Question 1

Which one of the following statements is not true in regard to non-residents? A) For all income levels non-residents pay a greater proportion of their income as tax than residents B) Only non-residents are entitled to the tax-free threshold C) Non-residents do not pay the Medicare levy D) Non-residents are not entitled to tax offsets

Accepted Answer

Non-residents are not entitled to the tax-free threshold; this privilege is typically reserved for residents. Non-residents usually start paying tax from the first dollar earned.

Question 2

Which of the following is not a factor under the ordinary concepts test for determining the residency of an individual? A) The history of residence B) The purpose of visits C) The time of the year that the person arrives in Australia D) The frequency, regularity and duration of the taxpayer's visits to Australia

Accepted Answer

The ordinary concepts test for determining residency considers factors such as the history of residence, the purpose of visits, and the frequency, regularity, and duration of visits to Australia. The time of the year that the person arrives in Australia is not typically a factor under this test.

Question 3

Which of the following is not a factor in determining whether the company has its central management and control in Australia? A) Where monies are invested B) where the governing body of the company meets C) minutes or other documents recording where high-level decisions are made D) where the company's register of shareholders is kept

Accepted Answer

Where monies are invested is not a factor in determining whether the company has its central management and control in Australia.

Question 4

Which of the following is true in relation the meaning of the term 'source' when used in the context of the source of income derived by a taxpayer?
A) The issue of source is not relevant to a non-resident taxpayer
B) Determining the actual source of a given income is a legal concept
C) Determining the actual source of a given income is always a question of law
D) Determining the actual source of a given income is a practical hard matter of fact

Accepted Answer

Determining the actual source of a given income is a practical hard matter of fact, as it involves examining the circumstances and facts surrounding the income to establish its origin.

Question 5

In the FCT v Mitchum case the source of the actor Robert Mitchum's acting income from appearing in a film shot in Australia was determined to be?
A) Australia, as that is where the acting services were performed
B) Switzerland, as that is where the contract was made
C) The United States, as that is where the actor lived
D) France, as that is where the actor liked to visit most often

Accepted Answer

The answer of In the FCT v Mitchum case the...

Question 6

Which of the following is not true in relation to the operation of the withholding tax rules? A) The maximum a taxpayer can claim as a foreign tax credit offset is the Australian tax payable on that income B) Include both the income and the withholding taxpaid in their assessable income C) Claim the greater of the Australian tax payable or the foreign tax paid on the foreign income D) Claim the withholding tax paid as a foreign tax credit offset

Accepted Answer

The taxpayer can only claim the lesser of the Australian tax payable or the foreign tax paid, not the greater.

Question 7

The new Australian anti-avoidance rules in regard to multinational corporations do not apply to which one of the following options? A) Significant global entities B) An entity or consolidated group of entities with an annual global income of less than $1 billion C) An entity or consolidated group of entities with an annual global income of $1 billion or more D) A foreign entity that has an Australian permanent establishment

Accepted Answer

The new Australian anti-avoidance rules target multinational corporations to ensure they pay their fair share of tax. These rules specifically apply to significant global entities, which are defined as entities or consolidated groups of entities with an annual global income of $1 billion or more, as well as foreign entities that have an Australian permanent establishment. Therefore, entities or consolidated groups of entities with an annual global income of less than $1 billion do not fall under these rules.

Question 8

Which one of the following statements is not true in respect to overseas businesses and their Australian GST obligations? A) Overseas businesses must levy and collect GST where they sell more than$75?000Australian dollars) of goods and services to Australian consumers B) Overseas businesses must register for GST, charge GST on sales of imported services and digital products to Australian consumers, and pay the GST collected to the Australian Taxation Office C) Overseas suppliers must work out if their customer is an Australian consumer by using information about the purchaser from their business systems D) Overseas suppliers have a choice whether to register for GST in Australia and this choice is not affected by the level of sales to Australian consumers

Accepted Answer

Overseas suppliers do not have a choice whether to register for GST in Australia if their sales exceed the threshold of 75,000 Australian dollars. Their obligation to register and collect GST is mandated by law once this threshold is surpassed.

Question 9

Thomas is a New Zealand resident who provided some accounting services to an Australian employer for 12 weeks in September 2019. For the rest of 2019/20 Thomas worked for various New Zealand employers. Does Thomas have any Australian tax liability?
A) Yes for the 12 weeks of employment services provided in Australia as the source of that employment income is Australia
B) No, as he is a New Zealand resident and so Australia has no taxing rights against him
C) Yes, on income derived for the whole of 2019/20 from both Australian and New Zealand sources
D) No, as the source of his Australian employment income was New Zealand as that is where he signed the contract to undertake that work

Accepted Answer

Australia taxes income based on both residency and source. Since Thomas provided services to an Australian employer, the income from those services is considered Australian-sourced income, and thus, he would have a tax liability in Australia for the income earned during those 12 weeks, regardless of his residency status.

Question 10

Anh is a non-resident of Australia but who sold some real estate in Australia in March 2020. Does Anh have any tax obligations in Australia in correction with the sale of this Australian real estate property?
A) Yes. As a non-resident he is subject to Australian tax on his worldwide income
B) No, as a non-resident he is not subject to any tax in Australia on any income from any source
C) Yes. As the real estate property was located in Australia, the source of any gains or losses on that real estate property are Australia and so he is likely to have some Australian tax obligations in respect to the sale of that property
D) No, as the source of the sale of the Australian real estate property is not Australia as the source of the income from the sale of that property is where he signs the contract and if this was overseas, then he has no tax obligations in Australia

Accepted Answer

Non-residents are taxed in Australia on their Australian-sourced income. Since the real estate is located in Australia, any gains from its sale are considered Australian-sourced, thus Anh likely has tax obligations in Australia regarding this sale.

Question 11

Adelaide Software pays royalties to a US firm for the use of the software products. The contract to arrange these royalty payments was signed in Canada. According to tax law what is the source of these royalty payments?
A) The USA
B) Australia
C) Canada
D) Some other place

Accepted Answer

The source of the royalty payments is determined by the location of the payer, which in this case is Adelaide Software, a company presumably located in Australia. Therefore, the source of the royalty payments is Australia.

Question 12

Richard is a non-resident of Australia and he owns shares in EZY Enterprises, a company incorporated in the Philippines. EZY Enterprises carries out operations in the Philippines and other countries with 10% of its profits sourced from Australia. It is a non-resident of Australia. If EZY Enterprises pays a $1,000 dividend in the 2020 year and if 10% of the profits, out of which that dividend was paid, were sourced in Australia, would Richard have any tax obligations in Australia?
A) No as he is anon-resident and the company is also a non-resident
B) No as 90% of the dividend relates to profits from sources outside of Australia
C) Yes on the whole dividend amount of $1,000
D) Yes but only on 10% of the dividend amount ($100)

Accepted Answer

The correct answer is D because Australia's tax system taxes non-residents on Australian-sourced income. Since 10% of EZY Enterprises' profits, from which the dividend is paid, are sourced from Australia, Richard would have tax obligations in Australia on that portion of the dividend, which is 10% of $1,000, or $100.

Question 13

What is the effect of Australia's Double Tax Agreements (DTAs) with other countries, such as the United States?
A) The DTAs contain tie-breaker rules to determine the country of residency and so the country that has the taxing rights to certain income. The provisions of DTAs override domestic law to the extent of any inconsistency.
B) The DTAs allow two countries to tax the same income without any corresponding foreign tax credit or offset
C) Where the terms of a DTA conflict with provisions of Australia's domestic tax law, the provisions of Australia's domestic law prevail
D) The DTAs promote the double taxation of income

Accepted Answer

DTAs are designed to prevent double taxation and resolve issues of tax residency by establishing which country has the right to tax certain income. They include tie-breaker rules for determining tax residency and override domestic laws where there is inconsistency, ensuring that taxpayers are not subject to double taxation on the same income.

Question 14

Moogle Inc is incorporated in the USA and has a permanent establishment in Australia. The global income of Moogle Inc is $800 million. Do Australia's new multinational anti-avoidance rules apply to Moogle Inc?
A) Yes as Moogle Inc is a multinational firm with a permanent establishment in Australia
B) Yes as Moogle Inc is a significant global entity
C) No as Moogle Inc is not regarded as a significant global entity as its global income is below $1 billion
D) No as Moogle Inc is incorporated in the USA

Accepted Answer

Australia's multinational anti-avoidance rules apply to entities regarded as significant global entities, which are defined as having global income of $1 billion or more. Moogle Inc's global income is $800 million, which is below this threshold.

Question 15

Arazon Plc is incorporated in the UK and sells various products online to consumers all around the world with some located in Australia. If, in the last financial year, Arazon Plc made sales to Australian consumers totalling $70,000, does Arazon Plc need to register for GST in Australia?
A) No as Arazon Plc is incorporated in the UK and has no place of business in Australia
B) Not at this time as its total sales to Australian consumers are below $75,000 per annum
C) Yes as there are some sales made in Australia to Australian consumers
D) Yes as a foreign business must register for Australian GST if its annual sales exceed $50,000

Accepted Answer

Businesses, including foreign entities, are required to register for GST in Australia if their annual turnover from sales connected with Australia is $75,000 or more. Since Arazon Plc's sales to Australian consumers total $70,000, it is below this threshold.

Question 16

Des is an Australian engineer was seconded to his employer's UK office for a period of 2 years or "such longer period as mutually agreed upon". After arriving in London, Des and his wife bought an apartment and lived there for two years whilst for the same time renting out his Australian home. After two years, Des did not accept the offer to stay on with the firm after his initial period of employment largely due to the fact that his wife wished to return to Australia. Des continued to stay in the UK after this two year period and has not as yet returned to Australia. Is Des a resident of Australia or not?
A) Yes, Des continues to have an Australian domicile and has not as yet acquired a permanent place of abode outside of Australia
B) Yes, as he is still regarded as 'ordinarily' residing in Australia
C) No, as Des has not been in Australia for at least 183 days in the last income year
D) No, as Des has acquired a permanent place of abode outside of Australia

Accepted Answer

Des has acquired a permanent place of abode outside of Australia.

Question 17

Michael Desmond is a South African diamond corporation executive. He takes the opportunity to participate in an intensive eight month advanced management development program at an Australian university. Michael's wife and children do not accompany him to Australia and while here he stays in basic accommodation on campus. He spends his time studying or writing reports for his company. He is in Australia solely to do the course and at the end of eight months he returns home. Is Michael a resident of Australia?
A) Michael would be a non-resident of Australia as he does not 'ordinarily' reside in Australia
B) Michael would be a non-resident of Australia as he does not have an Australian domicile
C) Michael would be a resident of Australia as he passes the 183 day test
D) Michael would be a resident of Australia as he does 'ordinarily' reside in Australia

Accepted Answer

Michael is a non-resident of Australia because he does not 'ordinarily' reside in Australia. His stay is temporary and solely for the purpose of completing a course, without establishing a permanent home or significant ties in Australia.

Question 18

Ian Ruven is an executive of a US corporation specialising in management consultancy and he comes to Australia to set up a branch of his company. Although the length of his stay is not certain, he leases a residence in Sydney for twelve months. His wife accompanies him on the trip but his teenage son and daughter, having just commenced college, remain in the family home. Apart from the absence of his children, Ian's daily behaviour is relatively similar to his behaviour before entering Australia. Ian earns interest from substantial investments he has in the United States. Satisfied with the progress of the branch, Ian and his wife return to the United States eleven months after arriving in Australia. Are Ian and his wife residents of Australia for the period of time he is in Australia?
A) Yes, as Ian and his wife would pass the 183 day test
B) Yes, as Ian and his wife would satisfy the 'ordinarily' residing in Australia test
C) No, as Ian has no intention to 'reside' in Australia
D) No, as Ian does not have an Australian domicile

Accepted Answer

Ian and his wife would satisfy the 'ordinarily' residing in Australia test due to their behavior and the establishment of a residence for a period that, although not permanent, is substantial and indicative of residing in Australia for that duration.

Question 19

Rovers Co is a company that was incorporated in the USA but has its head office located in Singapore. The company does carry on business in Australia but has no offices here. The directors of the company regularly (six or more times a year) meet in hired offices in Brisbane. At these director meetings high-level decisions are made that set the company's general policies, and determine the direction of its operations and the type of transactions it will enter. The directors also meet in other locations but the majority of the director meetings each year are held in Australia. Is Rovers Co an Australian resident company?
A) No, as the company was incorporated in the USA
B) No, as the company has its head office in Singapore
C) Yes as it has its central management and control located in Australia
D) Yes as it carries on business in Australia and this is the only factor required to establish residency for a company

Accepted Answer

The company is considered an Australian resident for tax purposes because its central management and control, evidenced by where the directors make high-level decisions, is located in Australia.

Question 20

Dexta Ltd is a company that was incorporated in Mexico and which has its head office in Canada. It carries on business in Australia and in a number of other countries. 55% of the shareholders of the company reside in Australia with the remaining 45% of shareholders spread across a number of countries. Is Dexta Ltd regarded as an Australian resident company?
A) No as although the company carries on business in Australia, the company does not have its central management and control in Australia
B) No, as although the company carries on business in Australia as the company does not have its voting power controlled by Australian resident shareholders
C) Yes as the company carries on business in Australia and has its central management and control in Australia
D) Yes as the company carries on business in Australia and has its voting power controlled by Australian resident shareholders

Accepted Answer

The answer of Dexta Ltd is a company that was...

Quiz 2: Residency and Source of Income

Which one of the following statements is not true in regard to non-residents?

Which of the following is not a factor under the ordinary concepts test for determining the residency of an individual?

Which of the following is not a factor in determining whether the company has its central management and control in Australia?

Which of the following is true in relation the meaning of the term 'source' when used in the context of the source of income derived by a taxpayer?

In the FCT v Mitchum case the source of the actor Robert Mitchum's acting income from appearing in a film shot in Australia was determined to be?

Which of the following is not true in relation to the operation of the withholding tax rules?

The new Australian anti-avoidance rules in regard to multinational corporations do not apply to which one of the following options?

Which one of the following statements is not true in respect to overseas businesses and their Australian GST obligations?

Thomas is a New Zealand resident who provided some accounting services to an Australian employer for 12 weeks in September 2019. For the rest of 2019/20 Thomas worked for various New Zealand employers. Does Thomas have any Australian tax liability?

Anh is a non-resident of Australia but who sold some real estate in Australia in March 2020. Does Anh have any tax obligations in Australia in correction with the sale of this Australian real estate property?

Adelaide Software pays royalties to a US firm for the use of the software products. The contract to arrange these royalty payments was signed in Canada. According to tax law what is the source of these royalty payments?

What is the effect of Australia's Double Tax Agreements (DTAs) with other countries, such as the United States?

Moogle Inc is incorporated in the USA and has a permanent establishment in Australia. The global income of Moogle Inc is $800 million. Do Australia's new multinational anti-avoidance rules apply to Moogle Inc?

Arazon Plc is incorporated in the UK and sells various products online to consumers all around the world with some located in Australia. If, in the last financial year, Arazon Plc made sales to Australian consumers totalling $70,000, does Arazon Plc need to register for GST in Australia?