INTRODUCTION TO TAXATION LAW SEMESTER 1, 2011 LINA TERRESA BUI
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STATE THE ISSUE
The issue which arises on the facts is whether the [taxpayer] is a resident for tax purposes.
The general jurisdictional rules provide: Residents are assessed on their ordinary income and statutory income from all sources (ss 6-5(2), 6-10(4) ITAA97) Foreign residents are assessed on their ordinary income and statutory income from Australian sources (ss 6-5(3)(a), 610(5)(a) ITAA97).
The assessable income of an Australian resident includes the ordinary income derived by the taxpayer, directly or indirectly, form all sources, whether in or out of Australia, during the income year (ITAA 97 s 6-5(2)). Assessable income also includes statutory income (ITAA s 6-10). Therefore, if [person] is a resident taxpayer of Australia, they will be assessed on all sources, whether in Australia or elsewhere (ITAA 97 s 6-5(2)).
A non-Australian resident is taxed on: Ordinary income derived directly or indirectly from all Australian sources during the income year (ITAA 1997 s 6-5(3)(a)); Other ordinary income that a provision includes in your assessable income for the income year on a basis other than having an Australian source (ITAA 1997 s 6-5(3)(b)); Statutory income derived from all Australian sources (ITAA 1997 s 6-10(5)(a)); Other statutory income that a provision includes in your assessable income for the income year on a basis other than having an Australian source (ITAA 1997 s 6-10(5)(b)).
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IS THE TAXPAYER AN AUSTRALIAN RESIDENT?
The residence of a taxpayer is determined from year to tear (s 4-10 ITAA97). Australian resident means a person who is an Australian resident under the ITAA 1936 (ITAA97 s 995). A resident or resident of Australia is a person, other than a company, who resides in Australia (s 6(1) ITAA36). TESTS FOR DETERMINING RESIDENCY The four tests of residence are alternatives and only one need to be satisfied to be a resident. The tests are: (a) (b) (c) (d) Common Law Test/Residence According to Ordinary Concepts The domicile Test The 183-day test The superannuation fund test
These tests determine whether a person is an Australian resident – if they do not meet at least one test they are a foreign resident. WHEN TO APPLY THE TESTS IF the taxpayer was once a resident now a non-resident: Common Law Test Domicile Test Superannuation Test
Here, the issue is whether the [taxpayer] has ceased to be a resident. Therefore, we must satisfy either the common law test or the domicile test. IF the taxpayer was a non-resident now a resident: Common Law Test 183 Day Rule
Here, the issue is whether the [taxpayer] has become a resident. Therefore, we must satisfy either the common law test of the 183 day rule.
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COMMON LAW TEST
The common law test of residence relies on the ordinary meaning of ‘reside’ to determine residency. The [taxpayer] will be a resident of Australia if they are a person who ordinarily resides in Australia. Residency is a question of fact and degree (FCT v Miller). TR 98/17 at  adopts the dictionary definition of reside, being to dwell permanently or for a considerable time, or to be settled, or have ones usual place of abode in a particular place. IF some influential events have taken place after the financial year: Events after the financial year may assist in determining residency status (FC of T v Applegate). The Commissioner considers 6 months to be a considerable amount of time for the purposes of this test, but this is not determinative (TR 98/17 at ). Residence is determined on the basis of a number of factors which must be considered, and the fact that a person is a resident of another country does not preclude a finding that they are also a resident of Australia (Gregory v FCT).
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