be associated to the discussion as stated under the various types of the extent for the
consideration of tax treatments in foreign business in Australia. The important nature of the
different impact of the taxation based on the residency has been identified the several types of
the discussions which are related to the tax residency and the implications on the business as per
test of residency. The differing nature of tax treatments for the individuals has been depicted in
terms of four broad tests. These are needed to be taken into consideration with the ordinary
concepts, domicile test, 183-day test and superannuation test2.
Varying nature of tax treatments and consequences for foreigners
In case a taxpayer in Australia is seen as a foreign resident then the only consideration for
the tax treatment needs to be depicted in terms of the taxes which are levied as per the ordinary
1 Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing, 2016.
2 Altshuler, Rosanne, Stephen Shay, and Eric Toder. "Lessons the United States can learn from other countries’
territorial systems for taxing income of multinational corporations." (2015).

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and statutory income which are based on the sources of income in Australia. This will not be the
case unless there is deemed assessable income present with the other sources of income. The
main questions for the sourcing of the income needs to be also followed with the anything which
has a real income source and hold a practical application. This is directly in relation to the case
of “Nathan v FCT (1918)”, the sources of rule are also based on the several types of other
aspects which are needed to be depicted in terms of the common laws and practices as per the
statutory provisions3.
The duties of the foreign residents are seen with lodgment of the tax return. Moreover,
the individuals are seen with the payment of the sources needed to be included for the Australian
residents which are needed to be considered for the various types of the sources of the tax
treatment. Some of the different types of spruces of the income pertaining to tax treatment are
considered with the royalties, unfranked dividends and interest. The treaties of the taxes
pertaining to the Australian residents are depicted as per overall impact on the individual as per
the prescribed foreign country’s tax slab4. It needs to be also seen that the various types of the
treaties for Australian pertaining to other countries needs to be updated overseas rates and also
address the residency actions pertaining Australian legislation and treatment of the tax as per tax
amount. It needs to be also understood that the owners of the Australian financial institutions will
be able to ensure status of the residency which needs to be deducted as per the correct amount of
taxation. The net impact for the same needs to be depicted as per the various types of the
considerations which are directly seen as per the actions of the Australia and foreign country in a
situation of discrepancy5.
3 Stewart, Miranda. "Redistribution between Rich and Poor Countries." (2018).
4 Burton, David R. "Tax Reform: Eliminating the Double Taxation of Corporate Income." (2017).
5 Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major Australian
taxes." Canberra: Treasury working paper 2001 (2015).

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As per the individual test 4 the member of the common wealth needs to be accounted for
taxation in case a member of the commonwealth public servant is a foreign diplomat living
abroad. Moreover, as per the companies test 1 it needs to be ascertained that the allocation of the
various types of the tax treatment based on the incorporation test needs to be followed with the
consideration of ‘resident’ concept regardless of the business being managed by the foreign
shareholders. Under the general principles of residency taxation, it has been also stated a resident
of the Australia will be depicted for taxation ass per the sources of income. The “s 6-5(2),
Income Tax Assessment Act 1997 (ITAA97)” is relevant in this aspect which is in line with “s
6-5(3), ITAA97”6.
Therefore, the differing nature of the tax treatment as per the residency is seen with
foreign residents are seen to be receiving the benefits of taxation as per offsetting of the tax.
Moreover, the foreign residents are not liable for claiming of medical levy7.
Recognizing the tax treatment which differs for foreigners and residents
Income
Type
Application of tax to the foreigners Application of tax to the residents
Income
from
Annuities
It needs to be seen that the
individuals are needed to be
considered under the pensions which
The inclusion of the annuities for the
taxation needs to be seen with the
various types of the treatments which
6 Holzmann, Robert. "Taxing pensions of an internationally mobile labor force: Portability issues and taxation
options." (2016).
7 Reimer, Ekkehart, Stefan Schmid, and Marianne Orell, eds. Permanent establishments: a domestic
taxation, bilateral tax treaty and OECD perspective. Kluwer Law International, 2018.

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and
pensions
are a result of receiving the returns
from the Australian tax and the
exemptions needs to be considered
for the inclusion under the Australian
tax treaty.
are regarded as per the assessment of
the income pertaining to the annuities
which are also needed to be considered
as per the several types of reversionary
benefits. The Australian pensions are
further needed to be depicted as per the
consideration which are seen to be
based on the tax treatment as per the
regular payments pertaining to stream of
income. The payments are further taken
into account with the retirement savings
pertaining to the account provider.
Generation
of the
income
from the
employmen
t in
Australia
The foreign individuals are seen to
be working in Australia and engaged
in the various types of the activities
which are seen to be based on the
depictions considered in Australia. In
addition to this, the comparison of
the taxable income has been depicted
as per the various types of the
evaluations based on the taxation
slabs. Moreover, the foreign
residents are exempted from taxation
The information shown in the excerpt
has identified that the application of the
tax pertaining to the employment in
Australia needs to be identified with the
various types of the sources which are
seen to be directly assorted to the Table
1. It needs to be assessed that the
different types of the focus of the
information as per the residents of
Australia needs to be also considered
with a Medicare levy of 2%9.

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from the revenue generated from the
Australia. However, for any other
source of revenue which is generated
from any other country is taxable in
nature8.
Treatment
of the
unfranked
dividend
and interest
It needs to be discerned that the
foreign residents in Australia are
seen to be going through the process
of interest, unfranked dividends and
the royalties which are seen to be
associated to the earnings of
Australia.
The interest borne with the non-treaty
countries are observed with 10%
interest. Moreover, unfranked dividends
are seen with interest rate of 30%.
Franked
Dividends
The receiving of the dividends are
needed to be taken into account as
per the exemption which are made
from the Australian income and
withholding of tax.
The residents of the company are
discerned to be elected with the various
types of tax consideration seen with
fully franked dividends and the amount
which is to be paid in credit10.
Income
from Rent
The inclusion of the investigation
pertaining to the Australian property
will be outlined as per the significant
nature of the ways in which the tax
will be applied to the rental income
The properties as per the residential tax
needs to be also incorporated as per the
consideration which are based on the
future usage. The different types of the
considerations of the taxation treatment
8 Burkhauser, Richard V., Markus H. Hahn, and Roger Wilkins. "Measuring top incomes using tax record data: A
cautionary tale from Australia." The Journal of Economic Inequality 13.2 (2015): 181-205.

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and to be received from the
properties based in Australia.
for the residents of the Australia.
Income
from
Australian
business
The foreign residents have been seen
to be conducting business in
Australia which are subject to
essential considerations pertaining to
the paying tax on income and
lodgment of the tax. The foreign tax
payers are also exempted from
paying any sort of unfranked
dividend and interest amount11.
The different types of assessable income
are seen with the nature of carrying out
the business in Australia. It needs to be
seen that nature of the consideration as
per the different nature of running
expenditure pertaining to the
assessable income is not inclusive of the
GST amount12.
Income
pertaining
to
construction
The foreign residents are further
identified with the tax amount which
is withheld by the tax payer.
The incomes pertaining to the
installment, construction and operation
from the casino gambling is not
exempted for the taxpayers.
Australian
assets as a
result of CG
on CGT.
The general consideration of the
capital gains has been depicted in
terms of the various types of the CG
associated to the Australian property.
In case of the foreign residents the
properties which are held for CGT
cannot be claimed for the duction
pertaining to the income tax. Moreover,
9 Shaviro, Daniel. "Taxing Potential Community Members' Foreign Source Income." (2015).
10 Basu, Subhajit. Global perspectives on e-commerce taxation law. Routledge, 2016.
11 Basak, Sayan. "Equalization Levy: A New Perspective of E-Commerce Taxation." Intertax 44.11 (2016): 845-
852.
12 Graetz, Michael J., and Alvin C. Warren. "Integration of corporate and shareholder taxes." (2016).

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This needs to be considered with the
Australian tax return clause13.
the cost of ownership will be included
for taxation14.
Table 1: Taxable income compared with Foreigners and Residents
Impact of tax treatment for foreigners
The net effect of the various types of tax treatment needs to be greater with every income
pertaining to both residents and foreigners. However, the net impact of taxation on the foreigners
13 Burton, David R. "Tax Reform: Eliminating the Double Taxation of Corporate Income." (2017).
14 Hemmings, Philip, and Annamaria Tuske. "Improving Taxes and Transfers in Australia." (2015).

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has been shown with non-claimant of the levy associated to Medicare liability. The interest
pertaining to the flat rate of 10% taxation has been identified overseas addresses. Moreover, the
foreign tax payers are excluded from offsetting of the tax. In addition to this, it needs to be also
discerned that tax is offset with the CGT included in the Australian property15.
Conclusion
The different types of assertions as per varying nature of tax treatments and consequences
for foreigners is seen as a foreign resident then the only consideration for the tax treatment needs
to be depicted in terms of the taxes which are levied as per the ordinary and statutory income
which are based on the sources of income in Australia. individual test 4 the member of the
common wealth needs to be accounted for taxation in case a member of the commonwealth
public servant is a foreign diplomat living abroad. It needs to be also discerned that the differing
nature of the tax treatment as per the residency is seen with foreign residents are seen to be
receiving the benefits of taxation as per offsetting of the tax. Moreover, the foreign residents are
not liable for claiming of medical levy. The different types of consideration for the Recognizing
the tax treatment which differs for foreigners and residents are considered with inclusion of the
annuities for the taxation for the residents. On thee other hand the foreign residents are seen with
pensions which are a result of receiving the returns from the Australian tax and the exemptions
needs to be considered for the inclusion under the Australian tax treaty. The foreign individuals
are seen to be working in Australia and engaged in the various types of the activities which are
seen to be based on the depictions considered in Australia.
15 Genser, Bernd, and Robert Holzmann. "The taxation of internationally portable pensions: Fiscal issues and policy
options." (2016).

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References
Altshuler, Rosanne, Stephen Shay, and Eric Toder. "Lessons the United States can learn from
other countries’ territorial systems for taxing income of multinational corporations." (2015).
Basak, Sayan. "Equalization Levy: A New Perspective of E-Commerce Taxation." Intertax 44.11
(2016): 845-852.
Basu, Subhajit. Global perspectives on e-commerce taxation law. Routledge, 2016.
Burkhauser, Richard V., Markus H. Hahn, and Roger Wilkins. "Measuring top incomes using tax
record data: A cautionary tale from Australia." The Journal of Economic Inequality 13.2 (2015):
181-205.
Burton, David R. "Tax Reform: Eliminating the Double Taxation of Corporate Income." (2017).
Burton, David R. "Tax Reform: Eliminating the Double Taxation of Corporate Income." (2017).
Cao, Liangyue, et al. "Understanding the economy-wide efficiency and incidence of major
Australian taxes." Canberra: Treasury working paper 2001 (2015).
Genser, Bernd, and Robert Holzmann. "The taxation of internationally portable pensions: Fiscal
issues and policy options." (2016).
Graetz, Michael J., and Alvin C. Warren. "Integration of corporate and shareholder taxes."
(2016).
Hemmings, Philip, and Annamaria Tuske. "Improving Taxes and Transfers in Australia." (2015).
Holzmann, Robert. "Taxing pensions of an internationally mobile labor force: Portability issues
and taxation options." (2016).
Miller, Angharad, and Lynne Oats. Principles of international taxation. Bloomsbury Publishing,
2016.

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Reimer, Ekkehart, Stefan Schmid, and Marianne Orell, eds. Permanent establishments: a
domestic taxation, bilateral tax treaty and OECD perspective. Kluwer Law International, 2018.
Shaviro, Daniel. "Taxing Potential Community Members' Foreign Source Income." (2015).
Stewart, Miranda. "Redistribution between Rich and Poor Countries." (2018).