Tax Law

Question 1 (300-500 words)

On 10 July 2015, Jarrold Alexander was transferred to the Singapore office of his company, Global AIH Ltd, for five years.  His wife Rosemarrie accompanied him to Singapore.  In Singapore they lived in a house owned by the company and leased their Sydney residence.  While residing in Singapore Rosemarrie borrowed $100 000 from the Commonwealth Bank on 1 December 2015, to fund the purchase of 50 000 shares in Global AIH.

During the 2015/2016 tax year Rosemarrie received $5 000 as her share of net rental income (after deductions) from the lease of their Australian home, and $2 500 in fully franked dividends from Global AIH.  She incurred no other expenses in deriving the rental income, but her interest payments on the Commonwealth Bank loan amounted to $5 650.

Required:

Advise Rosemarrie Alexander for the Australian tax consequences of these transactions. Refer to the relevant legislation and cases. (Hints: you need to do some research on the tax consequence of dividends paid to a resident and non-resident) (7 marks)

Question 2 (300-500 words)

Franklin is a medical doctor and a scientist. He works at a local hospital in the mornings, attending to patients. At lunchtime he takes a train to the local university where he works in a research laboratory. At the end of the day, he takes the train home. The train fares for the year include $1,200 from home to hospital, $800 between hospital and the local university and another $1,000 from the university back to home.

In the current income year, Franklin opens his own practice, servicing local residents. He rented an office for $10,000 a month. In order to run the business, he has to put his beloved dog to a local pet shop for pet minding. He incurs $ 20,000 pet minding fees for the income year.

Advise Franklin as to the tax deductibility for the above expenditures by referencing to the tax laws and case laws (8 marks).

Question 3 (800-1000 words)

Michael Pondage at all relevant times held a German passport.  From the time of his first visit Australia in 2007 until the end of the 2016 income year, he held a visa which permitted him to live and work in Australia.

During the time he was in Australia, Michael worked under contract as a marine engineer on a sea-going barge owned by an Australian company.  Subsequently, the barge was leased to a Malaysia-based company, Ocean Development Ltd (OD), for use in carrying out work in China.  Michael accepted employment with OD and left Australia on 8 July 2015, leaving his son and wife in Australia.  He worked for Ocean Development Ltd for nine months in China and earned AUD $90,000.  He then terminated his contract and returned to Australia where he stayed for the rest of the income year.  On his arrival back in Australia he entered into a partnership business with his wife.

Accommodation provided for Michael in China by his employer was of a temporary or transitory nature in the form of single men’s quarters or barracks.  Meals were also provided.  Ocean Development Ltd.’s office in Malaysia paid Michael’s wages into his bank account in Australia, after deducting tax required to be paid in Malaysia.  Michael paid no income tax in China.  Michael’s assets in Australia are his home in Sydney, an investment residential unit in Randwick, a super policy with AMP, listed shares, bank accounts and membership of a local golf club. Michael intended to be absent from Australia for approximately nine months and was in fact away for that period only.

Required:

For the 2015/2016 tax year, is Michael a resident or non-resident of Australia? Refer to the relevant legislation and cases (15 marks)