BFA714 Australian Tax Law

Issues: 

Is Racheal an Australian citizen with regard to the description of occupant given in “sec 995-1 ITAA 1997” for the year ended 2019 and 2020?

Rule: 

Under “sec 6 (1)” an “Australian resident” denotes someone that has the “domicile” in Australia and unless it is proven to commissioner that an individual has fixed house outside of Australia. The explanation given in “sec 6 (1) ITAA 1936” has four substitute test which are given below.

Resides Test: This test is recognised as the dwelling in arrangement with “ordinary perceptions”. This test largely consist of to live on an enduring basis. The significant factors are;

1. Amount of time a person has spent tangibly in Australia
2. The central objective of staying at Australian and out of the country
3. The person’s family, business and societal relations.
   
   

In “Joachim v FCT (2002)” the taxpayer has retained his Australian home while at work in overseas and was held as Australian citizen.

Domicile Test: A person is held as an Australian dweller if they have dwelling in Australia, apart from the circumstances when an  individual has stable home in outside Australia. As per “IT 2650” the main factors are;

1. The aimed and actual time spent outside Australia
2. Whether the person has the plan of remaining in overseas for years and come back Australia.
3. Whether the person has abandoned his residence in Australia or has envisioned to abandon.
   
   

In “FCT v Jenkins (1982)” the taxpayer was lived in foreign for three years. He cancelled his health insurance and sold his house. The taxpayer was not regarded as Australian citizen.

The 183-Day Test: When a person stays in Australia for six or more months of an income year, he or she is an Australian resident.

The Superannuation Test: This test is applied on individuals that has commonwealth superfund membership.

Application: 

Resides Test: For the year ended 2019 and 2020 the “resides test” for Rachael is not satisfied because even though she has residential house in Australia and her family lives there. She herself is not present in Australia physically for considerable period of 2019 and 2020.

Domicile Test: For the year ended 2019 Racheal is an Australian citizen because while she was working in Canada she lived with her mother and father in her childhood home when she was not working. When she was working she lived in hotels. This implies that Racheal has not established any fixed home in 2019 while working in overseas.

However, for the year 2020, Racheal is not a resident under domicile test because she has not convincingly confirmed that her choice of residence is in Australia. Citing “FCT v Jenkins (1982)” in conditions of Racheal it is understood that her permanent home is in Canada because she has sold her Australian home and has conclusively demonstrated that her choice of domicile is in Canada.

The 183-Days Test: For both 2019 and 2020 she was in Australia for only one month.

Commonwealth Superannuation Test: This has no application in Racheal circumstances.

Conclusion: 

Racheal is an Australian citizen under sec 995-1 for the year 2019 while for 2020 her domicile is in Canada and she will be regarded as foreign resident.

References:

Krever, Richard, and Kerrie Sadiq. "Australian Taxation Law Cases 2020." (2020).

Sadiq, Kerrie, et al. Principles of Taxation Law 2020. No. 13th. Thomson Lawbook Co, 2020.

Blissenden, Michael, and Paul Kenny. "Residence tests for individuals: Impact of the Harding decision." Taxation in Australia 54.6 (2019): 302-306.

Villios, Sylvia, Michael Blissenden, and Paul Kenny. "Residence Tests for Individuals: Impact of the Harding Decision." Taxation in Australia| December (2019): 2020-112.

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