Tax Law Revision Notes

Topics: Taxation, Tax, Capital gain Pages: 42 (10834 words) Published: November 4, 2013
Lecture 2 : Jurisdiction to Tax
Taxable Income
Tax Payable [s4-10 ITAA97] : (Taxable income x Tax Rate) – Tax Offsets Financial Year 1 July : 30 June
Tax Offsets [s13-1 ITAA97]
Social security benefits
Dividends (franking credits) etc
Taxable Income [s4-15 ITAA97] : (Assessable Income – Deductions) Assessable Income [s6-1] compromises Ordinary Income [s6-5] and Statutory Income [s6-10] but not Exempt Income [s6-15] Deductions include General Deductions [s8-1] and Specific Deductions [s8-5]

Australia’s Tax Jurisdiction

Australian Sourced income
Foreign Sourced Income
Australian Resident
Yes
Yes
Foreign Resident
Yes
no
Assessable income includes foreign residents [s6-1]
All ordinary income and statutory income of a ‘foreign resident’ taxpayer derived directly or indirectly from all Australian Sources during the income year and any other amounts specifically included [s6-5(3) & s6-10(5)]

Determining Residency
‘Australian Resident’ is a person who is a resident of Australia for the purposes of s995-1 ITAA36 s6(1) ITAA36 outlines 4 residency tests (only one needs to be satisfied, decided year-by-year) Assessment period is 1st July -> 30th June

Events after the year has ended can be considered to determine residency Applegate (1979)
Ordinary Resident Test (primary test)
TP is a resident if he resides in Australia
Dwells permanently or for considerable amount of time
Levene [CS 4.1] – Residency – Temporary Visits abroad
TP was a UK resident, retired and sold his home. Following 2 years he lived in a Hotel (UK), then 5 years (UK/Abroad) During this time he spent 4/5 months a year in the UK to obtain medical advice Ruled that until TP leased a flat overseas, he was a UK resident due to his strong ties and trips O/s was temporary Question of Fact

Lysaght [CS 4.2] – Residency – Moved Abroad
Frequency/regularity (1wk p/month) of his visits to UK along with strong business ties, plus original resident status was enough to convince judge of his residency.e Joachim [CS 4.3] – Family home in Aus, intention to treat Aus as home TP (mariner) and family migrated to Australia, was unable to find work, so was employed on Sri Lankan vessels which meant he was outside Australia for 316 days of each year. Concluded that TP was a resident as he maintains a home for his family in Australia, and despite absence intention to treat Australia as home has not changed. ATO TR 98/17 Outlines applicable factors

Physical Presence
Frequency, Regularity and duration of visits
Purpose of visits to Australia/abroad
Maintenance of a place of abode in Australia during absence
Family, business and social ties
Nationality
Domicile Test [s6(1)(a)(i)]
Australian resident includes a person whose Domicile is in Australia unless TP has a ‘permanent place of abode overseas’ 2 Categories of Domicile
Domicile of Origin – Citizenship
Domicile of Choice – Intention to stay indefinitely [IT 2650] Place of abode : Home/Presence outside Australia
Applegate (1979) [CS 4.4]
TP moved overseas, leaving no assets/ties to Australia. However his employment o/s was cut short. Judged to have had a domicile o/s, thus not a resident.
Permanent – Not Forever. Meaning defined by Context
But cannot be temporary or transitory
Applegate (1979) / Jenkins (1982) [CS 4.5]
TP sent o/s for 3 years, could not sell the family home and maintained a bank account in Australia. Due to failure to perform o/s, he was repatriated after 18 months. TC ruled TP had a PPoA overseas.

IT 2650 Outlines applicable factors
Intended and actual stay in the foreign country
2 years is the rule of thumb
Duration/Continuity of TP’s presence in the overseas country Establishment of a home outside Australia (not temporary)
Durability of Association with Australia
Maintaining bank accounts
Education of children
Family ties
183 Day Test [s6(1)(a)(ii)]
TP will be treated as resident if he has been here for 183 days or more unless: Does not need to be...
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