LWB 364 Into to Tax Seminar 1

Richard Gallagher 02340640

Mai-Ling:

  • Year 97/98
  • Arrival 5/4/98 – This 3 month stay is only temporary and therefore Mai-Ling will not have any tax liability in Australia for financial year 97/98. The reason for this decision is firstly looking to the three statutory tests namely the Domicile, 183 days and Commonwealth superannuation fund test Mai-Ling is not a resident. The Domicile test requires a permanent place of Abode and the court would not be able to find a number of different hotel rooms in different states a permanent place of Abode the secondary test of 183 days could not be tried as Mai-Ling had not been in Australia for that long at that time. A question arises that in light of her change in status in the following tax year does this change Mai-Ling status for this tax period. Looking to Case 19 for clarity on this point. Is the decision on Mai-Ling’s residency able to be made on a retrospective basis?
  • Year 98/99
  • Looking forward to the financial year 98/99 Mai-Ling’s residency status comes into question. It is stated her employer expects her to stay in Australia for 9 months or approximately 270 days. She also leases a serviced apartment and has some of her personal effects sent over. Applying the Domicile Test pursuant to the Domicile Act 1982 Mai-Ling has residence in Australia and a permanent place of abode. As evidenced by her lease of a serviced apartment the permanent nature of the serviced apartment is further proven by the fact that Mai-Ling has brought some of her own personal effects. This would differentiate the serviced apartment from simply a type of hotel room. Applegate v FCT agrees that a permanent place of abode can be read as something less than a permanent place of abode in which the taxpayer intends to live for the rest of his/her life. [As per Franki J]. Therefore Mai-Ling is a Resident for the purposes of the tax year 98/99. Should for any reason the Domicile test fail, Mai Ling has been in Australia for well over 183 days and meets the requirements of the 183 days test therefore she will be a resident for tax purposes.
  • Assuming Mai-Ling leaves Australia after the nine months she will only be entitled to claim 75% of the tax free threshold as she has only been in the country for 9 months. Therefore her tax bill will amount to:
  • Income tax = (Taxable income x rate) – tax offsets
  • Income tax = ($50,000 + $10,000 x rate) – tax offsets
  • Income tax = ($60,000 x rate) – offsets,
  • $4500@0%, $10500@17%, $22500@30%, $7500@41%, $15000@47%.
  • $0 $1785$6750$3075$7050
  • Total tax liability 98/99 = $18,660
  • If Mai-Ling is found to have residency in 97/98 because she had only been in the country for two months she would be very limited in her use of the TFT and would only be able to use 16.67% of the full annual amount.