The case of the taxpayer who was paid too late

HomeInsights

The case of the taxpayer who was paid too late.


What a difference timing makes. A recent case before the Administrative Appeals Tribunal (AAT) is a reminder about the tax impact of the timing of employment income. 


When the job ended, the taxpayer moved to Australia and became a resident. Once in Australia, the former employer honoured the performance bonus and paid it as a series of instalments.


The dispute between the ATO and the taxpayer started when the Commissioner issued amended assessments taxing the bonus payments received.


The dispute focused on when the bonus was derived. Had the bonus been derived while the taxpayer was still a non-resident then it would not have been taxed in Australia.


This is because non-residents are normally only taxed in Australia on Australian sourced income. Employment income is typically sourced in the place where the work is performed (although there can be exceptions to this).


Australian tax case law says that employment income is normally derived on receipt. In the taxpayer’s case, this was when he received the payments from his former employer, not when he became entitled to the bonus. Because the taxpayer received the bonus when he was a tax resident of Australia, the bonus was subject to tax.


The difference for the taxpayer was quite dramatic. Had he been paid the bonus when it was due, he would have paid no tax as Kuwait does not impose income tax.


Let's work together.

Please call us if you are concerned about tax residency or managing overseas income. We want our people to be the best they can be.


CONTACT US  CONTACT US 



Unraveling Payroll Tax: Common Blunders and Grouping Dilemmas for Small Business Owners

We'll dive into some of the everyday mistakes and tricky grouping issues that small businesses often encounter when dealing with payroll tax.


Effective strategies for managing cash flow in trades businesses

Maintaining control over cash flow is undeniably a complex balancing act. It's a challenge that lacks a quick and universal solution.


10 reasons why it’s time to change accountant

This article aims to shed light on red-flag indicators that may suggest it's time to consider changing accountants, providing insights into the reasons behind such a decision.

Related News

29 Nov

Unraveling Payroll Tax: Common Blunders and Grouping Dilemmas for Small Business Owners

We'll dive into some of the everyday mistakes and tricky grouping issues that small businesses often encounter when dealing with payroll tax.


READ MORE READ MORE
24 Nov

Effective strategies for managing cash flow in trades businesses

Maintaining control over cash flow is undeniably a complex balancing act. It's a challenge that lacks a quick and universal solution.


READ MORE READ MORE
24 Nov

10 reasons why it’s time to change accountant

This article aims to shed light on red-flag indicators that may suggest it's time to consider changing accountants, providing insights into the reasons behind such a decision.


READ MORE READ MORE