As Yvonne wants to understand her tax situation, she first is required to acknowledge if she is a resident of Australia for tax purposes or not. The terminology of "resident of Australia" or just "resident" has been defined by the Income Tax Assessment Act 1936 in subsection 6(1).
Yvonne Merrick is a British citizen who left Britain and moved to Australia on a working visa on January 2015. On 10 July 2017 she travelled back to the UK for personal reasons and worked in odd jobs until 1 April 2018 when she returned to Brisbane and resumed her position at the hospital. Merrick bought and maintained a permanent residence in Brisbane and holds an Australian bank account (ATO 2020). The taxation period in Australia starts on 1 July and ends on June 30 (Income Tax Assessment Act-1997 2020).
Resides test
The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and you don't need to apply any of the other residency tests. Some of the factors that can be used to determine residency status include:
AS per resides test, Merrick can be considered to be an Australian resident for the taxation year 2017/18 as per taxation laws (Applegate per Franki J 79 ATC at p.4309; 9 ATR at p.902).
Domicile test
Yvonne Merrick is not an Australian resident because his domicile is not in Australia, he has a place that is his permanent home in Britain, the same has been contended in the case of Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.).
Yvonne left Australia on 1 July 2018, which is the first day of the taxation year 2018-19. He left Australia for an indefinite period and for the whole year, did not return into the territories of Australia. He took-up a full-time position in a UK hospital at the post of senior administrator (ATO 2020).
As per the above discussion and considering Yvonne is a British domicile, he cannot be considered to be an Australian resident for taxation purposes and all of his Australian income will be taxed as a foreign resident for the taxation year 2018-19. Also, since 1 July 2018 Yvonne left Australia indefinitely, therefore on the basis of 183 days test, Merrick cannot be considered to be an Australian resident for the taxation year 2018/19 (Henderson v. Henderson [1965] 1 All E.R.179).
Part 1): Calculation of Merrick’s Australian assessable income for the 2017/18 and 2018/19 tax years.
Taxation Year |
2017/18 |
|
Particulars |
Assessable |
Non Assessable |
Income From Salary |
||
UK (Foreign) Income |
28500 |
|
Work as hospital administrator in Australia |
15000 |
|
Bonus |
12000 |
|
Interest from savings from bank |
2000 |
|
Fully franked dividend |
700 |
|
Total |
57500 |
700 |
Taxation Year |
2018/19 |
|
Particulars |
Assessable |
Non Assessable |
Rental Income |
26000 |
|
Interest from savings from bank |
2400 |
|
Fully franked dividend |
900 |
|
Total |
28400 |
900 |
Part 2): Advice to Yvonne regarding foreign tax paid in the UK for the 2017/18 tax year and calculation of tax offset amount.
Calculating foreign income tax offset
Income from UK work |
25000 |
Foreign taxes paid |
4500 |
tax on Australian Income of 15000 |
0 |
Tax offset |
-1000 |
Assessable income |
28500 |
ATO. (2020). Deductions you can claim. Retrieved from https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/
ATO. (2020). General Depreciation rules – capital allowances. Retrieved from https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/General-depreciation-rules---capital-allowances/
ATO. (2020). Legal Fees. Retrieved from https://www.ato.gov.au/Individuals/myTax/2018/In-detail/rent/?anchor=Legalfees
ATO. (2020). Work out your tax residency. Retrieved from https://www.ato.gov.au/individuals/international-tax-for-individuals/work-out-your-tax-residency/
Australian Government. (2019). Australian Taxation Office. Retrieved from https://www.ato.gov.au/Rates/Individual-income-tax-rates/
Australian Government. (2019). Australian Taxation Office. Retrieved from https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/self-education-expenses/#twofif
Braithwaite, V., & Reinhart, M. (2019). The Taxpayers' Charter: Does the Australian Tax Office comply and who benefits? Centre for Tax System Integrity (CTSI), Research School of Social Sciences, The Australian National University.
Income Tax Assessment Act 1997. (2020). Act No. 38 of 1997 as amended. Retrieved from https://www.legislation.gov.au/Details/C2006C00472/d6093a59-8622-46b1-8d5b-6575302e5592
Applegate per Franki J 79 ATC at p.4309; 9 ATR at p.902
Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Law Assignment Help
Get 24x7 instant assistance whenever you need.
Get affordable prices for your every assignment.
Assure you to deliver the assignment before the deadline
Get Plagiarism and AI content free Assignment
Get direct communication with experts immediately.
Get
500 Words Free
on your assignment today
It's Time To Find The Right Expert to Prepare Your Assignment!
Do not let assignment submission deadlines stress you out. Explore our professional assignment writing services with competitive rates today!
Secure Your Assignment!