Australian Taxation Law: Applying Residency Tests to a Case Study

This report assesses the residential position of an individual, Dave, under Australian taxation law, particularly focusing on sections 6-5(2), 6-10(4), and 995-1 of the ITAA 1997 and section 6(1) of the ITAA 1936. It examines the resides test, domicile or permanent place of abode test, and the 183 days test to determine Dave's residency status. The analysis considers factors such as Dave's physical presence in Australia, his intentions, family and social ties, and the maintenance of assets. Case laws like Miller v FCT (1946), IRC v Laysaght (1928), and Levene v IRC (1928) are referenced to interpret the definitions of terms used in section 6(1). The report concludes that Dave satisfies the criteria of the ordinary concepts test and permanent place of abode test, leading to the determination that he should be treated as an Australian resident for taxation purposes.

Running head: TAXATION LAW
Taxation Law
Name of the Student
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Table of Contents
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Resides Test:..............................................................................................................................2
Domicile or Permanent Place of Abode Test:............................................................................4
The 183 days Test:.....................................................................................................................5
Superannuation Test:..................................................................................................................6
Conclusion:................................................................................................................................6
References:.................................................................................................................................7

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Introduction:
According to the “section 6-5 (2) of the ITAA 1997”, the taxable income of the
Australian resident comprises of the ordinary income that are derived from every sources. As
per the “section 6-10 (4)” an Australian resident assessable income includes the statutory
income from every sources (Woellner et al. 2016). As per the “section 995-1, ITAA 1997”
Australian resident is a person that are the resident of Australia within the meaning of “ITAA
1936”. As per the “section 6 (1) ITAA 1936” Australian resident is the person that are
residing in Australia or person that has the fixed home in Australia (Barkoczy 2016). The
present report would be assessing the residential position of Dave The taxpayer however
decided to return to Australia after his mother suffered health issue.
Discussion:
According to the definition of resident of Australia it comprises of four different test.
These includes the resides test, permanent place of abode test and 183 days’ test. There are
number of instances that are dealing with the interpretation of the first three tests. While the
case laws assist in understanding the definition of terms that are used under “section 6 (1)”
(Morgan, Mortimer and Pinto 2018). This is mainly due to the residency of a person that are
determined on the case basis and are reliant on the particular facts as well as circumstances of
the individual. To ascertain the residential position of Dave and the below listed tests are
performed.
Resides Test:
The resides Test is known as the residence based on the ordinary concepts. The term
resides is not stated in the statute and its ordinary meaning is referred as to dwell on
permanent basis or for the considerable period of time. Referring to “Miller v FCT (1946)”
to determine the residency status of Dave, the question of fact and degree is considered. As

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evident Dave worked as the project engineer in Nepal. However, upon the ill health of his
mother he decided to return to Australia. As per the resides test there are certain factors that
are considered by the courts in determining the residency status (McGregor-Lowndes 2016).
This includes the time that is spent physically in Australia. The court of law in “IRC v
Laysaght (1928)” held that if the person is the regular visitor in Australia, then the frequency,
regularity as well as duration of the visits is a noteworthy factor. As per the “Taxation ruling
of IT 2650” factors such as purpose of visits to Australia and abroad as well as the
maintenance of residence in Australia for the use of taxpayer is necessary (Braithwaite and
Reinhart 2019). Similarly, in “Levene v IRC (1928)” the person’s family, business and social
ties are also necessary factors that are considered in determining the residential status.
As evident Dave having spent his time in 2007 and 2013 by working as project
engineer in Nepal returned to Australia. Though his initial intention was temporarily to reside
in Australia but his return to Nepal was uncertain. The taxpayer also bought a property in
Phillip Island and also moved into the property initially. Citing “Levene v IRC (1928)” the
evidences obtained suggest that Dave purpose of visit is his family and social ties (Sadiq
2018). The purchase of property in Phillip Island and taking up a work in Australia also states
his intention of residing in Australia.
In the current case of Dave, the taxpayer here Dave transferred a sum of $80,000 from
the overseas account to the Australian account that is jointly held with the interest bearing
account. The taxpayer also bought an investment property in Victoria and acquired the shares
in the Australian company. The taxpayer also maintained his private health insurance in
Australia. The behavioural characteristics of Dave, represents that a sufficient amount of
time has elapsed and reflects continuity and routine or habit. The purpose of presence reflects
his family and employment ties (Robin 2019). The maintenance and location of assets
together with the social and living arrangement reflects continuity. Dave from the year 2013

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to 2016 has been physically present in Australia and is meeting the criteria of ordinary
concepts test.
Domicile or Permanent Place of Abode Test:
An individual taxpayer is treated as the Australian resident if a person has the
domicile in Australia, except the commissioner is content that an individual has the
permanent place of abode out of Australia under the “section 6 (1) of the ITAA 1997”
(Braithwaite and Reinhart 2019). An individual generally obtains the domicile by Birth as the
country of his origin or the domicile of a choice where the taxpayer has the intention of
making their home for the indefinitely period.
According to the “Domicile Act 1982” a person is considered as the resident of
Australia given their domicile is in Australia, except the commissioner of taxation is content
that the person has the permanent place of residence out of Australia (Robin and Barkoczy
2019). The court of law in “FCT v Applegate (1979)” held that permanent does not
represents “forever” and the objectively is assessed every year. An individual’s purpose of
staying permanently, instead of being temporary or transitory is considered important but
cannot be treated as the only factor in consideration.
According to the “taxation ruling of IT 2650” there are factors that must be taken
into the consideration in ascertaining whether the person that leaves Australia to live in the
overseas nation by acquiring fixed place of residence in overseas ceases being an Australian
resident during their absence (Miller and Oats 2016). The factors include the actual or the
intended time of stay in overseas nation or whether any fixed place of residence has been
established out of the Australia along with the durability of the person’s constant relation
with the place within Australia.

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As held in the case of “Boer v FC of T (2012)” and “Sully v FC of T (2012)” the
taxpayers were treated as the Australian residents all through their stay in the overseas as they
did not establish a permanent place of residence out of Australia. During the overseas stay
from 2007 to 2013 Dave did not established a permanent place of Domicile. He travelled
from one country to another during his overseas stay and regularly returned to Australia to
visit his parents. The intended and the actual length of stay in Nepal and Paris was transitory
in nature and reflected durability with the Australian associations. The establishing of home
in Australia and taking up employment reflects his intention of staying permanently instead
of being temporary in nature. Furthermore, Dave also has the original domicile in Australia as
he holds the Australian passport. With respect to the “Domicile Act 1986”, Dave from the
year 2013 to 2016 has met the criteria of the Domicile test (Coleman and Sadiq 2013). Within
the extended meaning of the “section 6 (1) of the ITAA 1936” he will be treated as the
Australian resident based on permanent place of abode test.
The 183 days Test:
An individual that is living in Australia for the total amount of six months of any
income year or in other words for more than 183 days in the relevant income year will be
treated as the Australian resident. An exception to this case is that an individual will not be
treated as the Australian resident if the person established a permanent place of abode out of
Australia and does not has any intention of taking up the Australian residency (Kenny 2013).
Similarly, in the case of Dave for the income year ending 30 June 2018 Dave has made four
trips to Australia and has spent a total of 91 days in Australia. Therefore, Dave cannot be
treated as the Australian resident within the provision of 183 days’ test as the taxpayer did not
fulfil the criteria of spending more than six months in the relevant income year.

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Superannuation Test:
This test is applied on the member of the commonwealth superannuation fund that are
eligible employee such as the foreign diplomats and includes the member of the family that
are deemed to be the Australian resident for taxation purpose (Krever 2014). The
superannuation test cannot be applied in the situation of Dave as his not the member of
commonwealth fund.
Conclusion:
On a conclusive note Dave has successfully satisfied the criteria of ordinary concepts
test and permanent place of abode test. Dave physical presence and intention has coincided
for majority of the time when he returned to Australia. Dave purpose of visit in Australia and
abroad was transitory as the taxpayer did not established a permanent place of residence out
of Australia. The purchase of investment property and maintenance of place of dwelling in
Australia for his use signifies that he behavioural characteristics that are consistent with
residing here. The taxpayer intentions to stay in the overseas nation was temporary and
reflected durability with the Australia. With respect to the meaning stated under “section 6
(1) of the ITAA 1997” will be treated as the Australian resident.

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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.
Coleman, C. and Sadiq, K. 2013. Principles of taxation law.
Kenny, P. 2013. Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. 2014. Australian taxation law cases 2014.
McGregor-Lowndes, M., 2016. Lawyers, reform and regulation in the Australian third
sector. Third Sector Review, 22(2), p.33.
Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.
Morgan, A., Mortimer, C. and Pinto, D., 2018. A practical introduction to Australian taxation
law 2018.
Robin and Barkoczy Woellner (Stephen & Murphy, Shirley Et Al.), 2019. Australian
Taxation Law Select 2019: Legislation and Commentary. OXFORD University Press.
Robin, H., 2019. Australian Taxation Law 2019. OXFORD University Press.
Sadiq, K., 2018. Australian Tax Law Cases 2018. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.