Tax Law Notes

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  • Topic: Tax, Taxation, Capital asset
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  • Published : December 9, 2012
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Tax Law Exam

L. 2 Jurisdiction To Tax

Basic Formula:
S4-10 -Tax Payable = (Taxable Income x Tax rate) - Tax Offsets Taxable Year: 1 July – 30 June (note: s4-10 Note 1 – Commissioner may allow to adopt different period

Taxable Income
S4-15 – Taxable Income= Assessable Income – Deductions

Assessable Income
S6-1 – Assessable Income=
Ordinary Income S6-5 AND
Statutory Income s6-10 BUT NOT
Exempt Income s6-15

Deductions
General Deductions -s8-1
Specific Deductions -s8-5

Basic Rules
Assessable Income includes: – s6-1
For Aust. Residents = all ordinary and statutory income of Aust Resident taxpayer derived directly or indirectly from all sources, whether in or out of Australia, during income year s6-5(2) & s6-5(4) •For Foreign Residents: = all ordinary and statutory income of Foreign Resident taxpayer derived directly or indirectly from all Australian sources, whether in or out of Australia, during income year s6-5(3) & s6-10(5)

Residence
S995-1 – Aust Resident is a person who is a resident for tax paying purposes

4 RESIDENCY TESTS: s6(1) ITAA 93:
1)Ordinary Resident Test
2)Domicile Test -
3)183 Day Test
4)Superannuation Test
*Only need to satisfy one of these tests to be a resident → unless “temporary resident”

1. ORDINARY RESIDENCY TEST (common law)
TP is resident if resides in Australia:
Dwell permanently or for considerable time in a particular place- Levene (tem. visits abroad) •Question of fact, Lysaght (in UK for 1 week per month- ordinary course of life) Joachim (family home in Aus and intention to treat Aus as home) Factors in applying test ATO TR 98/17:

Physical Presence in Australia
Frequency, regularity and duration of visits
Purpose of visits in Aus and abroad
Maintenance of a place of abode in Aus
Family, business and social ties
Nationality

Levene v IRC (1928) AC 217
Reside: To dwell permanently or for considerable time in a particular place. ➢Levene was a UK resident often staying in hotels, but returning the UK 5 months a year for health, religious and family reasons. ➢Concluded his purposes abroad were temporary in nature, and he was a resident until he took a lease on a flat in Monte Carlo.

IRC v Lysaght (1928) AC 234
Moved from England to inherited estate in Ireland
Sold home in England
Non-Exec director of family company
Travelled to England approx 1 week a month
Held to be a resident in that his visits were not casual and in the ordinary course of life

Joachim v FCT (2002) 50 ATR 1072
TP from Sri Lanka working as mariner of coast of Australia with his family remaining in a family residence in Aus ➢Deemed resident given the lack of physical presence did not alter the intention to treat Australia as his home

2. DOMICILE TEST (s6(1)(a)(i))
Person is a resident of Australia if his domicile is in Australia unless the commissioner is satisfied that the TP has a permanent place of abode overseas. Individual will have Australian domicile only if it is demonstrated that he or she does not have a permanent place of abode overseas. Domicile- Jurisdiction in which person first established legal ties Two Categories of Domicile:

Domicile of origin
Domicile of Choice (migration)
oIntention to Stay Indefinately – IT2650

Permanent Place of Abode Overseas:
Question of FACT
Home or presence outside Australia – Applegate 1979 (left no assets in Aus) •Can be Permanent which does not have to be for forever – Applegate •Jenkins 1982 (attempted to sell house and close bank a/c→ permanent place of abode outside Aus) Factors to be taken into account IT 2650

Intended or actual stay in foreign country
Duration and continuity of TP’s presence in Foreign County •Establishment of home outside Australia (more than temporary) •Residence or place of abode in Australia
Durability of the association with Australia (maintenance of bank accounts,...
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