Tax Related Information: Sole Trader And Employee Activities, Australian Residential Status

Part 1

Computation of Net Tax Payable and FBT (GST Credit):

To Mr Dale

Respected Sir

I would like to draw your kind attention in this statement of advice concerning the net sum of tax payable from the business operations stood $73,269. I would like to recommend you in agreement with section 8-1 of the ITAA 1997 that you can claim deductions for the total sum of 83,865 incurred by you. Expenses such as renewal of lease and superannuation guarantee to employees can be considered for deductions. I would further recommend you in conformity with section 8-1 of the ITAA 1997 that expenses such as telephone, electricity and stationary charges are business expenditure and can be claimed for deductions. Citing a reference from High Court in FCT v D.P Smith 81 ATC 4114 insurance that is paid by you for income protection from disability can be claimed as deductions.

I hope that the above stated recommendations help in reducing your tax liability and hope that it served as a useful tool for you.

As defined under the taxation rulings IT 2650 and subsection 6 (1) of the ITAA 1936 an Australian resident consists of person having a permanent place of residence in Australia except the commissioner is satisfied that the person place of abode is out of Australia (Ato.gov.au 2017). The present case of Emity is based on assessment of residential status because she was an Australian before moving to Kiribati for employment. To evaluate the residential status of Emity the following tests are executed;

The domicile test can be regarded as the lawful notion where an individual obtains the domicile of their origin. As noticed Emity and her husband, being an Australian resident moved Kiribati and was determined to live for two years (Barkoczy 2016). However, her husband was infected by food poisoning and had to return Australia following eighteen months tenure. As found in the present state of Emity despite having Australia domicile she went to Kiribati for employment but did not intended to establish a permanent place of resident outside Australia.

Citing the case of F.C of T v Applegate (79 ATC 4307) (1979) the place of abode of the taxpayer was in Australia. An individual leaving Australia temporarily would be regarded to have maintained their Australian residential status unless it appears that an individual acquired a different domicile of their own choice or by operation of law (Woellner et al. 2016). Emity under subsection 6 (1) of the ITAA 1936 would be regarded as an Australian resident since the actual and intended length of stay outside Australia was only for 18 months to conclude that her actual place of residence was in Australia.

An individual residing in Australia for more than six months of the income year either continuously or with breaks would be regarded as an Australia resident. In the current study Emity remained outside of Australia from 2015 to June 2016. She will be considered as the Australian resident because the couple have house in Australia and the 183 days is applied based on income year and not on income year (Robin 2017). Citing the case of “F .C. of T. v. Applegate (79 ATC 4307; (1979) 9 ATR 899” despite Emity’s absence from Australia her domicile was in Australia and return to Australia after eighteen months of employment fulfils the 183 days test.

The ordinary concepts test forms the primary test in determining the residential status since Emily resided in Australia. As held in the case of Miller v FCT 1946 73 CLR 93, the history of presence and nationality for Emity is Australian and forms the fact and degree in determining her physical presence in Australia. Emity did not reside in Kiribati even though she was physically present there but her temporary nature of stay could not be said that she reside in Kiribati (Ato.gov.au 2017). The fact that Emity physical presence in a place will not be considered sufficient to conclude that Emity resided in Kiribati, therefore she is an Australian resident.

The superannuation test ensures that an Australian employees working at the Australian posts overseas will be considered as the Australian residents (Ato.gov.au 2017). In the present case of Emity, she is noticed to be working in Australian post overseas and it is presumed that she is member of the superannuation scheme created by the deed defined under the Superannuation Act 1990. Emity is regarded eligible employee for the purpose of Superannuation Act 1976 and would be considered as the Australian resident.

References: 

Ato.gov.au. (2017). Residency – the resides test. [online] Available at: https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Residency/Residency—the-resides-test/ [Accessed 8 Aug. 2017].

Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.

ROBIN, H., 2017. AUSTRALIAN TAXATION LAW 2017. OXFORD University Press.

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