Background Facts

Young Rodman

Young Rodman was born in Australia on 5 August 1985, and has lived in Australia his entire life.

Young lives in a large family home with his wife and children. All children go to the local primary school.

Young and his wife are members at the local lawn bowls club, have private health insurance and Australian bank accounts.

Young's extended family are also located in Perth.

Young owns an operates an Ugg boot manufacturing and distribution warehouse in

Perth and has done so for a number of years. This business is run through an Australian private company - Uggs 'R' Us Pty Ltd (URU).

Young holds the following assets in his own name:

Asset	Cost	Market Value
Mitsubishi Prado	$65,000	$45,000
Main residence	$1,500,000	$3,000,000
Shares in URU	$100	$750,000
Various ASX listed shares	$25,000	$27,500
Various cryptocurrency assets	$75,000	$3,500

As well as receiving dividends from URU each year, Young also receives a salary of $125,000 per annum from URU.

Uggs 'R' Us Pty Ltd

URU is an Australian private company, with Young being the sole shareholder and sole director.

As well as operating the business, URU also owns a warehouse in Perth (and the land also) where the business is carried on.

URU has the following assets:

Asset	Cost	Market Value
Trading Stock	$500,000	$500,000
Land and buildings	$2,500,000	$3,250,000
Plant and equipment	$750,000	$650,000
Trade debtors	$125,000	$125,000
Cash at bank	$25,000	$25,000

Through a long process of business development and negotiations, on 1 December 2020, Young expanded his business overseas to New Zealand.

Given the attention the business would need in the early stages, Young relocated to New Zealand by himself to run the business, with his family remaining in Perth.

Young relocated on 1 December 2020.

While in New Zealand, Young rented a modest apartment, opened a New Zealand bank account and took out private health insurance.

Young was in New Zealand for a total of 11 months and returned on 31 October 2021.

During his time in New Zealand, Young:

• Remained the sole director of URU.
• Kept his Australian private health insurance and bank accounts
• Visited his family in Australia for two short trips.

Uggs NZ (UNZ)

Through advice from Young's former accountant (Marcus from RedFlag

Accountants), Young incorporated a New Zealand Company (UNZ) which had 100% of its shares owned by URU.

UNZ leased a warehouse, and operated a similar business to URU, manufacturing and distributing Ugg boots.

For the year ended 30 June 2021, UNZ had almost entirely active income from the operation of the business, and had after tax profits of $300,000.

For the year ended 30 June 2022, UNZ had almost entirely active income from the operation of the business, and had after tax profits of $450,000.

The assets of UNZ as at 30 June 2022 are:

Asset	Cost	Market Value
Trading Stock	$125,000	$125,000
Cash at bank	$15,000	$15,00
Trade debtors	$12,500	$12,500
Plant and Equipment	$47,000	$47,000

Instruction

Young has come to you because he wants advice on the following:

For the year ended 30 June 2021:

• Advise Young on his tax residency position for the entire income year, and what impact his relocation during the year may have had.
• Advise Young on URU's tax residency position for the entire income year, and what impact his relocation during the year may have had.
• Assuming that the Australia / New Zealand Double Tax Agreement is the same as the OECD Model Convention, advise Young on how and where his salary received from URU will be taxed?
• Advise Young on the Australian tax implications of UNZ not paying any dividends to URU during the income year.

For the year ended 30 June 2022:

• Advise Young on his tax residency position for the entire income year, and what impact his relocation during the year may have had.
• Advise Young on URU's tax residency position for the entire income year, and what impact his relocation during the year may have had.
• During the year, UNZ paid $650,000 of dividends to URU. Advise Young on the Australian income tax implications (ignoring any withholding taxes)
• On 30 June 2022, an offer was made by a third party to acquire 100% of the shares in UNZ from URU for $500,000. Assuming URU had a cost base in the shares of $100, advise Young on the Australian tax implications of the sale of shares.

Notes:

1. Your letter of advice should primarily consider the Australian income tax implications of the above, and only consider the treaty where noted.
2. Where you are required to advise on an amount of tax to pay, you are not required to work out the net tax payable, just the impact on the taxable income of the relevant taxpayer, and whether any exemptions apply or any gains are disregarded.