Question 6 (25 marks)

DellaBella Pty Ltd is a private company which incorporated in Australia in 2009 under the Corporations Act 2001 in order to operate a Bungee jumping business.

The company has had the following results in the last three years:

Income year Tax result

2015/16 $370 000 loss

2016/17 $500 000 loss

2017/18 $35 000 loss

Della Bella Pty Ltd has prepared the following income statement for 2018/19:

Income

Gross profit from trading 510,000

Fully franked dividends 16,800

Exempt income 11,000

Gross Income 537,800

Expenses

Interest expense 23,000

Wages 58,000

Entertainment expense 12,000

Fines and penalties 3,000

Increase in provision for annual leave 14,700

Depreciation 41,000

PAYG Instalments paid 130,000

Total expenses 281, 700

Net Profit 256, 100

Other information

Note 1 - Decline in value for 2017/18 was $38,900.

Note 2 - Annual leave paid amounted to $12,000.

Note 3 - The $256, 100 profit does not include any tax losses from previous years.

On the 1 September 2016 65% of the shares with voting, income and capital distribution rights changed ownership.On the 17 June 2017 the company started to operate a Berry Bomb ice cream outlet.

DellaBella Pty Ltd has collected GST of $25 909 and received a yearly subsidy since 2009 from the Government of $20 000.The subsidy is classified as exempt income.

Required

With reference to the relevant legislation and/or case law:

a) Explain the conditions that must be met to establish if a company is a resident of Australia for tax purposes and determine whether the company is a resident of Australia for taxation purposes

b) Calculate DellaBella's taxable income

c) Calculate the tax assessed and the balance of Della Bella 2018/19 tax assessment

d) Discuss how a company's residency status impacts the taxation of a company in Australia. ( Disregard Double Tax Agreements foer the purpose of this question)