summary-lecture-1-12-summarized-notes-to-be-used-for-final-exams

Summary - lecture 1-12 -
summarized notes to be used
for final exams

Taxation Law I (University of Melbourne)

,Residency Test
Assessable income includes s6-1:
Residents
▪ All ordinary and statutory income of Australian resident TP
derived directly or indirectly from all sources, whether in or out
of Australia, during the income year: s 6-5(2) & s6-10(4).

Foreign residents
▪ All ordinary income and statutory income of foreign resident TP
derived directly or indirectly from all Australian sources
during the income year and any other amounts specifically
included: s 6-5(3) & s6-10(5)

Residence Test
• s995-1 ITAA97 states that ‘Australian resident’ is a person who
is a resident of Australia for the purposes of ITAA36.
• TP will be a resident if he satisfies any one of the residency tests:
s6(1) ITAA 36.

1. Ordinary resident test (ORT)
- Under the primary test of residency, a TP will be a resident if they
‘reside’ in Australia: s6(1).
- This is a question of fact: Lysaght (1928); Joachim(2002) to be
determined based on the TP’s individual circumstances.
- These cases would suggest that months in Australia are sufficient.
This is consistent with the Commissioner’s view in TR 98/17 where he
suggests that 6 months would be a considerable period. On balance,
could ‘reside’ here although he is only in Australia for a period of 9-10
months. This is supported by the cases and the Commissioner’s
examples in TR98/17.
- The following facts based on the guidance in TR98/17 also suggest
that ‘resides’ here:
• physically present in Australia during the tax year (must be
sufficient time to demonstrate continuity, routine or habit >> 6
months is sufficient)
• if the person is a visitor, the frequency, regularity and
duration of visits: Lysaght (1928)
• purpose of the visits to Australia and abroad (temporary or
permanent)

, • the maintenance of a place of abode in Australia during
absences
• family, business and social ties: Levene (1928)/ Joachim
(2002) >> family in Australia
• consistency of behaviour with residence


2. 183- day test >> applies to INCOMING individuals
- S6(1)(a)(ii) ITAA 1936 states that a TP will be treated as a resident
if the TP was present in Australia for 183 days or more, whether
continuously or intermittently, UNLESS the Commissioner is satisfied
that :
• the person’s usual place of abode is outside Australia
• the person does not intend to take up residence in Aus.


3. Domicile test >> applies to OUTGOING individuals (the person
moves overseas (work posting), but does not change his domicile)

- S6(1)(a)(i) ITAA 1936 states that an Australian resident includes a
person whose domicile is Australia, unless the Commissioner is satisfied
that the TP has a permanent place of abode overseas.
- Ruling IT 2650: FACTORS in determining whether a TP has a
permanent place of abode outside Australia:
• The intended and actual length of the taxpayer’s stay in the
overseas country
- In Applegate (1979); Jenkins (1982), the court suggests that
length of stay overseas (> 2 years enough to be permanent place
of abode but need to consider other factors)
• Duration and continuity of the TP presence in the overseas
country (> 2 years – permanent place of abode overseas)
• Establishment of a home outside Australia (more than temporary
accommodation but NOT backpacking)
• Existence of residence or place of abode in Australia
• Durability of association with Australia (maintaining bank
accounts in Australia, informing government departments like
Centrelink that he or she is leaving permanently and that family

, allowance payments should be stopped, education of children,
family ties)

- If a TP HAS a permanent place of abode overseas, then he is NOT a
resident in Australia.
EXAMPLE:
❖ On the facts, domicile is NOT Australia as Australia is not her
domicile of origin or domicile of choice. also not a
member of superannuation fund.
❖ As such, the domicile and superannuation tests in definition of
‘resident’ in s6(1)(a)(i)&(iii) are NOT relevant to .


4. Superannuation test
- S6(1)(a)(iii) ITAA 1936 applies to Commonwealth superannuation
fund members and their families

EXAMPLE:
Question 1 – Advice Jose as to whether he is a resident of Australia for tax
purposes for the year ended 30 June 2015.
s995-1 ITAA97 states that ‘Australian resident’ is a person who is a resident of
Australia for the purposes of ITAA36.
ITAA36 s6(1): 4 residency tests to determine whether the person is an Australian
resident. If satisfies any one of the tests then she will be assessed as a resident
for tax purposes.
1. Ordinary resident test (ORT)
Under the primary test of residency, a TP will be a resident if they ‘reside’ in
Australia: s6(1). This is a question of fact: Lysaght (1928); Joachim(2002) to be
determined based on the TP’s individual circumstances:
In Levene (1928), the court suggested that ‘resides’ means to dwell permanently or
for a considerable period of time. is only here for 9-10 months which does not
seem like a considerable period of time. However, in Levene, the court found that
the TP ‘resided’ in the UK even though he was only there for 4 or 5 months each
year. Similarly, in Lysaght (1928), the court found that a TP who was in the UK for
1 week every month ‘resided’ there. In Joachim (2002), the TP ‘resided’ in Australia
although he was out of the country for 316 days in the year. These cases would
suggest that months in Australia are sufficient. This is consistent with the
Commissioner’s view in TR 98/17 where he suggests that 6 months would be a
considerable period. On balance, could ‘reside’ here although he is only in
Australia for a period of 9-10 months. This is supported by the cases and the