Australian Taxation Law: Determining Residency Status And Assessable Income

Guidelines for Assessing Australian Residency for Tax Purposes

a) According to the guidelines for assessing the Australian residency for tax purpose, Marty is an Australian resident and he has to pay taxes for his foreign and income as well as for the income he earned in Australia. To determine the tax condition of an individual first requires verifying if the individual is an Australian or foreign resident for taxation purpose.

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An individual can be considered as the Austrian residents for the tax purposes. However, the individual is not an Australian citizen or a permanent resident of Australia. On the other hand, an individual may have a visa for entering the country Australia however, the individual may not be considered as an Australian resident for the taxation purpose (Chow, 2015). To determine the residency status of an individual have to work out on his/her residency status: if the individual is in Australia for working holiday, if an individual leaves Australia to work for an organization of outside Australia and the individual relocate in the destined country.  As per the Section 6-5(1) Of the Income Tax Assessment Act 1936, there are four tests for determining the residency status of an individual. The primary test for the tax residency is referred test. In the case of an individual resides in Australia, and then the individual is considered as the Australian residents for taxation purpose and does not require any other residency test. In the case of an individual does not satisfy the residency test, the individual remain is considered as an Australian resident in case the individual satisfy any one of the three statutory tests:

The domicile test: the individual is an Australian resident if that individual’s domicile is in Australia. The individual to be considered as domiciled in Australia should have a permanent place of Adobe in Australia (Clark, 2013). Under the domicile Act 1982, an individual is considered as domicile if the individual has a permanent place of residency in Australia.

The 183-day rule: as per the Australian Taxation Law, if a person stays 183 days or more in Australia is considered as an Australian resident for tax purpose.

The superannuation test: As per the Superannuation Act 1976, a person will be considered as the Australian resident if the person is an eligible worker for the Superannuation Act 1976.

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The Australian residents are taxed on the Australian source income as well as for the foreign source income as per 6-5(1-3) Of the Income Tax Assessment Act 1936. In Marty’s case, Marty is an Australian resident as under the domicile Act 1982, he is considered as the Australian domicile as he has residential home in Australia three Australian commercial investment properties and thus considered as Australian resident for tax purpose (Cooper, 2008). However, in spite of an Australian citizen for the year of 2012/2013 Marty must not be considered as the Australian resident for the tax purpose as during this particular financial year he never come to Australia and resided in USA in order to do business which he opened in Silicon Valley USA. Because, during the specific period he did not return to Australia and doing business over there in USA he is not considered for the tax purpose in Australia, instead of he has to pay tax in the USA on the income he earned by doing business over there. Afterwards, he has to pay tax in the both countries in UAS and in Australia. Because he was doing business in USA he has to pay tax there, and as he is an Australian resident he has to pay the tax over here in Australia also. Therefore, he is considered for the dual taxation (Esenwein, 2005).          

Determining Residency Status for Tax Purposes

b) As per the Australian taxation law the company opened by Marty in Silicon Valley USA, named Planks Pty Ltd is not considered as the Australian resident company for taxation purpose. However, the company has been opened by Marty an Australian citizen and Marty is eligible for the tax purpose in Australia.  The company Planks is situated in Silicon Valley USA and apart from Marty, there are five more partner or shareholders of this business and all the partner’s liver in different city in the world (Esenwein, 2006). However, for the first financial year Marty was the only director of the company but in the second year the company was expanded as well as the shareholders of the company has appointed a board of directors as well as all the directors of the board reside in the United State of America (USA). However, Marty was the managing director of the company and made the entire important decision for the company the company still cannot be eligible for the resident company of Australia till 2014/2015 when Marty retuned to the Australia and residing in Australia Marty made the entire important management decision on behalf of the Planks Pty Ltd. Moreover, he carried out all the associates business activities like signing important contract as well as trading platform from Australia during this financial year Marty’s income was $ 400,00 as well as the company has made $ 25,000,000 profits during this financial year (Goerke, 2014). However, the year of 2014/2015, Planks Pty Ltd is not considered as the resident Australian company. However, before the 2014/2015 financial year also the company must not be considered as resident Australian company as per the Australian Taxation Office.  According to the Australian Tax Office, the company Planks Pty Ltd was not considered as resident Australian company for the year before 2014/2015 as during that year any function of the company is not performed from Australia. However, after the year of 2014/2015 the company is not considered though the resident Australian company as its managing director Marty runs the main business activities of the company from the soil of Australia but the company has not any office in Australia and not registered as a Australian company.

  1. c) As Marty is assessed as the Australian resident for the taxation purpose he must pay the taxes on the income he earned. He must lodge income tax return in Australia. (Woellner et al., 2016) He must add the income he has earned from the entire jobs across the globe. According to the Australian Taxation Office (ATO) the following rate of tax have pay the tax payer for the year of 2015-2016:

Taxable income

Tax on this income

0-$80,000

32.5 c for each $1

$80,001- $180,000

$26,000 plus 37C for each $1 over $ 80,000

$180,001 and over

$ 63,000 plus 45c for each $1 over $1 over $180,000

During the financial of 2012/2013 Marty’s income was $10,000 but this income will not have considered as his assessable income as he did not return to Australia during this financial year.

Assessable Income Under Australian Taxation Law

In a 2nd year during the years of 2013/2014, Marty’s income was $200,000and it is an assessable income as during this period he returned Australia (Goode, 2010).

Hence Marty has to pay: $63,000 + 45c*$20,000 as he earned $200,000 ($200,000-$180,000) = $20,000

Or $63,000 + $9,000 = $ 72,000

In the 3rd financial year during 2014/2015 Marty’s income was $400,000 and it is an assessable income.

Marty has to pay $63,000 + 45c*$220,000 as he earned $200,000 ($400,000-$180,000) = $220,000

Or $63,000 + $99,000 = $ 1620,000

In the year of 2015/2016 Marty’s income was $100,000 + $ 50,00,000 and it is an assessable income.

= $5100,000

Hence Marty has to pay: $63,000 + 45c*$4920,000 as he earned $5100,000 ($5100,000-$180,000) = $4920,000

Or $63,000 + $22,14,000 = $22,77,000.

d) As the company is not considered as an Australian resident company hence the company does not have to pay any tax (Woellner, 2007).

The case study consists of the following details which are depicted to be consisting of the assessable income tax laws. The Rommy in the case study is depicted as the owner of the rural New South Wales in the year 2000. In this case study, he had bought this countryside area for the purpose of showing the Australia for the purpose of spending the weekend and also started farming on the land. Apart from this, he opened a grape farm from which he made a few crates of wine, and also he started reserving them for the purpose of achieving the quality wine (Handford, 2012). Later on, Rommy drank five boxes of wine and also he distributed ten boxes to his friends. Then he also 20 boxes in the local market during the time of the occasion and also sold another 20 boxes outside the farm property at the price of $20 per bottle. In the year 2015, he sold the farm at $1500,000 which he had bought at $500,000. 

As per the case study, the issue clearly shows that Rommy is not paying off is assessable income tax to the government of Australia (Woellner, 2013). As the income of the Rommy is defined, it is depicted to be coming under the assessable income. The enhancement of the description can be defined by showing the explanation of the case which is being undertaken in this case. The construction of the case can be made by providing the description of the assessable income to the case study as shown in this case (Krever, 2007). The structure of the case study can be shown by enhancing the assessment of the income tax. The explanation of the assessable income can be easily illustrated by showing the explanation of the definition. The assessable incomes are defined as the income received by the owner from the other foreign incomes or the business. The exceptions that are considered in this case also include the hobbies that are earning income for the owner is also included in the particular income. It also enables the generation of the income tax for the government of the Australia. The accounting method is also used for affecting the amounts that are requisite for the particular income which is being included in this case and also the enhancement of the income is being made by showing the enhancement of the structure of the study (Mason, 2012). The calculation of the assessable income is made by the gross earnings that are included in the form of the gross earnings and the proceeds that result in the form of the ordinary course of the income. The enhancement of the income is being made by showing the number of the payments that are being made as a part of the business which is requisite for the purpose of having the assessable income. The incomes are depicted to be earned from the farm, but also it includes the overseas business activities that are forming the part of the laws which enables the Rommy for the payment of the tax. The Australian tax is being also represented as the form of the business that shows the enhancement of the business by including the various values which are included in the form of the tax (Woellner, 2005).

Domicile Test

Other than these, the personal service income is also included in the part of the assessable income, and also it enables the individual production of the personal skills or the efforts which are included as an individual report. The income is being classified as the form of the skills which is being used in the form of the case study, and also it simply indicates the PSI rules which must be included for the special tax in the form of the income (Parsons, 2011). Therefore the generation of the income must be included in the form of the claimed deductions which must be provided by the Rommy which enables the structuring of the report. Therefore the report simply indicates the taxation norms and the regulations that must be implemented on the Rommy for the research and also the enhancement of the structure of the case study as per the Taxation Law of Australia can be identified. The other rules and the regulations can be easily included as per the Section (ss) 995-1 ITAA 1997, Section 6(1) (a) ITAA 1936 and the TR 98/17 is being applied for the purpose of showing the appropriate construction of valid case which is being shown to be carried out the Rommy. Therefore the construction of the case study is being provided by the following clauses which are described as follows:-

Must be the residence of Australia and the common law tests must be included.

Must be the domicile in Australia and unless the Cmmr is being depicted to be satisfied regarding the permanent place adobe of the Australia (Prince, 2007).

The income must be depicted to be generated throughout the year in the form of the various businesses that are carried out in this case. Therefore the enhancement of the laws can be easily depicted by showing that the Rommy is the domicile of the Australia (Viney and Phillips, 2015).

As per the case of Levene v IRC and the Lysght v IRC, the justification to the case can be easily provided by showing the enhancement of the form of the research which is being undertaken in the form of the laws and also the construction of the case clearly shows the appropriate enhancement of the study. The study can be easily explained in the form of indicating the justifications to the case and also the construction of the case can be easily represented in the form the justifications as provided in this case (Robertson, 2008). Henceforth, the issue is being appropriately explained by showing the enhancement of the case in which Rommy is found to be guilt and also the appropriate explanation to the case can be easily provided by showing the implementation of the Acts and the Sections is depicting to be showing the enhancement of the system. Thus the structure can be easily depicted by showing the property evaluation which is identified as the tax assessable and also the enhancement of the tax is being depicted by showing the structure of the case. The proper structure of the tax is being shown by showing the enhancement of the tax and is also indicated by showing that the financial amounts are appropriately will come under the assessable income and also the property will be includes with the selling of the goods will be considered as the assessable income and also the structure can be easily evaluated by showing the proper implementation of the Australian Taxation frameworks (Seibert, Booth and Weiner, 2011). Therefore the income can be indicated as the tax deductive before Rommy sold off its property and also the amount gained by selling the farm is also indicated as the assessable income which is being taxed on the basis of the business value. Therefore the illustrations that are made are shown to the context with explaining the past and the represent conditions as seen in this case study. It also shows the enhancement of the income which is illustrated to be showing the appropriate enhancement of case study that was undertaken for the explanation (Shvedov, 2008).   

References

Chow, M. (2015). Australian master tax guide 2015. CCH Australia.

Clark, C. (2013). National Income 1924-1931. Hoboken: Taylor and Francis.

Cooper, G. (2008). Executing income tax. [Sydney]: Australian Tax Research Foundation.

Esenwein, G. (2005). Individual income tax rates. 1st ed. [Washington, D.C.]: Congressional Research Service, Library of Congress.

Esenwein, G. (2006). Individual income tax rates. 1st ed. [Washington, D.C.]: Congressional Research Service, Library of Congress.

Goerke, L. (2014). Income tax buyouts and income tax evasion. International Tax and Public Finance, 22(1), pp.120-143.

Goode, R. (2010). The corporation income tax. 1st ed. New York: J. Wiley & Sons.

Handford, P. (2012). Limitation of actions. Pyrmont, N.S.W.: Thomson Reuters.

Krever, R. (2007). Australian taxation law cases 2007. Pyrmont, N.S.W.: Lawbook.

Mason, T. (2012). Income tax law. [N.S.W.]: Taxation Concepts.

Parsons, R. (2011). Income taxation in Australia. Sydney, NSW: Thomson Reuters.

Prince, J. (2007). Tax for Australians for dummies.

Robertson, P. (2008). Australian master tax guide 2008. Sydney: CCH Australia.

Seibert, K., Booth, M. and Weiner, D. (2011). Improving CBO’s methodology for projecting individual income tax revenues. 1st ed. [Washington, D.C.]: Congress of the U.S., Congressional Budget Office.

Shvedov, M. (2008). Statutory individual income tax rates and other elements of the tax system. 1st ed. [Washington, D.C.]: Congressional Research Service.

Viney, C. and Phillips, P. (2015). Financial Institutions, Instruments and Markets. North Ryde: McGraw-Hill Education.

Woellner, R. (2005). Australian taxation law 2006. Sydney, N.S.W.: CCH Australia.

Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.

Woellner, R. (2007). 2007 Australian taxation law. North Ryde, N.S.W.: CCH Australia.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. (2016). Australian Taxation Law 2016. Melbourne, Vic.: Oxford University Press.