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Taxation¡§What criteria have been considered in the courts in deciding if an entity is a resident or non-resident of Australia for tax purposes?¡¨
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Residence The residency rules for the purposes of Australian income tax law are a combination of common law principles and statutory rules in ITAA 1936. The definition of ¡§Australia resident¡¨ in sec 995-1 of ITAA 1997 merely adopts the definition of ¡§resident¡¨ (or ¡§resident of Australia¡¨) in sec 6 (1) of ITAA 1936, which itself partly adopts common law principles. Residence and source as criteria for liability A taxpayer, whether an individual or a company, who is a resident of Australia is generally assessable on ordinary and statutory income derived from all source whether in or out of Australia (ITAA 1997 sec 6-5; 6-10). There are some important exceptions to this rule, for instance, for overseas employment income, approved oversea projects and certain temporary residents (foreign income exemption for temporary residents effective from 1 July 2002). Income earned by some foreign companies and non-resident trusts is attributed to resident taxpayers and taxed on an accruals basis, that is to say, it is taxed in the hands of resident taxpayers when it is derived, not when it is remitted to Australia. Income earned by resident taxpayers from certain other foreign investments may also be taxed on an accruals basis. In general, however, it will be imperative to determine whether or not the taxpayer concerned is a resident of Australia and then to determine the source of the income concerned. Residence of individuals generally Section 6(1) of ITAA 1936 provides four exhaustive tests of residence for individuals. In summary, an individual is a ¡§resident of Australia¡¨ for Australia domestic tax purposes if he or she satisfies any of the following tests. (a) The individual is a resident of Australia according to ordinary concepts ¡V this test arises from the use of the words ¡§who resides in Australia¡¨ in the preamble portion of the definition before the 3 specific statutory inclusions. (b) The individual is domiciled in Australia unless the Commissioner is satisfied that the person¡¦s permanent place of abode is outside Australia. (c) The individual has been in Australia for more than one-half of the income year, namely in excess of 183 days, unless the Commissioner is satisfied that the individual¡¦s usual place of abode is outside Australia and that he or she does not intend to take up residence in Australia. (d) The individual is a member of certain Commonwealth Government superannuation scheme or is the spouse or child under 16 of such an individual. Consequently, an individual who does not fall within any of the three specific rules (i.e. 2 to 4 above) may nevertheless be treated as a resident of Australia on the basis of the common law concept of residence. There are a number of cases dealing with this issue but none seems to and establish any specific principle that is of general application: Lysaght v IRC (1928) and Levene v IRC (1928).
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