Case study 1: Residence and source Kit is a permanent resident of Australia. He was born in Chile...

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Case study 1: Residence and source Kit is a permanent resident of Australia. He was born in Chile and retains his Chilean citizenship. Kit spends most of the year working off the coast of Indonesia on an oil rig for a United States company. He was recruited for this job in Australia and signed a contract with the company here. For the last four years, Kit’s wife has lived in Australia with their two children. They purchased a home in Australia three years ago. Kit and his wife have a joint bank account with Westpac Bank. Kit’s salary is paid directly into his account. All of the family’s other investments, including a share portfolio that generates dividend income, remain in Chile. Kit gets one month off from work every third month and, on these occasions, he meets with his family either in Australia or on holidays around South America (usually in Chile where his parents reside). Discuss whether Kit is a resident of Australia and how his salary and investment income would be taxed (10 marks, max. 1000 words). Case study 2: ordinary income Explanations of the respective outcomes reached by the courts in the following cases which all involving sales of land: I. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes XXXXXXXXXXTC 159 II. Scottish Australian Mining Co Ltd v FC of T XXXXXXXXXXCLR 188 III. FC of T v Whitfords Beach Pty Ltd XXXXXXXXXXCLR IV. Statham & Anor v FC of T 89 ATC 4070 V. Casimaty v FC of T 97 ATC 5135 VI. Moana Sand Pty Ltd v FC of T 88 ATC 4897 VII. Crow v FC of T 88 ATC 4620 VIII. McCurry & Anor v FC of T 98 ATC 4487
	
Document Preview: HI6028 Taxation, Theory, Practice & 
Law 
 
T1, 2017 ASSIGNMENT 1

Due date: Week 7 
Due date: Week 8 ( Block Mode) 
Maximum marks: 20 (20%) 
 
Instructions:   
This assignment is to be submitted by the due date in both soft-copy 
(Safeassign – Bb). NO hard copy assignment will be accepted. 
 
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policy stated in the Subject Outline and Student Handbook. 
 
It is the responsibility of the student submitting the work to ensure 
that the work is in fact his/her own work. Ensure that when 
incorporating the works of others into your submission that it 
appropriately acknowledged.Case study 1: Residence and source 
 
Kit is a permanent resident of Australia. He was born in Chile and retains his Chilean 
citizenship. Kit spends most of the year working off the coast of Indonesia on an oil rig 
for a United States company. He was recruited for this job in Australia and signed a 
contract with the company here. For the last four years, Kit’s wife has lived in Australia 
with their two children. They purchased a home in Australia three years ago. Kit and his 
wife have a joint bank account with Westpac Bank. Kit’s salary is paid directly into his 
account. All of the family’s other investments, including a share portfolio that generates 
dividend income, remain in Chile. Kit gets one month off from work every third month 
and, on these occasions, he meets with his family either in Australia or on holidays 
around South America (usually in Chile where his parents reside). 
 
Discuss whether Kit is a resident of Australia and how his salary and investment income 
would be taxed (10 marks, max. 1000 words).

Case study 2: ordinary income 
 
Explanations of the respective outcomes reached by the courts in the following cases which 
all involving sales of land:  
I. Californian Copper Syndicate Ltd v Harris (Surveyor of Taxes XXXXXXXXXXTC 159 
II. Scottish Australian Mining Co Ltd v FC of T XXXXXXXXXXCLR 188...

Robert · Accepted Answer

Answer to Case 1. 
To determine the tax liability in Australia on the income that is earned by an individual or a 
company the most important factor to be determine is if that person is an Australian or foreign 
resident for tax purposes. The income earned by an individual is liable to be taxed as per the 
Australian tax laws. There are laid down laws that define the manner of taxation of the income of 
the person or entity assessed to tax.  
It is a complicated task to understand the issue of residency. There is no strict mark to identify a 
resident and moreover is on each individual's circumstances. The issue is of extreme importance 
and even a small mistake in determination of residency status can lead to costly consequences.  
The scenarios that can arise in tax residency can be like: 
 A person can be a resident for tax purposes even without being a citizen of Australia or a 
permanent resident 
 A person may not be a resident of Australia even if he has an Australian VISA. 
The above scenarios may rise due to the fact that the tax laws of Australia use quite different 
criteria to determine residency status of an individual or corporate as compared to that used by 
Department of Immigration and Border Protection for determining the residency for tax 
purposes.  
There are some tests that need to be done so as to determine the residency status of a person for 
Australian tax purposes: 
 Resides test: The essence of this test is that whether a person resides in Australia should 
be a question of fact that would be decisive based on the circumstances of each case. The 
factors to be considered for determining the residency in each case can be as under: 
o The extent of the level of ties related to business or family that a person has in his 
country of origin and in Australia. 
o The reason of absence from Australia for the purpose of business is not merely 
enough to state that a person is non-resident of Australia for the purpose of tax.  
o The frequency and duration of the return of a person to the country of origin can 
also be decisive factors.  
o The employment of person outside Australia. 
o The extent to which the personal assets and bank accounts are kept in Australia or 
the country of origin by the person. 
Further the term 'resides' is not defined within income tax legislation, the courts and the 
ATO rely on the normal definition of this term while deciding about who is an Australian 
resident for income tax purposes. 
The Shorter Oxford Dictionary defines reside as: 
'...to dwell permanently, or for a considerable time, to have one's settled or usual abode, 
to live, in or at a particular place...' 
 The domicile test: One is an Australian resident if his domicile i.e., unless the 
Commissioner is satisfied that the person's permanent place of abode is outside 
Australia. A person is said to be domicile in Australia if he intends to keep in permanent 
home indefinitely in Australia under the Domicile Act 1982. This test has been discussed 
in Taxation Ruling IT 2650. Unless a person migrates to another country and adopts the 
“domicile of his choice”, the country in which he is born is said to be his domicile. 
 The 183-day test: If a person is actually present in Australia for more than half the 
income year,

Case study 1: Residence and source Kit is a permanent resident of Australia. He was born in Chile and retains his Chilean citizenship. Kit spends most of the year working off the coast of Indonesia on...

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