ASSIGNMENT

Assignment

Assignment

Question 1

He would not be considered as a tax resident in Australia. Australian tax residents are generally taxed on their worldwide income, regardless of source. Therefore it is important for individuals to determine whether they are in fact Australian tax residents. This is not always an easy question to answer.

The starting point in determining Australian tax residency is Australia's basic legislative definition. This provides that an individual will be an Australian taxation resident where that person:

?? 'resides' in Australia;

?? has their domicile in Australia, unless the Australian Taxation Commissioner ('the

Commissioner') is satisfied that their permanent place of abode is outside Australia;

?? has actually been in Australia, continuously or intermittently, during more than on half of the year of income (i.e. 183 days), unless the Commissioner is satisfied that their usual place of abode is outside Australia and that they do not intend to take up residence in Australia; or

?? is:

- a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

- an eligible employee for the purposes of the Superannuation Act 1976.

The ordinary concept of residence appears to be a relatively simple concept, however the problem that arises is that the term 'reside' is not defined within Australia's taxation legislation. Therefore, whether or not an individual 'resides' in Australia must be determined by looking at each individual's specific circumstances. In order to assist taxpayers the Commissioner has issued a ruling which is based on a number of principles laid down by Australian courts over the years, and lists the types of issues that the Commissioner will consider when determining whether an individual resides in Australia for tax purposes.

The concepts associated with tax residence in Australia can be extremely complex, in particular in situations where an individual is located in Australia for short periods of time throughout an income year or where the individual is resident in both Australia and another country. Careful travel records should be maintained and we recommend these records are reviewed regularly to ensure that the residence status of an individual is determined correctly.

Resident taxpayers are generally taxed on worldwide income, with an offset forforeign tax paid on foreign income up to the amount of Australian tax payable on that income. Australian residents in certain lines of work overseas (e.g. aid, charity or government work) for a continuous period of 91 days or longer are exempt from Australian tax on their foreign earnings from that continuous foreign service period if the earnings are generally taxable in the country where sourced and are not exempt from tax by reason of a tax treaty in the foreign country. Nonresidents in Australia are taxable only on Australia-source income. Temporary residents are taxable on their worldwide employment income and on Australiansource investment income.

Residence - For tax purposes, an individual is resident if he/she ordinarily resides in Australia or satisfies 1 of the following statutory tests: is domiciled in Australia (unless the Commissioner of Taxation is satisfied that the individual's permanent home is elsewhere); has ...