Determining Assessable Income
Introduction.
Individuals thrive off producing income in order to meet their day-to-day needs and wants. Tax is imposed on these income producing activities to provide the government revenue. This involves identifying the various ranges of assessable income. The legal question which must be addressed is any of the income that was earned by these individuals assessable income under the Australian income tax assessment act? To answer this question, we must determine if a nexus exists between Australia and the person(s) being taxed by applying the concepts of Residency, Source and Derivation.
1. Residency.
Residency is important because it is the basis as to how the government will tax individuals.
S6-5(2) and s6-5(3) ITAA97 states residents are taxed on all income while non-residents are taxed only on Australian sourced income. An individual is a resident if they satisfy the common law definition of residency. Similarly, residency exists if a person resides in Australia denoted by the legislation incorporating the common law notion. Additionally, a person can be a resident if they satisfy any one of the three statutory tests which include; Domicile, 183 day test and the Commonwealth employee Superannuation fund test as listed under s6(1) ITAA36.
1.1 Application of Residency.
In this case, Melinda and her husband were residing within Australia up until the point of 15th January 2009. Therefore, under common law, they were no longer residents because they ceased to be residing within Australia. However, they can still be considered residents if they satisfy one of the three tests under statutory law.
The law states that ‘a person, other than a company, who resides in Australia and includes a person whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia; who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner
Individuals thrive off producing income in order to meet their day-to-day needs and wants. Tax is imposed on these income producing activities to provide the government revenue. This involves identifying the various ranges of assessable income. The legal question which must be addressed is any of the income that was earned by these individuals assessable income under the Australian income tax assessment act? To answer this question, we must determine if a nexus exists between Australia and the person(s) being taxed by applying the concepts of Residency, Source and Derivation.
1. Residency.
Residency is important because it is the basis as to how the government will tax individuals.
S6-5(2) and s6-5(3) ITAA97 states residents are taxed on all income while non-residents are taxed only on Australian sourced income. An individual is a resident if they satisfy the common law definition of residency. Similarly, residency exists if a person resides in Australia denoted by the legislation incorporating the common law notion. Additionally, a person can be a resident if they satisfy any one of the three statutory tests which include; Domicile, 183 day test and the Commonwealth employee Superannuation fund test as listed under s6(1) ITAA36.
1.1 Application of Residency.
In this case, Melinda and her husband were residing within Australia up until the point of 15th January 2009. Therefore, under common law, they were no longer residents because they ceased to be residing within Australia. However, they can still be considered residents if they satisfy one of the three tests under statutory law.
The law states that ‘a person, other than a company, who resides in Australia and includes a person whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia; who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner
Bibliography: Barkoczy, S., Evans, C., Murphy, S., Pinto, D. & Woellner, R., Australian Tax Law, 21st edition CCH. Barkoczy, S., Core Tax Legislation & Study Guide, 14th Edition, CCH. Income Tax Assessment Act 1936 Income Tax Assessment Act 1997