Taxation Law: Residency, Double Taxation Agreements and Jurisdiction

This report delves into the intricacies of taxation law, exploring key concepts such as residency, double taxation agreements (DTAs), and the determination of suitable tax jurisdictions. The report begins by defining residency based on Australian tax law, outlining the various tests used to determine an individual's residency status. It then examines the implications of DTAs, specifically focusing on the agreement between India and Australia, highlighting how these agreements prevent double taxation and provide tax credits. The report analyzes the source of income for taxation purposes, particularly for non-residents. It explains the benefits of DTA between India and Australia, allowing individuals to claim tax credits to avoid double taxation. The conclusion emphasizes the role of DTAs in assigning taxing rights and the importance of domestic laws in implementing tax. This report offers a thorough analysis of international tax legislation.

Running head: TAXATION LAW
Taxation Law
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Table of Contents
Introduction:...............................................................................................................................2
Residency:..................................................................................................................................2
Double Taxation Agreement (DTA)..........................................................................................5
International tax Legislation: India and Australia DTA:...........................................................6
Suitable Tax Jurisdiction:...........................................................................................................6
Conclusion:................................................................................................................................7
References:.................................................................................................................................8

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Introduction:
The area relating to international taxation has been shaped by the rapid globalization
that creates an effect on the trade and capital flows. Persons are now easily capable of
moving the provision of their occupation capital from one dominion to another and business
are now able to increase their trade interest and transactions out of Australia as well
(Blackstone & Christian, 2014). The most vital reason for taking account the essentials
international tax is to mainly understand when either the taxpayer or the income falls inside
the jurisdiction of Australia and how such kind of claims will be able to interact with the tax
rules of the other nations.
Whether a taxpayer or the amount is regarded as the subject of tax in Australia it is
dependent on whether or not an individual taxpayer is observed as the occupant of Australia
for levying tax whether or not the income has been sourced in Australia. When the taxpayer
is observed as the dweller of Australia for the purpose of income tax, they are considered
taxable as income from all the sources (Grange et al., 2014). Nevertheless, when the taxpayer
is regarded as non-resident of Australia they are usually held taxable for income from income
that are sourced in Australia.
Residency:
With respect to the “section 6-5 (2), ITAA 1997”, the chargeable earnings of the
Australian occupant covers the ordinary earnings that is resulting from each sources.
Correspondingly, “section 6-10 (4)” explains that the chargeable earnings of the Australian
occupant covers the earnings from all the bases. While for the overseas inhabitant, “section
6-5 (3)(a)” contains the taxable earnings as the ordinary proceeds that is derived from the
Australian bases (Jover-Ledesma, 2014). Correspondingly, “section 6-10 (5)(a)” comprises
of the statutory income that are sourced in Australia of the overseas resident. Ordinary

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income together with the statutory income that is included into the assessable income on
certain aspects apart from Australian sources are both taken into account as taxable for the
foreign resident under the legislative provision of “section 6-5 (3)(b)” and “section 6-10 (5)
(b)” correspondingly.
Accordingly under “section 995-1, ITAA 1997” an overseas dweller is regarded as
somebody that are not the Australian inhabitant inside the legislative sense of “ITAA 1936”.
A non-resident is clarified under “section 6 (1), ITAA 1936” take into account the individual
that cannot be regarded as resident of the Australia (Kenny, 2013). Therefore, the resident
status is stared as an important means based on which Australia imposes its ability of
implement tax. The individual tax rates always differ on the basis of whether the individual
taxpayer is the Australian resident for tax purpose of the foreign resident. The definition of
resident of Australia involves of four relevant test and only the last is undoubtedly regarded
as objective. These tests include
a. Reside test
b. Permanent place of abode test
c. 183-day Test
d. Superannuation test
There are large amount of cases that deals with providing understanding of three tests.
Whereas case law assist taxpayers in understanding the meaning of terms that are used under
“section 6 (1)” and does not necessarily clarifies the rules (Krever, 2015). Mainly because
the residency of the individual is ascertained on the case basis and it is largely dependent on
the specific evidences as well as situations of individuals.
Resides Test:

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This is known as the residence with respect to the ordinary conceptions. An individual
is held as Australian occupant under the provision of income tax given they are actually
residing in Australia apart from their nationality, residency and their place of the fixed house.
The Federal Court has understood the significance of “reside” in the famous case of
“Applegate v FCT (1979)” by stating that to dwell on perpetual basis or for the significant
period of time (Morgan et al., 2013). The case law provides the factors which are considered
indicative of whether the person resides in Australia together with;
a. Time a person spent physically in Australia
b. Where an individual is the visitor then the frequency, duration of coming Australia
and frequency is an indicative factor
c. Any employment engagement
d. Objective of coming to Australia
The above stated factors are weighed up so that it can be understood a person is a
Australian resident.
The Domicile Test:
The domicile test as per “Domicile Act 1982” explains that a taxpayer is regarded as
the Australian occupant if their residence in Australia excluding when the official is gratified
that an individual has the enduring place of house outside of Australia (Sadiq & Coleman,
2013). This test is usually applied on the person that are shifting overseas but they are not
changing their domicile. The taxation commissioner under “Taxation Ruling of IT 2650”
takes into account numerous factors such as the intended time of stay in foreign nations,
location of home established, duration of stay in foreign country and durability with
Australian associations.

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Citing the example of “Boer v FCT (2012)” and “Sully v FCT (2012)”, the taxpayers
were held as Australian resident all through their overseas stay because they did not set up the
fixed home out of Australia (Sadiq, 2014). Therefore, an individual intention to stay
permanently, instead of the temporary basis or transitory is regarded as vital but not the only
conclusive factor.
183-day Test:
As per 183-day test an individual is held as the Australian inhabitant if he or she for a
total of six months is present in Australia of the income year will be viewed as the occupant
of Australia except when the person has set up the fixed place of residence out of Australia
and do not have the objective of living in Australia.
Commonwealth Superannuation Test:
This is regarded as objective test that simply requires the membership of the
superannuation scheme. As held in “Baker v FCT (2012)” that taxpayer had ceased to live in
Australia, however retained the membership of the Australian government superannuation
scheme and hence was treated as resident of Australian inside this test despite the fact that he
ceased his contribution to the fund (Woellner, 2013).
Therefore, on meeting any of the above test a person is regarded as the tax resident of
Australia.
Sources for Taxing Income:
A resident of Australia is subjected to tax on income irrespective of the sources but a
non-resident of Australia is only subject to tax on earnings from Australian bases under
“subsection 6-5 (3)(a)” and “section 6-5 (5)(a), ITAA 1997” (Woellner et al., 2014). In

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“FCT v French (1957)” income comprising of remuneration for services rendered is
generally sourced where the services are performed.
Tax Treaties:
Double Taxation Agreement (DTA)
A double taxation agreement is regarded as the element amid the two nations that
governs the manner in which income that is earned by the residents of those nations are
levied tax. The main purpose of DTA is to prevent the double taxing of income and
eliminating the tax avoidance (Robin, 2019). The “Taxation Ruling of TR 2001/13” provides
the useful guidance for interpreting the DTA of Australia.
International tax Legislation: India and Australia DTA:
On a typical note, the sources of income originate where the services are rendered.
The residential status is ascertained based on the physical presence an individual in India in
the financial year and last ten financial years. The salary income that is earned in Australian
and India will be considered taxable in India during the financial year (Dumiter & Jimon,
2016). So to avoid the double taxation of salary that is earned in Australia, benefit can be
claimed under the Double Taxation Avoidance Agreement between India and Australia. On a
typical note the benefits that is available under the DTAA in a taxpayer’s case would be
included in claiming the tax credit that is paid in Australia against the tax that is payable in
India on the income that is doubly taxed.
Suitable Tax Jurisdiction:
As India has the double taxation agreement with the Australia an individual that earns
salary can obtain the advantage of paying tax India and simultaneously claim the tax credit
that is paid in Australia against the tax that is payable on the income that is taxed twice.
Furthermore, an individual may subsequently obtain reduction of the Indian tax as well which

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the Australian government charges for any amount of the Indian tax that is forgone (Robin,
2019). An individual residing in India can also avoid the double taxation in relation to the
income that are sourced within Australia that has been the element of tax in both the countries
will be permitted as credit against the Indian tax payable. So, it can be stated that India as a
tax jurisdiction is most advantageous for the taxpayers as the taxpayers can avoid the double
taxation agreement of taxing their income twice in both the nations.
Conclusion:
On a conclusive note, it can be stated that the Double Taxation Agreement between
India and Australia simply assigns the rights of taxation. It usually does not levy tax. This
implies that if the DTA assigns the taxing rights to Australia by enabling Australia to apply
tax on income, then the Australian domestic law implements tax on the income.

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References:
Blackstone, W., & Christian, E. (2014). Commentaries on the laws of Taxation. [Charleston,
South Carolina]: Forgotten Books.
Dumiter, F., & Jimon, Ș. (2016). Double Taxation Conventions in Central and Eastern
European Countries. Journal of legal studies, 18(32), 1-12.
Grange, J., Jover-Ledesma, G., & Maydew, G. 2014 principles of business taxation.
Jover-Ledesma, G. (2014). Principles of business taxation 2015. [Place of publication not
identified]: Cch Incorporated.
Kenny, P. (2013). Australian tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, R. (2015) Australian taxation law cases 2015.
Morgan, A., Mortimer, C., & Pinto, D. (2013). A practical introduction to Australian
taxation law. North Ryde [N.S.W.]: CCH Australia.
Robin, H. (2019). Australian Taxation Law 2019. Oxford University Press.
Sadiq, K. (2014). Principles of taxation law 2014.
Sadiq, K., & Coleman, C. (2013). Principles of taxation law 2013. Sydney, N.S.W.: Lawbook
Co./Thomson Reuters.
Woellner, R. (2013). Australian taxation law select 2013. North Ryde, N.S.W.: CCH
Australia.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. Australian taxation law 2014.

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