Homework: Week 4

Instruction: Please do research from textbook & internet and then explain the following exercises in your own opinion and understanding, also make sure to input references as well.

Exercise 1

May, a Malaysian citizen, has been in Australia for 10 months on a working holiday visa during the current income year. During that time, she has been employed as a medical research scientist and has lived in a rented apartment in Melbourne.

Required

Determine whether May is a resident of Australia for tax purposes?

Exercise 2

Michelangelo is an Italian citizen who has longed to spend 12 months down under. He has lived in Australia for the entire current income year on a working holiday visa. To help cover his living expenses during this time he has held several short-term part-time jobs in different locations whilst traveling around Australia.

Required

Whether Michelangelo is a resident of Australia for tax purposes

Exercise 3

Shah Pty Ltd is a company incorporated in NZ. It has 2 equal shareholders-Mohamed Pty Ltd and Noor Pty Ltd (both NZ companies with all shares held y NZ residents)

The Board of Directors of Shah consists of 5 members-the two executive directors are Australian residents, and 3 non-executive directors are NZ residents appointed by the shareholders.

Shah conducts its entire business in Australia and alternates its directors meeting between Sydney, Australia and Wellington, NZ.

All operational decisions concerning the company are delegated to the 2 executive directors who manage the company from Sydney.

Required

Giving reasons, advise Shaah Pty Ltd whether it is a resident or nonresident for Australian taxation purposes.

Exercise 4

What are the positive and negative limbs of s 8-1 ITAA97?

Exercise 5

What is the difference between loss and outgoing?

Exercise 6

A Drifter has lived in peace on the streets of San Francisco for the last 12 months. One of the beautiful people he met gave him a return ticket to Sydney.

Drifter arrives in Sydney intending to stay until his return flight in 8 months time. While in Australia, Drifter looks for new ways to experience life. His first adventure is to get a job. He finds his job fulfilling and asks you to outline for him the income tax implications.

Required

Is Drifter an Australia resident?

Exercise 7

Pacific Equipment is a Panamanian company specializing in hiring vessels to fight oil spillage at sea.

A spillage occurs in Bass Straits and the Australian oil drilling company responsible, Blue Mountain Pty Ltd, enters into a charter agreement with Pacific Equipment under which Pacific Equipment supplies the ships and the Blue Mountain Pty Ltd supplies the crew and oil spillage experts.

The vessel is specially equipped for its task. The ship will operate in Bass Strait for 4 months, calling occasionally at Melbourne to collect food and workers etc.

The contract is entered into in Panama and the charter fees are paid into a Panamanian bank account.

Required

1.What is the source of income for the charter fees? Give reasons for your answers, supporting it with reference to case law?

2.Will the charter fees be subject to Australian tax?

Exercise 8

Nick is a resident TP employed by Ace Ltd. The following transactions were all as a consequence of Nicks employment.

1. Net weekly wages totaled $78,000 for the year.

2. Total PAYG tax withheld from weekly wages from Ace and forwarded to the ATO $19,000.

3. Additional wages paid as a Christmas bonus of $6,000 (net of $4,200 PAYG tax withheld)

4. Reimbursement of out-of-pocket travel cost of $1,200 incurred during employment.

5. A travel allowance totaling $2,000. No PAYG was withheld.

6. Ace paid health insurance premium for Nick and his wife of $2,750

7. Superannuation contributed $10,000 to ACE Super Fund on behalf of Nick.

For each of the transactions indicate which amounts are to be included in Nicks assessable income

Exercise 9

The following taxpayers have derived income from Australia and foreign sources.

1.Susan, a non-resident for tax purposes, received gross wages from employment in Australia.

2.Catherine, an Australian resident for tax purposes, received rent from her property in France.

3. Lee, an Australian resident for tax purposes, received a trust distribution from an oversea trust fund.

4. Kelly, a nonresident for tax purposes, received dividends from a company in Canada.

Required

Giving reasons, indicate which if these amounts are to be included as assessable income.