International Taxation And Resident Status: A Case Study

The International Taxation Implication

Discuss About The International Taxation Bloomsbury Publishing.

I would like to draw your kind attention towards the letter of advice that is concerned on your net taxable income from your business stands $86,150. Agreeing with “section 8-1 of the Income Tax Assessment Act 1997” you shall be allowed to make entitlement for an specific deduction for the total sum of $97,550 that is incurred by you during the course of your business. Expenditure relating to the renewal of lease and superannuation guarantee provided to employee will be accounted as the permissible general deductions under “section 8-1 of the ITAA 1997” (Woellner et al., 2016). You will be able to deduct from your taxable earnings any loss or outgoing till the level that the expenses that is suffered by you is having direct association in producing the assessable income.

Further recommendations can be stated down in respect of the expenses such as telephone, electricity and stationary charges. These expenses constitute administrative business expenditure and you can claim an allowable general deductions for the same. These expenses are characterised as outgoings that is necessarily incurred under positive limbs for execution of business activities for deriving taxable earnings. Referring to the case of “Ronpibon Tin NL v Federal Commissioner of Taxation (1979)” expenditure that are satisfying the test of incidental and relevant is allowable for deductions (Barkoczy, 2016). Instances obtained from the list of expenditure provided by you also constitute insurance expenditure that is paid by you for income protection disability. Your insurance expenditure would be entitled specific deduction with respect to the provision of ITAA 1997.

Referring to the decision of tax commissioner in “High Court in FCT v D.P Smith 81 ATC 4114” the income protection disability expenditure can be regarded for deductions (Tan et al., 2016). There are expenditure such as wages and rental expenditure of $1,000 and 15,600 respectively. These expenditure is allowed for general deductions under “section 8-1 of the ITAA 1997” they satisfy the criteria of positive limbs and it is incidental to the business (Cao et al., 2015). You further reported expeditor on tax agent fees and bank merchant fees. Presumably the expenditure constitute a part of business expenditure that is incurred in producing the taxable income. Therefore, with respect to “section 8-1 of the ITAA 1997” you will be allowed to claim an allowable deductions for the tax agent fess and bank merchant fees.

Residential Status of Emily

After considering all the relevant income and transactions reported by you total amount of tax that would be payable by you stands $19545.75. You shall also be entitled to Medicare levy of 2% on your taxable income. Therefore the Medicare levy stands $1723 on your total reportable taxable income. The total amount of net tax that is payable by you following the considerations of the necessary items reported and after taking note of the relevant deductions under “section 8-1 of the ITAA 1997” stands $68,327.25.

I hope that the above stated recommendations that has been provided would be helpful in lowering the tax liability and hope that the recommendations provided has served as the useful tool to you.

The present issue is based on determining whether Amity would be considered as the Australian occupant for assessment for the income year ended 30 June 2017?

The residence is of an individual is determined under the “Domicile Act 1982”. A person would be considered as the Australian occupant if the person has maintained their domicile in Australia if the officer is content that the individual’s perpetual place of residence is outside of Australia.  

The taxation ruling of IT 2650 is concerned with providing course of action in defining whether the individual would who leaves Australia to reside in foreign nation for a provisional foreign work project ceases to be an Australian resident for income tax purpose (Braithwaite, 2017). “Subsection 6 (1) of the ITAA 1936” outlines a person to be Australian occupant if the individual has the residence in Australia except it is contented by the tax officer that the person has the perpetual place of residence outside of Australia. As evident in the current case study of Emity, being an Australian resident she undertook the decision of moving to Kiribati and determined to reside in Australia for a period of two years. As evident in the current case study of Emity in spite of moving to Kiribati she maintained her home in Australia however she does not intend to establish home permanently out of Australia.

The projected and the genuine span of stay of a person outside Australia in the abroad nation is vital. The length and the continuousness of a person’s existence in the abroad nation along with the permanency of the association that a person has with a specific place of abode in Australia (Davis et al., 2015). Similarly, in the case of Emity in spite of being away from Australia she maintained her domicile in Australia. The taxpayer Emity did not established home outside Australia neither did she abandoned any of her home or place of residence that she held in Australia. Referring to the case of “Applegate v Federal Commissioner of Taxation (1979)” the federal court viewed whether the taxpayer perpetual place of residence was outside of Australia (Saad, 2014). Additionally, the federal commissioner also stated that the permanent does not constitute perpetual or endlessly and the same is assessed based on the objectivity of each year.

Conclusion

The court of law has stated that each year of income should be looked upon separately. In the current case of Amity in important subject is that whether the taxpayer has abandoned any place of residence that she held in Australia. Amity in the current case has not abandoned her place of residence (Miller & Oats, 2016). With respect to “subsection 6 (1) of the ITAA 1997” she would be viewed as the Australian resident because the actual and the intended length of stay in Kiribati was 18 months and conclusively her permanent place of abode in Australia. As per domicile act 1982 Emity would be considered as the Resident of Australia since she has met the criteria of Domicile Test.

The 183 days’ test defines that a person who is a resident of Australia and has been existent in Australia for either continuously or in breakdowns for more six months of the income year would be considered as the Australia resident (Middleton, 2015). However, an exception to this case is that if person would not be viewed as the Australian occupant if the tax officer is satisfied that the persons permanent place of abode is outside of Australia and does not intends to take up the residency in Australia.

As evident in the current case of Emity she has remained outside of Australia during the year 2016 and only returned in 2017. Therefore, she has been outside of Australia from 2016 till July 2017. She would not be considered as the Australian resident under the 183 days’ test since she and her husband were not present in Australia. However, despite the absence of Emity from Australia she has maintained her domicile in Australia following her return to Australia. Referring to the verdict of “Applegate v Federal Commissioner of Taxation (1979)” she is said to have constructive resident of Australia (Robin & Barkoczy, 2018).

The ordinary concepts test is regarded as the primary test in ascertain the residential status of an individual. In the current context of Emily and her husband the ordinary concept test has been applied to determine the residential status (Blakelock & King, 2017). The ordinary concept test is applied since Emity has been resident of Australia. Referring to the case of “Federal Commissioner of Taxation v Miller (1946)” the history of presence and nationality for Emity is considered to be an Australian. Therefore, this forms the fact and degree in ascertaining her physical presence in Australia.

References

Emity did not permanently establish home in Kiribati and did not resided in Australia permanently. Despite the fact that she was physically present in Kiribati however the temporary nature of stay for Emity cannot be considered sufficient to determine that her permanent place of residence was outside Australia. As a result of this, Emity under the ordinary concept test will be considered as the Australian occupant since she has satisfied the conditions of Resident according to the ordinary concept.

A person under the commonwealth superannuation fund constitute a person that are eligible employee of the government and is sent aboard to carry-out the government related work (Fry, 2017). The superannuation test is usually applicable to the commonwealth public servants generally the overseas diplomats residing abroad. Similarly, in the current case of Emity she is not a government employee therefore the superannuation test would not be applicable on Emity.

On a conclusive Emily would be regarded as the Australian resident under the Domcile test since she has met the criteria set under the provision of “Domcile Act 1982”

Reference List:          

Barkoczy, S. (2016). Foundations of taxation law 2016. OUP Catalogue.

Blakelock, S., & King, P. (2017). Taxation law: The advance of ATO data matching. Proctor, The, 37(6), 18.

Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion. Routledge.

Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., … & Wende, S. (2015). Understanding the economy-wide efficiency and incidence of major Australian taxes. Canberra: Treasury working paper, 2001.

Davis, A. K., Guenther, D. A., Krull, L. K., & Williams, B. M. (2015). Do socially responsible firms pay more taxes?. The accounting review, 91(1), 47-68.

Fry, M. (2017). Australian taxation of offshore hubs: an examination of the law on the ability of Australia to tax economic activity in offshore hubs and the position of the Australian Taxation Office. The APPEA Journal, 57(1), 49-63.

Middleton, T. (2015). Banning, disqualification and licensing powers: ACCC, APRA, ASIC and the ATO–regulatory overlap, penalty privilege and law reform. Company and Securities Law Journal, 33, 555-580.

Miller, A., & Oats, L. (2016). Principles of international taxation. Bloomsbury Publishing.

ROBIN & BARKOCZY WOELLNER (STEPHEN & MURPHY, SHIRLEY ET AL.). (2018). AUSTRALIAN TAXATION LAW 2018. OXFORD University Press.

Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and Behavioral Sciences, management, 1069-1075.

Tan, L. M., Braithwaite, V., & Reinhart, M. (2016). Why do small business taxpayers stay with their practitioners? Trust, competence and aggressive advice. International Small Business Journal, 34(3), 329-344.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation Law 2016. OUP Catalogue.