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BULAW5916 Taxation for Australian Expats Assignment Answer

BULAW5916 Taxation Law & Practice 

Assignment 

Purpose

The purpose of the assignment is to enable you to research and explore an aspect of taxation law.

Word limit

The length of the assignment is to be approximately 2,000 words. Assignments of more than 2,200 words will not be marked; those with less than 1,800 words will be at risk of failing. Please provide a word count with your assignment. Do not include any synopsis, references or bibliography in the word count. Do not use appendices or footnotes as a way around the word limit. 

Note all Federation University Australia rules relating to assessment, including those relating to plagiarism, referencing and late submission of work, apply.

Note all Federation University Australia rules relating to assessment apply.

Task

In essay style, and with the use of headings, please discuss the following implications of the judgements in these cases

  1. What are the tax implications for Australians who are living as expats in other counties?

  2. What are the implications for the application of the ordinary concepts test?

  3. What are the implications for what can constitute a permanent place of abode and why is this important?


Criteria used to grade this assessment

Analysis (approximately 60% of the marks will be allocated here):

  • Depth of understanding of the topic and identification of relevant issues

  • Clarity and coherence of the debate or discussion

  • Quality of discussion and argument

  • Attempt to canvass a range of views and to offer an individual opinion on the need for reform

Research (approximately 30% of the marks will be allocated here):

  • The use made of appropriate legal sources, in particular sections of the Income Tax Assessment Act 1936 and Income Tax Assessment Act 1997 to support your discussion

  • The breadth and use made of relevant secondary legal sources such as Government reports, newspaper reports, and academic articles

Presentation (10% of the marks):

  • Readable connected prose. Not point form summaries

  • Effective use of heading

  • Consistent and accurate acknowledgement of sources using a recognised referencing style- Both in relation to in-text referencing and list of references/ bibliography.
    Your lecturer will mark your assignment. Feedback and grades will be communicated via Moodle within two weeks of the assignment deadline or submission (whichever is the latter).

This assignment carries a 30% weighting.

Answer

Taxation for Australian Expats 


Introduction 

With the ramified Australian economic changes, taxation rules and regulations have been very complex. It is considered that the implication of the tax on the individual or taxpayer is dependent upon the residential status. The residential status is key aspects to determine whether that person would be liable to pay tax on his income or not. In this report, the implication of the taxation rules and laws on the taxpayer has been taken into consideration. However, in the starting of this report, taxation rules and laws for the Australian expats in other countries are analyzed for their taxation liabilities. Afterward, evaluation of the ordinary concept test and domicile test has been assessed to determine the residential status of the Australian people. In addition to this, permanent place of abode and individual having a permanent place of abode are assessed to determine their tax liabilities which they earn from Australia and other countries. The main purpose of this report is to assess and research the taxation implication on the individual and its aspects.  At the end of this report, key terminology related to the taxation has been divulged for the better understanding of the taxation rules and laws.  

Discussion 

Assessment of the Australian taxation rules and laws for the Australian people who expats to other countries. 

With the changes in economic, there has been increasing complexities for the assessment of the tax liabilities of the Australian expats to other countries. It is considered that before computing the taxation liabilities of the individual, it is first required to identify the residential status and source of income. Australian expats are the individual who is living in other countries In Australia, income earned by the Australian expats is deemed to be received in Australia for the services rendered by them in other countries and they will be liable to pay tax on the same. However, residency status for the individual as per the taxation rules and citizenship rules both are different. An individual may be resident of Australia as per the taxation purpose it is not necessary that he will be Australian citizen as per the citizenship rule.  There are several taxations rules which need to be abiding by the Australian expats to other countries for their taxation implications.  

Tax residency of the individual

As per the ATO of the Australian taxation authority, a person's tax residency status will be determined on the basis of the circumstances and arrangement. It is very critical to determine for the taxation purpose and tax liabilities of the individual is dependent upon the residential status of the individual. If a person is not staying in Australia consistently and randomly for at least 183 days in an income assessed year then he will not fall in the Australian residential status for the tax computation purpose and his tax will be paid in the country in which he has been residing. In addition to this, as per the taxation rules and law given under the income tax assessment Act 1977, an individual needs to comply with the residential test of 183 days for being called a resident of the Australian in the income year for tax purpose. Nonetheless, it is equivalent to half of the year and individual needs to stay in the Australia for more than half of the year either in one time or in break interval taken in a year. In addition to this, as per the superannuation test given in the the income tax assessment Act 1977 for the residential ship of the individual, it is found that government employees who are designed to work out of Australia for the government purpose will be called Australian resident even if they do not satisfy the 183 domicile test. All the earning earned by them would be liable to be taxed in the Australia only. They will not be bound to pay tax in other countries (Hoopes, Robinson, & Slemrod, 2018).

Impact of CGT due to family home in Origin country"

It is considered that ATO of the Australian taxation authority has full vested right to acquire or take over the home origin property of the Australian expats in Australia if he does not comply with the taxation implications and rules in Australia. It is analyzed that Australian expats to other country need to present all the legal paper works of his assets before leaving to other countries. This is done to keep his assets safe and secure while expats to other countries. In addition to this, assets leased or rented by the Australian expats to other people will be liable to be taxed in Australia (Jade.io 2019).

Furthermore, if Australian expats want to sell his capital assets and any of the investment in Australia then all the capital gain will be fully taxed and he needs to pay tax to Australian government within 6 months of the time of property sale in Australia. However, indexation method and deduction provisions would be available for Australian expats while computing his tax liabilities (Kohl, 2018).

Capital investment properties and assets in Australia

It is considered as per the taxation assessment act, 1936 that every individual in Australia will be liable to pay tax on the income and profit earned on the investment properties and assets in Australia. It is analyzed that Australia taxation authority has given leverage to the Australian resident to reduce their tax burden by deducting the certain eligible amount from the capital profit earned on the assets. However, an Australian resident who is not resident of Australia as per the taxation purpose will not be eligible to take any kind of deduction on their capital investment profit. Nonetheless, capital gained earned before 8th may 2012 will be exempt from these provisions and they could take the deduction on those capital gain (Smith, 2014). 

Other investments

There are several other investments which are taxed on the Australian expats. As given in the taxation assessment 1977, it is found that Australian expats will be exempt from the tax on the income earned on the shares, stock, and other specified securities. All the Australian expats are not liable to pay tax on these assets investment. However, they have to present proper documents and needs to comply with the applicable taxation rules for availing the exemptions on these certain assets (Spiro, 2018).

Allowance of the personal tax in Australia

As per the taxation rules and assessment act 1977, all the Australian expats are not liable to pay tax on the allowance of the personal tax in Australia. 

 


Tax implication

Fig 1: Tax implication (Australian Expats)

(Source: Self-created)

Ordinary concept test (Implication for the application of OCT)

In the given rules and law of taxation assessment 1977, it is assessed that while determining the tax liability of the individual, firstly, there is need to determine the taxation residential status (Australian taxation, 2017).  There is mainly four ordinary concept test which an individual needs to undertake. The first main test is ordinary concept test which reveals that individual is whether a resident or not as per the ordinary concept. There are other statutory tests which are used to in place of ordinary test such as domicile test, 183 days rule test, superannuation test. As per the Australian assessment 1977, ordinary test organized by the government to make the clear picture of the residential status of the individual in Australia. However, the first test is domicile test in which a person or individual would be domiciled in Australia normally until and unless ATO is having enough proof to determine that individual is having permanent place of Abode out of the country.  There is another testing rule which is called 183 days rule test which reflects that an individual would be Australian resident if he satisfies the period of stay in Australia for at least or more than 183 days (Woellner, et al. 2010). Nonetheless, ATO may reject this residential status if he has proof that individual is having a permanent place of Abode out of the country. Another test is called superannuation test which reveals that an individual would be Australian resident even if he does not satisfy but he 183 days but he is working as or member of government commonwealth scheme. 

Therefore, it could be inferred that a person could be liable for the tax in Australia only when he has satisfied the above given test for the tax purpose. 

Assets maintained and tax implication on the place

Australian resident as per the taxation assessment act 1977 will be to pay tax on the income and profit earned on the investment properties and assets in Australia. However, he will not be liable to pay tax on the income earned on shares and other securities in Australia (Braithwaite, 2007).

Personal belonging assets 

As per the taxation assessment 1977, individual who is having personal belonging and assets in Australia will fall under the ordinary concept test in Australia. These personal belonging and social activities include sports play in the given areas, member of the social clubs and other local items. These all the activities and income earned from these activities will be taxed. Nonetheless, these activities are also helpful to determine the resident ship of the individual for the taxation purpose as per the ordinary concept test (Kirchler,  Niemirowski, & Wearing, 2016).

Physical presence in Australia

It is analysed that an individual needs to satisfy the 183 days condition in the income assessment year. It shows that the individual needs to present physically in Australia for 183 days for being the Australian resident for tax purpose.  

Permanent place of Abode

This term could be justified by using the practical example of the case study in Australia. As per the case of Harding v Commissioner of Taxation [2019] FCAFC 29," it was suggested that being Australian citizen and being an Australian resident for the tax purpose both are way too different and these two aspects do not have a relation with each other. Therefore, both terms have their specific rules and regulations which individual needs to satisfy (Australian taxation, 2017).

Domicile

As per the domicile test, individual having assets in Australia will be domicile in Australia. However, being domiciled in Australia does not require that he needs to have permanent place of abode (Braithwaite, & Reinhart, 2019).

Harding case study analysis

After assessing the case, it is found that Harding left Australia and settled down in other country for the short period. However, he wanted to bring his family with him but failed to do so due to some situation. It was considered that as per the permanent place of abode in other countries, he is liable to make the tax on his income in other country. However, as per the permanent place of abode, a person is not visiting Australia and lives in other country permanent. In the given case, Harding is exempt from paying tax on his income to Australian government will reside in other country only. It is analyzed that an individual needs to satisfy the 183 days condition in the income assessment year for being called Australian resident in the year (McBarnet, 2013)

Conclusion 

The residential status is the key pillar while determine the taxation liabilities of the individual. The Australian expats to other countries will be liable to pay tax on the income earned or capital gain made in the Australia. However, certain exemptions and deductions are allowed to Australian expats on his income. In addition to this, in the case of Harding, he was not liable to pay tax on his income due to his permanent domicile in other countries. Now in the end, it could be inferred that proper tax planning is necessary to maintain by the individual if he wants to lower down his tax implication. 

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