Issues
The facts of the case explain that Helena and Maxwell were the resident of the Scotland. Helena later moved to Australia after she signed a contract to work with Van Diemen’s Architecture Ltd which is an architecture firm based in Tasmania. The company despite being Tasmanian based company was established in England and started its business by transferring three key directors to a new office created in Tasmania.
Issues:
The subject of issue here is to understand Helena and Maxwell residential status based on “subsection 6-1 of the ITAA 1936”. The issue would also address whether Van Diemen’s is an Australian resident company based on the “Central Management and Control Test”.
Rule:
Referring to “taxation ruling of TR 98/17” the taxation administrator states that the definition of the expression reside is within the scope of explanation given under “subsection 6 (1) of the ITAA 1936” (Sadiq et al., 2013). The “taxation ruling of TR 98/17” explains that a person that comes to Australia under pre-arranged work employment would be held as the Australian resident (Coleman et al., 2013). Referring to commissioner view in “Applegate v FCT (1979)” circumstances after the year of income may assist in determining the status of residency for an individual taxpayer.
The definition that is given under “section 995-1 of the ITAA 1997” the resident of Australia comprises of a person who is living in Australia inside the scope of the Act (Woellner et al., 2016). The clarification of the ruling includes the behaviour of a taxpayer is helpful in determining whether the taxpayer resides in Australia. Features convenient in reflecting the persons behaviour comprises of objective of present in Australia, service ties, communal and living arrangements.
As per “taxation ruling of 98/17” the physical existence period forms the vital element in ascertaining whether an individual is the resident of Australia (Braithwaite, 2017). As per the view of taxation commissioner the time of six months is viewed as the extensive period in ascertaining whether the individual’s actions is in agreement with living here.
Quoting the allusion of “Commissioner of Inland Revenue v Reid (1926)” an individual work or education relation provides backs to the purpose of living in Australia (Bankman et al., 2017). The time period of a person presence helps in determining whether or not the taxpayer resides in Australia. The taxation commissioner in “Miesegaes v Commissioner of Inland Revenue (1957)” held that the intent or the determination of living in Australia aids in determining whether the individual lives in Australia.
Rule
As per the “taxation ruling of TR 2018/5” the test of central controlling and management provides assistance in understanding whether the company is an Australian resident (Murphy & Higgins, 2016). A foreign incorporated company is held as Australian resident company based on the test of central management and control if the company is found to be carrying on the commercial activity in Australia. Referring to decision in “FCT v Malayan Shipping Co Ltd (1946)” the judgement of commissioner included that if the business carries out the business in Australia and also has its chief management together with regulatory control in Australia, the company is carrying on the trading activity within the definition of “central management and control test”.
The vital element of the test includes taking high level decision of implementing policy and determining business directions together with the mode of transaction a business enters (Buenker, 2018). The taxation commissioner judgement in “FCT v Bywater Investment Ltd & Ors (1973)” explained that implementing the central management and control consists of investment set up and functional policy. The interpretation of commissioner includes viewing the relevant evidences and situations along with the director’s roles in controlling and managing business affairs or the process of decision making must be accounted in concluding the status of residency.
Application:
Evidences from the case facts explains that Helena having graduate degree in Architecture she decided to work with the Tasmanian based Van Diemen’s Architecture Ltd for twelve months’ time period. Helena also maintained the bank in Australian that stipulated her wages to paid in that account. With reference to Helena situation the “taxation ruling of TR 98/17” is applicable since she came to Australia with pre-arranged work employment.
The taxpayer carried the initial intention of migrating from Scotland to Australia. Helena’s behaviour reflected a period of continuity when she established a bank account in Australia that stipulated her employment wages to be paid in that account. Evidences suggest that the nature of Helena’s existence in Australia is regular with behaviour of living in Australia since the opening of bank account demonstrated the behaviour of maintenance and location of assets in Australia.
With reference to the case of “Commissioner of Inland Revenue v Reid (1926)” the behaviour of Helena’s is in agreement with residing in Australia (Robin, 2017). Helena inside the description of the “subsection 6 (1) of the ITAA 1936” will be held as the Australian occupant since the period of physical presence with social and maintenance of assets is in conformity with the definition of the act.
Application
Later in the case study Helena joined the group of local runners so that she remains active. This is in conformity with the social and living arrangement as she interacted with the surrounding by joining the charity community while present in Australia which evidently states that she is an Australian inhabitant inside the explanation of “subsection 6 (1) of the ITAA 1997” (Blakelock & King, 2017). Referring to the judgement in “Commissioner of Inland Revenue v Miesegaes (1957)” the social and living arrangement as well as joining the charitable community reflects the behaviour of continuity of residing in Australia.
Van Diemen’s Architecture Ltd reported a rise in business which led the company offering Helena permanent position of residing and working in Australia. Helena’s behaviour reflected permanency when she decided to take up the residency of Australia. Inside the scope of “section 995-1 of the ITAA 1936” Helena should be treated as the Australian resident since the facts obtained are relevant in deciding the residency status inside the meaning of “subsection 6 (1) of the ITAA 1936”.
Maxwell, on the other hand came to Australia for the purpose of making holiday. Maxwell nature of stay and character of behaviour does not demonstrated any continuity of residing in Australia. Maxwell cannot be treated as the Australian dweller under the meaning of “subsection 6 (1) of the ITAA 1936”.
In view of Van Diemen’s Architecture Ltd the company was established in England however transferred its key three directors to Australia. Van Diemen’s is held as the Australian occupant business based on central controlling and regulatory test as three central directors of the corporation is relocated to Australia. The directors are also found to be setting up the procedure for the company to decide on the upcoming company directions.
Citing the case of “FCT v Malayan Shipping (1946)” Van Diemen’s Architecture Ltd is carrying on the business within the meaning of central controlling and regulatory test (Miller & Oats, 2016). The nature of the company activities and business provides that the directors implement the control by exercising the decision of company operations under “central management and control” in Australia. As the decision of the business are made in Australia, the company with reference to “FCT v Bywater Investment Ltd & Ors (1973)” will be treated as the Australian occupant corporation under the “central management and control test”.
Conclusion:
On a conclusive note, Helena’s behaviour reflect the period of continuity. The social maintenance of locations and assets reflects a habit of living in Australia. Helena would be treated as the Australian inhabitant under “subsection 6 (1) of the ITAA 1936”. Van Diemen’s Architecture Ltd under the central controlling and regulatory test will be held as the resident company of Australia since directors are found to be taking decision of future commercial directions as well as operations from Australia.
References:
Bankman, J., Shaviro, D. N., Stark, K. J., & Kleinbard, E. D. (2017). Federal Income Taxation. Wolters Kluwer Law & Business.
Blakelock, S., & King, P. (2017). Taxation law: The advance of ATO data matching. Proctor, The, 37(6), 18.
Braithwaite, V. (2017). Taxing democracy: Understanding tax avoidance and evasion. Routledge.
Buenker, J. D. (2018). The Income Tax and the Progressive Era. Routledge.
Coleman, C., Hart, G., Bondfield, B., McLaren, J., Sadiq, K., & Ting, A. (2013). Australian Tax Analysis. Thomson Reuters.
Miller, A., & Oats, L. (2016). Principles of international taxation. Bloomsbury Publishing.
Murphy, K. E., & Higgins, M. (2016). Concepts in Federal Taxation 2017. Cengage Learning.
Robin, H. (2017). Australian taxation law 2017. Oxford University Press.
Sadiq, K., Coleman, C., Hanegbi, R., Hart, G., Jogarajan, S., Krever, R., … & Ting, A. (2013). Principles of taxation law 2012. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation Law 2016. OUP Catalogue.
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