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Determining Residency for Taxation Purposes

Dicsuss About The Tax Guide Musicians Actors And Entertainers?

From the background scenario it is noted that Ms. Jenny was a Honkong resident who was initially offered a temporary business travel to Australia in order to offer suggestions to the former residents of Honkong who were settled in Melbourne, Sydney, and Brisbane during April 2016. To complete her training she visited all the three cities by next three months but the employer asked her to extend her stay in Australia for a further period of nine more months. On July, she leases a service executive apartment for the tenure of nine months till which she stayed in Sydney. Once a week, Ms. Jenny travelled outside of Sydney to meet her clients. Hence the underlying issue is that whether Ms. Jenny can be considered as an Australian Resident or not for taxation purpose.

Rules by the national taxation authorities of Australia provide an understanding about the taxability of an Australian or foreign resident. The rule is stated as under:

One will be continued to be an Australian resident for taxation purpose if one leaves Australia temporarily and do not set up in another country permanently. The key factor that decides residency is the intention. Even for a short span of time an individual can be considered as the resident if he carries the intention to stay back in Australia

An individual will be considered as an Australian resident if he visits Australia and he works and lives in a location and has taken ample steps to make Australia as his home. If somebody is working and staying there it means that he is permanently residing there has a long term perspective. The tenure of employment is another considerable factor. An employee can be sent to visit Australia for work and may extend beyond the prescribed limit of 183 days in an income year but again the intention of keeping the employee becomes the driving factor to decide the residential status of Australia.

If an individual visiting Australia is travelling across different locations of Australia for most of the time, then he will be considered as the foreign resident only. Since his intention doesn’t seem to settle down permanently.


She went to visit all the three cities to complete the training by next three months but the employer asked her to extend her stay in Australia for a further period of nine more months. So she her intentions are evident. One will be continued to be an Australian resident for taxation purpose if one leaves Australia temporarily and do not set up in another country permanently. The key factor that decides residency is the intention

Application

The primary test of tax for residency of Australia is the “resident test”. In case the reside test is not passed out, the individual is classified as resident of Australia provided that any one of the following statutory criteria is satisfied:

183 days Test: An individual will be considered as an Australian resident if he visits Australia and he works and lives in a location and has taken ample steps to make Australia as his home. If somebody is working and staying there it means that he is permanently residing there has a long term perspective. If for more than half of the financial year an individual is present in Australia whether continuously or with irregular travelling, he can be considered having a constructive residency in Australia unless it can be proved to the contrary that the usual place of adobe is outside Australia and his intention are not to stay back in Australia.

  1. Other factors which are a healthy decision maker are as follows :
  2. Physical presence in Australia
  3. Employment tenure
  4. Marital Status is also a decisive factor
  5. Intention to stay back
  6. Maintenance and location of assets
  7. Social and living arrangement
  8. Frequency and Duration of visit
  1. Physical presence in Australia: The physical presence in Australia is not based on the days of stay or so. Physical presence is very much required to have a residency status. The purpose of stay comes to reality when an individual is having a long physical presence as well.
  2. Employment Tenure: An employee can be sent to visit Australia for work and may extend beyond the prescribed limit of 183 days in an income year but again the intention of keeping the employee becomes the driving factor to decide the residential status of Australia.
  3. Marital Status: If an married individual and his spouse is working in Australia and has the intention to stay together, it is considerable to understand the status of the individual as Australian Resident from tax point of view. Migration and other perspective comes in picture.
  4. Intention to stay back: The residential status is further dependent on the intention to stay. Even for a short span of time an individual can be considered as the resident if he carries the intention to stay back in Australia.
  5. Maintenance and locations of assets: An individual’s personal effects are kept safe and in its permanent adobe in order to prevent the same of wear and tear out of travelling since he is internally attached to those.
  6. Social and living arrangement: The living arrangement decides whetherthe resident will stay there or not.
  7. Frequency and Duration of visit – The frequency of travel is again taken ahead with the purpose as well as the intent of the travel. The duration factor is also important to decide upon the residential status. If the duration exceeds the specified time limits, it can be said that the applicant has an intention to stay permanently. Migration and other perspective comes in picture.

In relation to the training assignments assigned by the Employer, Ms. Jenny moved to Sydney and she was supposed to visit cities like, Sydney, Melbourne and Brisbane within a period of three months. The proposal was restated by the Employer to extend her stay further by a period of nine more months in Sydney where she started living in a leasehold property. Further, she moved her personal effects and clothes to Australia. During her visit, her parents visted her twice.

  1. Jenny initially had no intention to settle down and was merely a business traveller in Australia. If a person has no intention to settle down it dosent mean he can be treated as resident of Australia thus we can say that he cannot be treated as resident of the country.
  2. An extension of nine more months was made by the Employer from July, 2016.
  3. With this extension, her duration of stay of more than 183 days in Australia in an income year got triggered. The movement of personal effects and tenure of employment ignited the purpose of presence irrespective of the expiring tenure of nine months of stay.
  4. She rarely travelled for business puposes thereafter and was settled in Sydney Office.
  5. When she got herself a leasehold apartment in Sydney, her living behaviour and other attributes discussed above confirmed her intention and presence in Australia.
  6. Since the extension of tenure is there, the communication and seasonal challenges is also expected and hence the clothes and personal effects are brought.
  7. The visit of their parents twice on two occasions symbolizes the change of intent of Ms. Jenny on having a connection within local Australia.
  8. The employment tenure, movement of personal effect, living habits and intention has triggered the purpose of the presence irrespective of the expiring tenure of nine months of stay on completion of nine months. Migration and other perspective comes in picture.

The intention and the days of stay being more than the prescribed limit of 183 days prohibit Ms. Jenny to be foreign residents from the taxation governance of Australia at least for the period of current financial year of 2016.

On the basis of the outlined discussion and applying the taxation rules of Australia, Ms. Jenny can be concluded as the resident of Australia for the current income year of 2016-17. Her presence in Australia is concluded by her living behaviour and other attributes as discussed above. Further, for the income year 2015-2016, Ms. Jenny is not an Australian Resident since she travelled Australia for business purpose and had no intention to stay permanently there in.

A TV personality has been offered to join a television show of an Australian Based channel with an initial offer of a lump sum amount of USD 400,000 followed by USD 100,000 in addition to the same as monthly salary. The issue dwells on the determining whether both the receipts of USD 400k as well as USD 100K per month as recurring salary income are assessable income or not for an Australian Based show.

Assessable Income for Special Professionals

A special professional is an individual having professionalism in music, artistic work, literature or a sports person or a performing artist. The concept of averaging income has to be there in order to derive the special professional income.

.Assessable income is taxable under certain laws and regulation. The assessable professional income is an income arising directly from the performance of the special professional. The following are the incomes included for the calculation of the assessable professional income:

  1. Rewards, prizes and gifts which has been received from some individual or company.
  2. Fees or the income earned from commentating, advertisement, endorsement, interviews and similar kind of social participation.
  3. Any kind of royalty income which is gained through franchise or from other source.
  1. Lumpsum superannuation payment
  2. Capital gains (Net)
  3. Payment for unused leave.

The lump sum money is bifurcated then the same is considered for taxable income.

Ruling 12 and subsection 6(1) further extends the meaning of royalty to the use of motion picture films or video tapes for the purpose of TV or other broadcasting.

A special professional is an individual having professionalism in music, artistic work, literature or a sports person or a performing artist. In the given situation the TV personality has successfully been offered USD 400000 as lump sum and a fixed monthly salary component of USD 100000. The following points of consideration are relevant to sum to a conclusion:

The TV personality to whom the show is offered falls within the ambit of Special professional.

The lump sum amount of INR 400,000 USD which the TV personality earned is the result of her existing brand name created over a period of time. Such a brand name attracts royalty income wherever it is received. A royalty income is received from a franchise when the franchise uses the name of the company. The lump sum money is bifurcated then the same is considered for taxable income.

Ruling 12 and subsection 6(1) further extends the meaning of royalty to the use of motion picture films or video tapes for the purpose of TV or other broadcasting.

Thus, from the above assessment it can be considered as royalty income. The companies who are having different franchise fetch royalty income. The owner of the franchise pays royalty to the company.

The monthly income of USD 100000 that corresponds to the salary is a taxable income.

Further, to support the above situation, case law of Muzak Corp. v. Composers, Authors, and Publishers Association of Canada, [1953] 2 SCR 182, (Supreme Court of Canada- Canada (Federal)) can be referred as well.

Conclusion

USD 4000 that corresponds to royalty income on basis of narration stated above is lump sum money and USD 100000 per month of Salary is to be considered as assessable income for the year.

References

AllanHall, 2017. Tax Guide. Musicians, Actors and Entertainers, 1(7th), p. 20.

Atotaxrates, 2017. atotaxrates. [Online]
Available at: https://atotaxrates.info/individual-tax-rates-resident/income-averaging/income-averaging-special-professionals/
[Accessed 25th September 2017].

Exfin, 2017. exfin.com. [Online]
Available at: https://www.exfin.com/australian-tax-residency
[Accessed 25th September 2017].

Government, A., 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Individuals/Tax-return/2017/In-detail/Publications/Income-averaging-for-special-professionals-2017/?=redirected
[Accessed 25th September 2017].

Government, A., 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/Residency-tests/
[Accessed 25th September 2017].

Government, A., 2017. ato.gov.au. [Online]
Available at: https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/residency/residency---the-resides-test/
[Accessed 25th September 2017].

humanservices, 2017. humanservices. [Online]
Available at: https://www.humanservices.gov.au/individuals/enablers/lump-sums-while-income-support
[Accessed 25th September 2017].

interactivetaxconsultants, 2017. interactivetaxconsultants. [Online]
Available at: https://interactivetaxconsultants.com.au/tax/income-averaging-eligible-works/
[Accessed 25th September 2017].

Interactivetaxconsultants, 2017. interactivetaxconsultants. [Online]
Available at: https://interactivetaxconsultants.com.au/tax/income-averaging-eligible-works/
[Accessed 25th September 2017].

smh.com.au, 2017. smh.com.au. [Online]
Available at: https://www.smh.com.au/money/tools-and-guides/what-is-income-20100531-wqvb.html
[Accessed 25th September 2017].

Cite This Work

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My Assignment Help. (2018). Tax Guide For Musicians, Actors And Entertainers. Retrieved from https://myassignmenthelp.com/free-samples/tax-guide-musicians-actors-and-entertainers.

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My Assignment Help (2018) Tax Guide For Musicians, Actors And Entertainers [Online]. Available from: https://myassignmenthelp.com/free-samples/tax-guide-musicians-actors-and-entertainers
[Accessed 03 March 2024].

My Assignment Help. 'Tax Guide For Musicians, Actors And Entertainers' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/tax-guide-musicians-actors-and-entertainers> accessed 03 March 2024.

My Assignment Help. Tax Guide For Musicians, Actors And Entertainers [Internet]. My Assignment Help. 2018 [cited 03 March 2024]. Available from: https://myassignmenthelp.com/free-samples/tax-guide-musicians-actors-and-entertainers.

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