ACC304 Taxation Law: Residential Status and Partnership Income

This report is a taxation law assignment that analyzes the residential status of an individual under Australian tax law and the net income of a partnership. Part A provides a private and confidential letter of advice to a client, Jack Johnson, regarding his residential status for the 2017/18 income year, considering the resides test, permanent place of abode test, 183-day test, and Commonwealth superannuation test. The advice concludes that the client is a non-resident. Part B addresses the net income of a partnership, including a distribution statement. The report references relevant legislation and case law, such as ITAA 1997, IRC v Lysaght (1928), FCT v Applegate (1979), and IT 2650, to support the analysis and conclusions. The assignment demonstrates an understanding of tax principles and the application of relevant tests for determining residency and partnership income.

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

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Table of Contents
Part A:........................................................................................................................................2
Private and Confidential: Letter of Advice............................................................................2
Part B:.........................................................................................................................................6
Net Income of Partnership:....................................................................................................6
Distribution Statement:..........................................................................................................6
References:.................................................................................................................................7

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Part A:
Private and Confidential: Letter of Advice
To Jack Johnson
From: Roma Tax Consultancy
Date: 6th May 2019
Dear Jack
In response to our latest meeting and telephone discussion we have below attached
our advice relating to your residential status that was requested by you.
Scope:
The scope of the letter is to provide you with the valuable advice regarding how you
must respond to the ATO regarding your residential status. This letter of advice only takes
into the account for tax purpose your residential status for the year 2017/18.
Facts:
We have opinion our advice with respect to the facts and assumption based on your
circumstance. If at any stage of the advice you find any assumption or facts improper or not
in accordance with your understanding, then immediately contact us because this will create
an impact on the advice given.
Summary of Advice:
We have provided a summary of advice with respect to the matters that you have
outlined during our recent meeting. We are strongly encouraging you to read the letter of
advice.

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Statutory Definition:
One of the important reason for taking into the account the fundamentals of
international tax is to understand when the taxpayer falls within the jurisdiction of Australia
and how the claims for taxation interacts with the taxing system of other nations. It is should
be noted that the definition of resident under “section 6 (1), ITAA 1997” includes the person
that are living here in Australia (Woellner et al. 2016). The definition implies that a person is
held as Australian resident when they are having their permanent house in Australia and
satisfies the commissioners viewpoint that an individual does not have any fixed dwelling or
house out of Australia. The definition exclusively lays down four test that is given below;
a. Resides Test
b. Permanent place of abode test
c. 183-Day Test
d. Superannuation Test
On meeting any one of the above highlighted test an individual will be considered an
Australian resident under the meaning of “section 6 (1), ITAA 1936”.
Resides Test:
This test is better known as the common law test. For the purpose of tax, a person is
only considered Australian resident if they are in actual terms living in Australia. The test
does not take into the account the nationality, location of any permanent home or the
citizenship of the taxpayers (Braithwaite and Reinhart 2019). Whether a person is living here
in Australia is mainly dependent on the facts of their particular circumstances. Important
factors have been considered by court in “IRC v Lysaght (1928)” which includes whether
someone is in Australia physically or the frequency and regularity involved in the movement

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of the taxpayer (Barkoczy 2016). It also involves the main objective of visiting in Australia
and the trip in a foreign country.
The evidences that has been gained in your case suggest that you were have sold all
the belongings that you were actually having in Australia. You also left Australia to move to
Bahrain where you took up employment for the period of twelve months.
We can summarize our opinion by explaining that despite the fact that you are having
home in Australian for residential purpose where your family presently resides these factor is
not sufficient in your case to determine you as resident of Australia. During the income year
of 2017/18 you were not physically present in Australia for a very long time. Though you
returned to Australia during November and April but only stayed here for two months. You
also have the intention of returning to Bahrain following your very short stay in Australia.
Therefore, under the resides test you are not an Australian resident.
Permanent place of abode test:
This test is commonly known as Domicile Test. Under the Domicile Act (1982) a
person usually acquires the domicile of their father by birth. However, the domicile of person
can also be determined if one acquires the domicile of another country by his or her own
choice. The “taxation ruling of IT 2650” examines the necessary factors that should be taken
into the consideration in ascertaining whether someone that leaves Australian to move in
foreign country ceases to be the Australian resident (Freudenberg et al. 2017). This includes
the intention of the taxpayer in living overseas on permanent basis or the temporary basis. It
also involves the location of home that is established by the taxpayer. Looking in the famous
case of “FCT v Applegate (1979)” the commissioner arguably stated that the domicile of the
taxpayer was in Australia but failed to meet the requirement that his permanent place of
residence was out of Australia (Sadiq 2019).

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As we look into your situation Jack, we have found that you have bought a house in
Bahrain which is a single room apartment. This provides a conclusive evidence that your
choice of domicile is out of Australia in Bahrain. The circumstances also explain that you do
not have intention of joining your family once your employment contract ends. You only
visited twice in the last twelve months. Therefore, you are non-resident under this test.
183-Day Test:
This test states that a person only held resident when they are present for six months
here in Australia. Jack we noticed that you only stayed here for two months (Pert, Chen and
Carvosso 2018). You have also set your permanent home in Bahrain. So you are non-resident
under this test.
Commonwealth Superannuation Test:
The commonwealth superannuation test is not applicable in your situation because
you are not the member of commonwealth superannuation fund.
On the basis of above analysis, it can be concluded that you are non—resident of
Australia for the year 2017/18 as you did not meet any of the above stated test. If you wish to
discuss with us the above stated matters in more depth the we would welcome you to our
office during our working days.
Yours sincerely
Associate Taxation
Roma Tax Consultancy

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Part B:
Net Income of Partnership:
Distribution Statement:

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References:
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Braithwaite, V., and 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.
Freudenberg, B., Chardon, T., Brimble, M. and Isle, M.B., 2017. Tax literacy of Australian
small businesses. J. Austl. Tax'n, 19, p.21.
Pert, A., Chen, H. and Carvosso, R., 2018. 'Federal Commissioner of Taxation v
Jayasinghe'(2016) 247 FCR 40. Australian Year Book of International Law, 35, p.260.
Sadiq, K., 2019. Australian Taxation Law Cases 2019. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.