Australian Taxation Law
Week 2 – Residence and Source
Residents:
* Section 6-5(2) ITAA97 states that assessable income includes ordinary income derived directly/indirectly from all sources, in and out of Australia, during the income year. * Section 6-10(4) ITAA97 states that assessable income includes statutory income from all sources in and out of Australia.
Non-residents: * Section 6-5(3) ITAA97 states that assessable income includes ordinary income derived directly/indirectly from all Australian sources during income year * Section 6-10(5) ITAA97 states that assessable income includes statutory income from all Australian sources.
Definition of resident:
Section 995-1 ITAA97 provides that an Australian resident means a person who is a resident of Australia for purposes of ITAA1936.
Section 6(1) ITAA1936 contains tests of residency for both individuals and companies.
Individual Test for Residency Section 6(1) ITAA1936: 1. Ordinary concepts test
A common law test on a person who resides in Australia. * Levene v IRC (1928)
The taxpayer, a UK resident, retired from business and sold his house. For the next two years, he lived in hotels in UK and for the following five years, he lived in hotels in UK and overseas. During the five years, he spent four to five months a year in UK for medical, family and religious purposes. The Court held that the taxpayer is a UK resident until he took up a lease on a flat in Monte Carlo. This is based on the fact that the overseas trips are temporary and the taxpayer still has ties in the UK.
* IRC v Lysaght (1928)
The taxpayer partially retired, sold his home in England and moved to Ireland. However, he remained a non-executive director of his family company. He travelled to England for a week every month, staying in hotels, to attend board meetings. The Court held that the taxpayer is a resident of UK on the basis that he frequently visited England and he still has ties with it.
Factors to consider in
Residents:
* Section 6-5(2) ITAA97 states that assessable income includes ordinary income derived directly/indirectly from all sources, in and out of Australia, during the income year. * Section 6-10(4) ITAA97 states that assessable income includes statutory income from all sources in and out of Australia.
Non-residents: * Section 6-5(3) ITAA97 states that assessable income includes ordinary income derived directly/indirectly from all Australian sources during income year * Section 6-10(5) ITAA97 states that assessable income includes statutory income from all Australian sources.
Definition of resident:
Section 995-1 ITAA97 provides that an Australian resident means a person who is a resident of Australia for purposes of ITAA1936.
Section 6(1) ITAA1936 contains tests of residency for both individuals and companies.
Individual Test for Residency Section 6(1) ITAA1936: 1. Ordinary concepts test
A common law test on a person who resides in Australia. * Levene v IRC (1928)
The taxpayer, a UK resident, retired from business and sold his house. For the next two years, he lived in hotels in UK and for the following five years, he lived in hotels in UK and overseas. During the five years, he spent four to five months a year in UK for medical, family and religious purposes. The Court held that the taxpayer is a UK resident until he took up a lease on a flat in Monte Carlo. This is based on the fact that the overseas trips are temporary and the taxpayer still has ties in the UK.
* IRC v Lysaght (1928)
The taxpayer partially retired, sold his home in England and moved to Ireland. However, he remained a non-executive director of his family company. He travelled to England for a week every month, staying in hotels, to attend board meetings. The Court held that the taxpayer is a resident of UK on the basis that he frequently visited England and he still has ties with it.
Factors to consider in