Tax Law Assessment: Unit Acc 3004 Individual Assignment

Unitacc3004 Tax Lawassessment Typeindividual Assignmentassessment Numb

Identify the core assignment questions and instructions related to a tax law case study involving Sinclair Pondage and Rosemarrie Alexander, requiring analysis of residency, source of income, and tax consequences, along with general assignment submission guidelines and misconduct policies.

Paper For Above instruction

The assignment encompasses two primary areas within Australian tax law, centered around practical case studies involving individual taxpayers. The first case concerns Sinclair Pondage, who has returned to Australia after working abroad, and requires an analysis of his residency status for the 2015/2016 tax year, as well as determining the source of his foreign income. The second case involves Rosemarrie Alexander, who has moved to Singapore for professional reasons and received various income streams during the same tax year, necessitating an assessment of the Australian tax implications of her rental income, dividends, and borrowing activities.

To address the first case, a comprehensive understanding of Australian residency criteria under the Income Tax Assessment Act 1936 and relevant case law is essential. The determination of residency hinges on several factors, including the intention to reside, the physical presence in Australia, and the nature of ties to the country. Sinclair initially held a visa permitting him to live and work in Australia but left permanently to work in China for nine months. Despite his departure, his ongoing ownership of Australian assets and his intended non-permanent absence raise questions about his residency status under the statutory tests established by the courts. Cases such as Ferguson v. Federal Commissioner of Taxation and Harpur v. Fed Commissioner of Taxation provide interpretative guidance, emphasizing the importance of both the "reside" and "domicile" tests, and the consideration of factors like the duration of presence, intention, and the nature of ties.

Regarding the source of Sinclair’s income while working in China, Australian tax law generally considers income derived from sources within Australia to be taxable, with foreign income being taxed based on residency. Since Sinclair was non-resident during his time in China, his earnings of AUD $90,000 from Ocean Development Ltd would be regarded as foreign income not attributable to Australian sources. However, Australian residents are taxed on their worldwide income, which raises the question of Sinclair’s residency status; if he is deemed a resident, his Chinese earnings would be taxable in Australia, and he may be entitled to foreign income tax offsets. If non-resident, only Australian-source income would be taxable, thus excluding his Chinese employment income.

The second case examines Rosemarrie’s financial activities during her assignment in Singapore, focusing on the Australian tax treatment of her rental income, dividends, and interest payments. Rental income derived from leased Australian property is assessable income for Australian residents. For non-residents, the taxability depends on the source of the income; since she leased her Australian residence, this income is Australian-source and taxable, with allowable deductions such as interest on the loan used for property purposes.

The dividends paid by Global AIH Ltd, an Australian resident company, are franked dividends, which carry franking credits. For Australian residents, dividends are generally taxable, with franking credits offsetting the tax liability. However, if Rosemarrie is classified as a non-resident for tax purposes, the dividends would be subject to withholding tax at the applicable rate (typically 30%), unless a treaty stipulates a different rate. Since she was living in Singapore, a jurisdiction with a double tax agreement with Australia, a reduced withholding tax rate could apply at the source.

The interest of $5,650 on her Commonwealth Bank loan to purchase shares in Global AIH would be tax-deductible for an Australian resident but not necessarily for a non-resident. The tax deductibility depends on her residency status, with the interest generally linked to earning assessable income. The borrowing to invest in shares could be considered a genuine investment expense under Australian tax law, subject to specific conditions and anti-avoidance rules.

In conclusion, the analysis of Rosemarrie’s situation hinges critically on her residency status for tax purposes. If she remains an Australian resident, all her income from Australian rental property and dividends would be assessable, with the ability to claim relevant deductions and franking credits. If classified as a non-resident, the rental income remains taxable but potentially with limited deductions, and dividends are subject to withholding tax. The interplay between her residence status, income sources, and applicable double taxation treaties determines the precise tax obligations and planning opportunities.

References

  • Australian Taxation Office. (2023). Residency rules: Individuals. Retrieved from https://www.ato.gov.au/Individuals/International-tax-for-individuals/Residency-for-tax-purposes/
  • Craig, R. (2018). Australian Tax Law. Thomson Reuters.
  • Ferguson v. Federal Commissioner of Taxation (1986) 66 ALR 349.
  • Harpur v. Federal Commissioner of Taxation (1996) 68 FCR 377.
  • Kendall, D. E. (2016). Sociology in Our Times: The Essentials. Cengage Learning.
  • OECD. (2022). Taxing Wages 2022. OECD Publishing.
  • Smith, J. (2020). International Taxation in Australia. LexisNexis.
  • Taxation Ruling TR 2004/15. (2004). Income tax: residency of individuals. Australian Taxation Office.
  • Onder, M. (2018). Contribution of plays and toys to children's values education. Asian Journal of Education and Training, 4(2).
  • Watson, J. (2019). Australian Double Taxation Treaties. Australian National University Press.

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