BTC3150 Lecture Notes - Lecture 2: Qantas, Capital Asset, Labor Rights
Week$2a:$Residence$&$Source$
!
General!principles:!
• A!resident$of$Australia!for!tax!purposes!will!be!taxed!on!income!from!all!sources:!
– See,!s$6-5(2)!ITAA97.!
• A$foreign$resident!for!tax!purposes!will!be!taxed!on!income!from!Australian!sources!
only:!
– See,!s$6-5(3)!ITAA97.!
!
Tax$residency:$impact$on$individual$taxpayers$
• Individual!tax!rates:!
§ Differ!depending!on!whether!the!individual!tax!payer!is!a!resident!for!tax!
purposes!or!a!foreign!resident.!
§ Broadly,!a!foreign!resident!does!not!receive!the!benefit!of!the!tax-free!
threshold.!
• Foreign!residents!:!
§ do!not!have!access!to!many!personal!tax!offsets.!
§ not!liable!for!the!Medicare!levy.!
To$determine$taxpayer’s$ordinary$income.$
When$is$a$taxpayer$a$tax$resident$of$Australia?$
!! !
$
A) Individuals$S6(1)$ITAA36$
Only!one!of!the!four!tests!needs!to!be!satisfied!to!be!tax!resident:!
!
!" #$%&'$%()$%)(*+$%&'$,-$(.--/+'&,0()/(/+'&,.+1(-/,-$2)%"(
• Determination!of!tax!residency!rests!on!a!question!of!fact!and!degree:!!"##$%&'&()*&
(1946).!
• Term!“resides”!is!not!defined!in!statute.!
!
!!!!!!!(+,-.%/&,.0/"1$%$1&23&-4$&,.5%-/&
• Time!physically!spent!in!Australia.!
• If!the!person!is!a!visitor,!the!frequency,!regularity!and!duration!of!visits:!!
)67&89)&'&63/+:4-&;<=>?@&A&7&.0$&B$$C&$+,4&D.0-4&"0&-4$&EFG&$/-+2#"/4$1&+&H#+,$&.I&
+2.1$&"0&8%$#+01G&4+1&2+0C&+,,.50-/&"0&2.-4&EF&J&8%$#+01K&7&L&%$/"1$0-&2+/$1&.0&
-4$&%$:5#+%"-3&.I&'"/"-"0:&EF&15$&-.&.2#":+-".0.!!
• Purpose!of!the!visits!to!Australia!and!abroad.!
• The!maintenance!of!a!place!of!abode(home)!in!Australia!for!the!taxpayer’s!use.!
• The!person’s!family,!business!and!social!ties:!!
CL:!6$'$0$&'&89)&[1928]!–!purpose!were!nothing!more!than!temporary!(eg!visit!
relatives,!obtain!medical!advice,!attend!religious!ceremonies)!
• The!person’s!nationality!may!be!considered!for!borderline!cases.(not!a!strong!
factor!though)!
!
&&&&&&&&&*4$&).DD"//".0$%&.I&*+M+-".0N/&'"$B&
• The!Commissioner!places!emphasis!on:!
–Intention!or!purpose!of!presence!
–Family!and!business!or!employment!ties!
–Maintenance!and!location!of!assets!
–Social!and!living!arrangements.!
• In!addition!to!the!above!behavioural!characteristics!of!the!taxpayer,!the!
Commissioner!considers!there!must!be!sufficient!time!elapsed!to!demonstrate!
continuity,!routine!or!habit!(physical!presence!in!Aus)!
Example:Ruling!TR!98/17!
A) Bjorn!18!month!Contract,!did!not!perform,!went!back.!Resident-intented!to!stay!
for!18mtnh!w!his!family,behaviour!consistent!wit!intention!
B) Michael!uni!–!Foreign!resident!as!he!did!not!exhibit!consistent!with!residing!to!
Aus-!returns!to!SA!after!8!onth!course.!
- 183!test!considered!–!stll!not!a!resident!as!his!usual!place!of!abde!is!outside!
of!Aus!&!does!not!intend!to!take!up!residence!in!Aus!
C) Michelle-!conduct!reasarch,!family!in!borsedaux,!had!to!go!back.!Foreign!
resident-quality!of!her!stay!&!charater!are!closer!to!a!visitor.!
!
3" 4/5&-&6$()$%)(*78$+$(1/9(+$%&'$:6&;$"<(%).)9)/+1()$%)(
• An!individual!is!a!resident!of!Australia!if!his!or!her!domicile!is!in!Australia,!unless!
the!Commissioner!is!satisfied!that!the!person!has!a!permanent!place!of!abode!
outside!Australia.!
• RuLE!OF!THUMB: 2 YEARS ITA 2650!
If!a!taxpayer!leaves!Australia!and!intends!to!return!within!2!years,!then!they!will!
not!have!a!permanent!place!of!abode!overseas.!(Still!consider!other!factors)!
• Domicile’!is!determined!according!to!the!O.D","#$&L,-&<=?>7!
–Domicile!of!origin!at!birth!
–Domicile!of!choice:!country!where!the!taxpayer!intends!to!make!their!home!
indefinitely.!
• Generally!applies!to!individuals!moving!overseas!(eg,!usually!as!a!work!posting),!!
!
&&&&&&&P$%D+0$0-&H#+,$&.I&+2.1$&.5-/"1$&L5/-%+#"+&
• The!domicile!test!does!not!apply!when!the!individual!can!demonstrate!that!he!or!
she!does!not!have!a!“permanent!place!of!abode!outside!Australia”.!
– CL:!=$'$+.6(>/55&%%&/,$+(/?(@.A.)&/,(;(B226$0.)$C(
–!Taxpayer!moved!to!Vila!and!stayed!there!for!two!years!but!returned!on!one!
occasion!when!his!wife!had!a!baby.!The!taxpayer!became!ill!iand!returned!to!
Australia.!
–High!Court!held!that!permanent!does!not!mean!“forever”-!not!ever!lasting!and!
is!assessed!objectively!each!year. the!taxpayer!had!abandoned!his!Australian!
home!and!intended!to!stay!in!Vanuatu!for!an!indefinite!period.!Had!a!place!of!
abode!outside!Aus!–!non-resident.!
– CL:!FCT!v!Jenkins!–!3!years!is!more!than!temporary!(non-resident)!The!taxpayer!was!
considered!to!have!a!permanent!place!of!abode!outside!Australia!he!intended!to!
stay!with!his!family!in!Vila!for!3!years!at!least!and!then!further!extend!their!stay!
overseas.!He!was!considered!not!to!be!a!resident!despite!not!selling!his!Australian!
house!(though!attempts!were!made),!retaining!the!furniture!in!Australia,!receiving!
child!endowment,!and!having!to!return!after!18!months!due!to!illness.!!
&
&&&&&&&&*4$&).DD"//".0$%&.I&*+M+-".0N/&'"$B&
• Ruling!IT!2650!whether!a!taxpayer!has!a!“permanent!place!of!abode!outside!
Australia”.!Factors!include:!
–Intended!and!actual!length!of!stay!in!the!overseas!country;!
–Intentions!to!stay!in!the!overseas!country!permanently!or!temporarily;!
–Location!of!established!home;!
–Duration!and!continuity!of!taxpayer’s!presence!in!overseas!country;!
–Durability!of!Australian!associations!(eg,!place!of!education!of!taxpayer’s!children).!
!
D" !ED<'.1()$%)(
F9%)(G.)&%?1C(B(H(I(
a) An!individual!is!a!tax!resident!of!Australia!when!his!or!her!physical$presence!in!
Australia,!continuously!or!intermittently,!is!for!more$than$one-half$of$the$income!
year.!
b) Exceptions:!
i)!If!the!Commissioner!is!satisfied!that!the!individual’s$usual$place$of$abode$is$
outside$Australia;$and!
ii)!The!individual!does!not!intend!to!take!up!residence!in!Australia.!
•Working$holiday$visa$holder!who!was!in!Australia!for!more!than!183!days!was!not!a!
resident!as!their!“usual!place!of!abode!was!outside!Australia”:!
CL:!9$&F.5/-%5H&'&()*&(2015)!
~!Special!rules!apply!to!working!holiday!makers:!
Ø TR!98/17!-183!DAYS!&!intends!to!take!up!residence!in!Aus!
NOTE:!Domicile!–!PERMANENT!PLACE!
!!!!!!!!!!!183!day!test!–!USUAL!PLACE!
!
J" G92$+.,,9.)&/,()$%)(
• Applies!in!relation!to!Commonwealth!superannuation!funds.!
• Under!the!superannuation!test,!the!member!of!a!Commonwealth!superannuation!
fund!(ie,!Commonwealth!public!servants)!and!the!member’s!family!are!deemed!to!
be!tax!residents!of!Australia.!
!
!
Document Summary
General principles: a resident of australia for tax purposes will be taxed on income from all sources: See, s 6-5(2) itaa97: a foreign resident for tax purposes will be taxed on income from australian sources only: Differ depending on whether the individual tax payer is a resident for tax purposes or a foreign resident. Broadly, a foreign resident does not receive the benefit of the tax-free threshold: foreign residents : Do not have access to many personal tax offsets. When is a taxpayer a tax resident of australia: individuals s6(1) itaa36. Factors considered by the courts: time physically spent in australia. If the person is a visitor, the frequency, regularity and duration of visits: Cl: irc v lysaght [1928] - : one week each month in the uk, established a place of abode in ireland, had bank accounts in both uk & ireland.
