Australian Citizen Marty Goodson: Domicile Test, 183 Day Test, And Taxation Computation

Marty Goodson’s Background and the Creation of Planks Pty Ltd

1: The present case study is associated with the assessment of the residential status of Marty as an individual and Planks Pty Ltd as a company. As per the Australian taxation, the first test of assessing the residential status of an a person is performing the Resides Test. If a person living in Australia will be regarded as the Australian inhabitant if the person satisfies the domicile test and 183 days test. From the existing case study it is understood that Marty in spite of being an Australian inhabitant is engaged in the development of web platform and designs for organisations across the world (Laidlaw et al., 2014). It is understood from the case study that to consider the residential status of Marty from the below stated test are as follows;

The domicile test is performed to in order to determine that if an individual has permanent place of abode within Australia will be taken into the considerations as the Australian resident upon satisfying that if a person has a permanent place of abode outside Australia. As defined under the rulings of IT 2650 an individual living on temporarily or working outside of Australia and leaves Australia will not be considered as the Australian resident for the purpose of taxation during his or her stay outside Australia (Sharkey, 2015).

The summary of Domicile Test is stated below;

1. The original intention and length of stay outside Australia
2. Expressing intentions of coming back to Australia at a particular point of time
3. The establishment of home is out of Australia
4. The length and continuity of presence outside of Australia

It is found from the case study that Marty is an occupant of Australia and keeps his Australian residency even after being engaged in the creation of web designs in Australia. The domicile test states that the intention and original length of stay out of Australia for Marty is considered at the time of determining the residential status under the domicile test. In addition to this, the domicile test states that Marty on his return to Australia has expressed his intention of marrying his love to settle permanently in Australia with his wife. The duration along with the length of stay in Australia was two years ranging from 2012/13 and 2014/15. Nevertheless, Marty had returned to Australia in order to live permanently and will be considered as the Australian occupant for the purpose of taxation (Trakman, 2015).

As defined under the 183 days test if a person is, living in Australia for greater than half of the income year either continuously or with breaks will be considered as the occupant of Australia. The 183 days lays down that unless it is ascertained that an person had a permanent place of dwelling outside of Australia and the person does not had any such intentions of taking up the Australian residency (Sharkey, 2016). The assumptions are made below which are as follows;

1. It is understood from the case study that Marty did not lived in Australia spanning from 2012/13 and will not be regarded as the Australian resident for the period
2. In 2013/14 Marty only returned for Christmas and had spent four weeks with his family. Marty’s length of stay was short and could not be considered as the Australian resident concerning that period (Thampapillai, 2016).
3. Marty returned to Australian in 2014/15 for a period spanning from 1^stSeptember to 1^st April with the intention of spending time with his girlfriend. Marty length of stay consisted of seven months and was more than 183 days. Therefore, Marty under this circumstances will be considered as the Australian resident for the period spanning 1^st September to 1^st April and his income will taken into the considerations for taxation.
4. Marty again returned to Australia from 2015/16 so that he could marry his girlfriend and commence family. Thus, Marty effectively fulfils the 183 days criteria ranging from the period of 2015/16 and he would be declared an  Australian resident for the given year (Thampapillai, 2014).

Domicile Test for Marty Goodson’s Australian Residency

The above stated 183 days test successfully establishes that Marty is an Australian resident because he lived in Australia for more than 183 days. He further returned to Australia during 2015/16 in order to marry his girlfriend and decided to live permanently. As defined under the 183 days an individual will be considered to be an Australian resident unless it is found that his permanent place of domicile was out of Australia and the person had no intention of taking up the Australian residence (Barkoczy, 2016). Marty on his return to Australia has stated his intentions of living in Australia by taking up the Australian residency and he will regarded as the Australian resident.

B: To be considered as the Australia resident company, companies, corporate limited partnerships and trust must fulfil the relevant criteria in order to be regarded as the Australia resident (Ismer, & Jescheck 2017). From the existing case study, it is understood that Planks Pty Ltd, which is a technical business, located in Silicon Valley was incorporated in USA. To assess the residential status of Planks Pty Ltd it is understood that from the year 2012/13 Marty was the solitary director of the company and as per the residential test performed on Marty he will not be considered as the Australian resident since he had not returned to Australia. Therefore, Planks Pty Ltd cannot be regarded as the Australian resident company because no business proceedings took place from Australia. In the subsequent period 2013/14 Marty had returned to Australia merely for the span of four weeks and as per the residential test conducted Marty’s length of stay was considered to be short and all the decisions related to management was taken outside of Australia.

Furthermore, from the period of 2014/15 Marty on his stay in Australia ranging from 1^st September to 1^st April Marty took all the management decision from Australia. Therefore, Planks Pty Ltd will be considered as the Australian resident company for the purpose of tax. According to the taxation rulings of 2004/14W in order to determine the residency of company which is not incorporated or formed in Australia however carrying on the business in Australia or its central management is located in Australia then the company will be treated as the Australia resident company (Taylor & Richardson, 2013). Even though Planks Pty Ltd was not incorporated in Australia but Marty on being appointed as the director of the company from 1^st September to 1^st April took all the managerial decisions from Australia. Therefore, Planks Pty Ltd will be considered as the Australia resident company. Furthermore, the company had five shareholders and one of its shareholders lived in Australia which had voting power. Therefore on account of such circumstances Planks Pty Ltd will be treated as the Australian company (Evans et al., 2015).

183 Day Test for Marty Goodson’s Australian Residency

C: 

D:

At the time of carrying on the business activities income generated from the business undertakings will be considered for taxation. A person with an investment property used for building or renovating with the objective of generating profit will be considered for taxation (Cao et al., 2015). From the existing scenario, it is understood Rommy carried on the hobby of selling wine that was made from farming of grapes of small quantity at weekends. Rommy had sold 20 boxes in the local market and disposed another 20 boxes outside his property with the help of honesty box. It is worth mentioning that it is important to understand the difference amid the hobby and business with the objective of taxation and other purposes (Newman 2016).

From the following case study, it is evident that Rommy had regularly engaged in the activities of farming of grapes at weekends. The activities conducted by Rommy does not results in regular business activities however selling of wine made of grapes attracts liability of tax. Usually, while determining the taxable income a person is under the obligation to consider the gross amount of his earnings or proceeds derived from the ordinary course of business together with the profit (Saad, 2014). Earnings generated from the activities of farming of grapes and converting the same into wine of reserved quality is required to included into the assessable income of Rommy.

Capital gains or capital loss, which is generated from the sale of assets, consists of the difference amid the purchase price and the selling price on its disposal (Lang, 2014). A person paying tax on their capital gains will be considered as the income tax and it will not be taken into the considerations as the separate tax despite being regarded as the capital gains tax. As evident from the following case study Rommy had bought the land in the year 2000 for $500,000 and the land was subdivided and disposed for a sum of $1,500,000 which constituted in the form of capital gains from such sales. As stated by the Australia taxation office, an asset, which is acquired on or after 20 September, will be treated as the capital gains tax if not specifically excluded (Woellner et al., 2013). As evident from the case study, it is understood that Rommy had bought the land in the year 2000 and capital gains generated from the sale of property represents capital gains tax.

Taxation Computation for Marty Goodson’s Four Financial Years

Profit generated from the disposal of subdivided land may be treated as the capital gains or ordinary income depending upon the circumstances. If a person subdivides the block of land and sales the land with the purpose of generating profit from the sale of land leads to capital gains and will be treated as capital gains tax (Mishra & Anwar, 2017). As noticed from the case study the sale of subdivided land and earnings in the form of profit will be treated as the ordinary income and will be treated for tax assessment. According to the case study, the objective of Rommy on entering the transaction to generate profit from the disposal of subdivided land will be treated as the capital gains and will be considered for assessment.

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Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.

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Evans, C., Minas, J. and Lim, Y., 2015. Taxing personal capital gains in Australia: an alternative way forward.

Ismer, R., & Jescheck, C. (2017). The Substantive Scope of Tax Treaties in a Post-BEPS World: Article 2 OECD MC (Taxes Covered) and the Rise of New Taxes. Intertax, 45(5), 382-390.

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