大三下合作课税法part bs

1、Residency, source and derivationSemester 1, 2015Key conceptsResidencyDerivationSource2KEY CONCEPTSImportance:Determine Australias jurisdiction to tax a persons e.Who can be taxed? What is taxed?Example:Marie, a French citizen, who lives in Paris, receives:Salary from her accountancy job in Paris; an

2、dRent from an investment property she owns in Melbourne.Ask yourself: What can Australia tax? RESIDENCY AND SOURCE34DERIVATIONWhy is derivation important?It determines in what year a persons e is to bebrought to account for tax purposes.Example:Acme Pty Ltd sells a customer a machine on 1 Mayfor $10

3、0,000. Payment is to be made in 30 days butthe customer does not pay until 1 July (the start ofthe next financial year).Ask yourself: When is the payment derived by Acmefor tax purposes? 5RESIDENCY: residents v non-residentsDifferent treatment for residents and non-residents. For example:1)KEY DIFFE

4、RENCE: Residents are taxed on e from all sources; non-residents only on e with a source in Australia.Tax rates vary.Non-residents do not pay the Medicare levy.Special withholding tax rates for non-residents.The key difference:Section 6-5(2):Australian residents assessable e includes ordinary e deriv

5、ed directly or indirectly from all sources.Section 6-5(3):Non-residents assessable e includes ordinary e derived directly or indirectly from Australian sources.RESIDENCY: residents v non-residents67Residency test: individuals8Residency test: individuals mon law testThe person must reside in Australi

6、a. Will reside where the person:dwells permanently or for a considerable time; orhas their settled or usual place of abode.In determining this issue the Australian courts take a number of factors into account. None of these is decisive, but collectively build up a picture of a persons residency. Phy

7、sical presence of the person in Australia for some part of the yearThe nationality of the personThe persons history of residence and movementsThe persons mode of lifeIf the person is a visitor to Australia, the frequency, regularity, duration and purpose of the visit(s)Where a person visits for more

8、 than two years they will be seen as a resident: TR 98/17If a person is outside Australia for part of the year, the length and purpose of the absence.The persons family and business ties in Australia.Whether the person maintains a place of abode in Australia or elsewhere. RESIDE : individuals common

9、 law test - factors to consider910Residency test: individuals statutory testsIf individual is not a resident under the mon law test, they may be aresident under the statutory tests.The main statutory tests are:The domicile testThe 183 day test11Residency test: individuals statutory tests (domicile)S

10、tatutory domicile test: Domicile is (prima facie) proof of residence UNLESS Commissioner is satisfied that the persons permanent place of abode is outside Australia.Domicile - the place the person regards as their home (even if they do not live there).Can be domicile of origin or of choice.Under s 1

11、0 of the Domicile Act in order to acquire a domicile of choice in a country, the person must have the intention to make their home “indefinitely” in that country.Domicile test - the exception:UNLESS the person has a “permanent place of abode outside Australia”Permanent does not mean foreverFCT v App

12、legate IT 2650 Residency test: individuals statutory tests (domicile)1213Residency test: individuals statutory tests (183 day test)Statutory 183 day test:Must be physically in Australia for at least 183 daysWill be a resident UNLESS Commissioner is satisfied that (a) the persons usual place of abode

13、 is outside Australia AND (b) they have no intention of taking up residence in Australia14Residency test: companiesFIRST QUESTION:If YES: it is a resident of Australia for tax purposes.If NO: go to the second question.15Residency test: companies SECOND QUESTION: If the company is not incorporated in

14、 Australia (that is, the answer to the first question is no) ASK: Does the company carry on business in Australia? If it does not, it is NOT a resident. If it does it WILL be a resident if EITHER:(a)Its central management and control is in Australia; OR(b)Its voting power is controlled by Australian

15、 residents.16Residency test: companiesIncorporated in Australia?YesNo A resident Carries on business in Australia?YesNoControl or voting power in Not a residentAustralia?YesNo A resident Not a residentThe ATO has a site dedicated to explaining the meaning of resident. Residency ATO guide17Double tax

16、ationDual residencyTemporary residence18Residency other issues19Residency: double taxationOur system of taxing e from all sources can lead to the possibility of double taxation.Ask yourself: How can this occurand (importantly) how can it beprevented?20Residency: double taxationDouble taxation can oc

17、cur where:A resident receives foreign sourced e which is taxed in the country of sourceA non-resident with Australian sourced e is also taxed on that e in their country of residence21Residency: double taxationWhat can be done to prevent it?Effect is nullified by:(A) Foreign tax credit system (B) Dou

18、ble tax agreements (DTA)(C) Specific exemptions22Residency: double taxation(A) Foreign tax credit systemWhere an Australian resident pays foreign tax on non-Australian sourced e, the resident receives in Australia a credit for the foreign tax paid.23Residency: double taxation(B) Double tax agreement

19、sTaxing rights over certain classes of e are reserved exclusively for the country of residence.All other e can also be taxed by the country of source; but if also taxed by the country of residence, the latter must give a tax credit for the tax paid in the source country. 24Residency: double taxation

20、Example of a DTA:Clause 19: Australia/Germany DTA“Remuneration which a professor or teacher who is resident of a Contracting State and who visits the other Contracting State for a period not exceeding 2 years for the purposes of study/research/teaching at a uni/college/school receives shall not be t

21、axed in that other State”.Ask yourself: What is clause 19 doing?25Residency: double taxation(C) Specific exemptionsSee, for example, s 23AG ITAA 1936 which (subject to certain conditions) exempts from Australian tax the foreign employment e of an Australian resident individual who was engaged in cer

22、tain foreign service for a period of not less than 91 days.26Residency test: dual residency YES. In such cases relief from double taxation is normally found in a DTA. Most DTA have tie-breaker rules for these situations (eg: for individuals it is the place where they have their permanent home; if th

23、at doesnt decide, it is where they have closer personal or economic relations)If no DTA applies, the foreign tax credit system mayprovide relief.27Residency : temporary residencyTemporary resident basically a personwho holds a temporary visa and is not aresident under the Social Security Act1991 and

24、 does not have a residentspouse: s 995-1 ITAA 1997Generally they are taxed on the same basis asnon-residents: see s -915 ITAA1997.Importance of source:Basis of governments right to tax based on residency.2) e sourced in Australia can be taxed by government.Remember:(a) s 6-5 ITAA 1997(b) Double Tax

25、AgreementsSOURCE OF E2829Source of e: how is it determined?(1) No general definition of source in the ITAA.(2) Specific direction given for particular types of e.For example:(a)S.6C ITAA 1936: e in the form of royalty payments which are an outgoing of an Australian business deemed to be sourced in A

26、ustralia.(b) DTAs have own source rules.30Source of e: how is it determined?Source is a question of factAs was noted by the court in Nathan v FCT :the ascertainment of the actual source of a given e is a practical, hard matter of fact.31Source of e: how is it determined?Principles for determining so

27、urce:(1)Where e is derived solely from the acts of the taxpayer: Source is where the acts are performed.(2)Where e arises from the possession of property :Source is where the property is situated32Source of e: how is it determined?(3)Where the taxpayers act involves the performance of a contract:Mus

28、t consider:(a) Place of performance(b) Place of payment(c) Where the contract was entered intoAsk yourself: What happens if these are all in adifferent country?Must balance the factors according to importance.Wages and salaries e generally where the services are performedBusiness e generally where t

29、he goods are sold or where the business is transactedInterest e usually the place where the loan agreement is entered into and the money is lentDividend e generally the place where the profits of the company that pays the dividends are madeProperty e usually where the land is locatedNote: these are

30、a guide only. It very much depends on the facts of the case (see, for example, FCT v French and FCT v Mitchum) and legislation (see, for example, s 6C ITAA 1936).33Source types of e34Derivation of e: why is it important?1)S.6-5 ITAA 1997 brings to account e derived by the taxpayer.2)It is a timing c

31、oncept it determines in which year the taxpayer should bring particular e to account for tax purposes.35Derivation of e: When does it occur?Depends on the tax accounting method adopted by the taxpayerNote:(a) There are two choices.(b) Derivation differs for each choice.36Derivation: which method sho

32、uld be used?Taxpayer must choose the method which:is calculated to give a substantiallycorrect reflex of the taxpayers true e.per: Dixon J in C of T (SA) v The Executor Trustee and Agency Co of South Australia (Cardens case)37Derivation: tax accounting methods38Derivation: cash receipts methodOccurs

33、 by the movement of cash or its equivalent to the control of the taxpayer.Cash or equivalent must be received by the taxpayer.The receipt may be actual or constructive.39Derivation: cash receipts methodActual receiptPhysical receipt the payment has beenphysically received.Constructive receiptTwo typ

34、es:Payment credited to the taxpayer without restriction.Receipt under s. 6-5(4) or s. 6-10(3) ITAA 1997.40Derivation: who uses cash receipts method?Normally used by employees and professionals whose e is derived from the personal provision of skill and knowledge.Applies to investment e.41Derivation:

35、 earnings/accruals methodDerivation occurs when the e is earned (which can occur before payment is received).The e is earned when the taxpayer has the legal right to receive payment.This depends on the contractual. arrangement between the taxpayer and the payer, the common law and any statutory provisions.42Derivation: who uses the earnings/accruals method?1)Used for business e involving trading or manufacturing.2)Used by professionals whose activity constitutes the running of a business.43Derivation: changing methodsTaxpaye