Question

Amandeep born in India and migrated to Australia. He lives in Australia permanently. He still holds Indian passport. Amandeep works with the New Zealand Princess Cruises tours and most of the income year is in New Zealand. He signed an employment contract for this position in the company’s Australian office in Sydney. Amandeep has two kids that are living with his wife Sandeep in Sydney. Three years ago, Amandeep purchased a unit apartment in Sydney. Amandeep and his wife holding dividend yielding shares in an Indian public company called Hindustan Unilever. Amandeep and Sandeep have an Australian bank account as well. Amandeep’s employer pays his salary to this bank account every fortnight.

Biannually Amandeep receives a holiday package from his employer, New Zealand Princess Cruises tours and he is using this package with his family traveling in Australia interstates or moves to India to visit his in laws.

Required: With reference to the relevant laws, discuss whether Amandeep is an Australian resident for tax purposes and also critically discuss whether Amandeep needs to pay income tax on his salary and investment income explained above. (10 marks, maximum 400 words)

Answer 1

Solution :

To determine the residency status of the individual, "The Resides Test" can be performed to determine whether a person is an Australian resident for the purpose of income taxes.

The Taxation Ruling TR 98/7 applies to class of individuals entering Australia :

• migrants
• academics teaching or studying and students studying in Australia
• tourists
• workers who have entered into pre-arranged employment contracts.

As per this ruling, the meaning of the word "reside" is not defined and general dictionary meaning has to be taken into consideration.

The Oxford dictionary defines reside as a person who dwells permanently or has settled in a particular place to live.

Other factors like intention or purpose  of residency, family, lociation of assets, social and living arrangements and the period of the stay should also be taken into consideration while determining the residential status.

Subsection 6(1) of the 1936 Income Tax Assessment Act defines the term resident includes a person whose domicile is in Australia or a person who has been in Australia for a continuous period or for intermittent period of one half of the year of income.

Analyzing Mr.Amandeep's residential status :

1) Mr. Amandeep lives in Australia permanently even though he is an Indian citizen.

2) He has signed the contract of employment in Sydney, Australia.

3) His family is residing in Sydney, Australia.

4) He has purchased a unit apartment is Australia (location of asset).

Therefore, considering all these factors, Mr. Amandeep is a Resident of Australia for the income tax purpose.

The Nationality of the Mr. Amandeep is irrelevant for the purpose of determining the residential status. Also, his temporary visit to India to visit his inlaws and family will not affect the residential status in Australia as the purpose of visit is temporary.

Taxability of Income :

An Australian resident is required to offer all the incomes earned domestically as well as internationally to tax.

Hence, Mr. Amandeep's Salary income and Investment income is taxable in Australia.

The aggregate salary income received during the year is taxable as Employment Income.

The dividend earned from investment of shares in Indian Company is taxable as Investment Income.

Note : If you have any queries relating to this answer, do reach us out at the comment section below. Your valuable feedback is important to us.