Question

John, is a designer, who came to Australia in November 2017 on an assignment creating colorful designs based on the vibrant colors of the Great Barrier Reef. The project is expected to take six and a half months. John purchased a small boat so that he would be able to enjoy the islands he is using as inspiration for his designs and to take friends at weekends to the special locations he has discovered. John’s salary is paid into the Australian bank account he opened when he arrived. John intends to return to France, his country of domicile, and to his family when the contract is over. His father has agreed to look after all his assets and investments for him while he is on assignment in Australia. John was hoping that he may be considered non-resident for Australian tax purposes and has come to you for advice. Explain to John the factors that the ATO will take into consideration and comment on his likely residency status. Explain the tax consequences of being classed a resident or not for tax purposes.

Answer 1

An individual will be an australian resident of he/she satisfy at least one of the following:

1.Domincile test : The person is having perminant house australia, Then he will be considered as resident of australia.

2.The 183 day test: The person is present in australia for morethan 183 days in income year, unless the preson's usual place of residence is outside australia and not intended to stay in australia.

3.Commonwealth superannuation fund test: The person is common wealth government officer and working on behalf of goverment in outside , He will be considered as resident of australia.

ATO gives weight to following points:

a) Intention or purpose of presence

b) Family and business/employements

c) Location of assets

d)Social and living considerations

Hence in this case even though John stayed for morethan 183 days , His actual home is in oversea and his intention is not to stay in autralia after certain period of time.He will be considered as Nonresident of Australia in this case.

Tax consequences of Non resident:

1. No threshold limit will be applicable and has to pay on every single dollar he earns in australia.

2. He will be taxed only on australian sourced income

3.Can't claim on medicure liabilities

4.Interest income will be taxed flat at 10%