Business & Personal Tax Planning – Written Assessment Please chose ONE (1) of the following cases and prepare a case analysis: •Federal Commissioner of Taxation v Stone 2005 ATC 4234. •Federal...

BUSINESS AND PERSONAL TAX PLANNING
HARDING v COMMISSIONER OF TAXATION [2007] FCAFC 29
1. EXECUTIVE SUMMARY
The report is intended to provide a conceptual framework on the case law Harding’s V commissioner of Taxation and the effect of CMAC on the MNC’s. Moreover the reports main motive to create a legal analysis on the residential status criteria’s of Australian Income Tax laws and the current changes in the law as recommended by the Board of Taxation. The various stages involved in the case laws is briefly discussed on the lights of legal causes and the information’s obtained from both internal and external sources.
A mapping of the information’s obtained under different analysis hands are also done. Lastly the report concludes my sighting the changes of the laws pertaining to the residential status and discussing the effects of these changes on both individual and corporate tax payers.
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. FACTS
4. DECISIONS OF THE COURT
5. IMPLICATIONS ON BUSINESS AND COMMERCIAL ENTERPRISE
6. ANALYSIS OF HOW AUSTRALIAN CENTRAL MANAGEMENT AND CONTROL TEST FOR TAX RESIDENCY AFFECT A MNC
7. CONCLUSION
8. REFERENCES
2. INTRODUCTION
Residency was a hot topic in Australia for determining the tax liability of a person. A resident is someone who resides in Australia also includes one whose domicile is in Australia, unless the commissioner is satisfied that the persons permanent place abode is outside Australia. As per the Income Tax Act 1936 there requires two test to decide the residential status of a person, namely Domicile test and Ordinary concepts test. A domicile test includes two steps verification where the two steps decide whether Australia is your permanent place of adobe or outside Australia. The next is an Ordinary concepts test which means the way in which a person organizes his domestic and economic affairs as a part of his life is an influencing factor in fixing residential status. We may be considered as an Australian resident if our day – to – day activities in Australia is relatively similar to our behavior before entering Australia.
A clear explanation regarding the residency and the steps to identify whether a person is a resident or non- resident has been defined by the court after the hearing of the case of Harding’s. Here in this report we make a detailed analysis of the hearing of the case and also the impacts of the judgment.
Precis on the case
When a person maintains home in Australia but lives and works in another country, the assessment of their status as a resident becomes complicated. A decision on Harding’s case makes it easier for Australians living in and working overseas to prove that they are no longer tax residents in Australia.
The issue was whether the taxpayer, an individual was the resident of Australia for the purposes of the subsection 6(1) of the Income Tax Assessment Act 1936 for the 2011 financial year under either the ordinary meaning of resides [ordinary concepts test] or under subparagraph 6(1)(a)(i) [ the domicile test]. In the first instance the court found that Mr. Harding was not a resident under the ordinary concept test but was resident under the domicile test (and the ATO put on a notice of contention regarding the concepts test). The court on appeal found that Mr. Harding was not a resident under both the test. The commissioner’s special leave application to the court was refused.
3. FACTS
Mr. Harding an Australian citizen was an aircraft engineer, was living in Saudi Arabia with his wife for about 7 years while working for BAE systems. Due to escalating geo – political instability across Saudi Arabia and regions they re – located to Australia where they built a house and lived in Queensland. After spending 3 years in Australia due to dissatisfaction in reduced salary and employment opportunities in Australia, and attraction towards most modest lifestyle he returned to Middle East in March 2009 to live in Bahrain, leaving his family behind in Australia. While living in Bahrain, Mr. Harding continued to commute daily to Saudi Arabia, across the cause way.
Upon his return to Bahrain he made plans to relocate his family to there. Mrs. Harding and children visited Bahrain and looked for an appropriated accommodation and enrolled their youngest son in a school in Bahrain. Mr. Harding purchases a car for the use of Mrs. Harding when in Bahrain. Mr. Harding went return trips to Australia each year to visit his family including a trip of 91 days, generally when working conditions permitted. In 2011Mrs. Harding indicated her reluctance to return to Middle East. He tried to persuade his wife to rejoin him in over - seas but he was unsuccessful in his attempt. Later on he got divorced with her as he was not willing to drop his plans about future. Thereon he fallen in a relationship with Ms. Gonzales in Bahrain but when he went for work in Oman in 2014 she didn’t accompanied him, and subsequently he married another woman whom he met in Oman.
In December 2015 the Commissioner of Taxation issued a notice of amended assessment to Mr. Harding stating that he was a resident of Australia and he is required to pay tax on his overseas income. His objection to this amended assessment was disallowed in an objection decision made by the Commissioner in 2017, and then the matter came before Justice Derrington of the Federal Court.
4. DECISIONS OF THE COURT
Ordinary Concepts Test
Davies and Steward JJ agreed with the reasoning and conclusion of the first instance judge regarding the ordinary concepts test. The first instance judge placed a substantial significance on the finding that Mr. Harding held a strong and a fixed intent to resume to his previous lifestyle in the Middle East irrespective of whether his family was willing to rejoin him there or not. The first instance judge noted that the objective circumstances surrounding his departure where consistent with his intent and his actions prior and after 2011 income year was also consistent to that intent.
His connections with Australia in this relevant...