TAXATION (Australian)

INDIVIDUAL COMPULSORYCASE STUDY-
Semester 1 2016

Assessment: 25% of final assessment

Assessment Criteria : – The following assessment criteria will be used:
– Relevance to the question.
– Accuracy of information/argument.
– Clarity of expression.
– Referencing to relevant tax
legislation, case law and ATO
rulings

Required: Complete assignment tasks one to three inclusive.
The final grade will be scaled to 25 marks. Limit your written response to task one to 350 words and task two to 800 words.
In grading task one and task two examiners will focus on your referencing to case law, appropriate sections of the ITAA 1936 and ITAA 1997 and income tax rulings issued by the Australian Taxation Office.
Section referencing is not required in respect of task 3.
A list of references used to answer all assignment tasks should be attached to the assignment.
Assignment Task One- (350 words – 5 Marks)
Assignment Task Two (800 words – 10 marks)

the ITAA 1936:
http://law.ato.gov.au/atolaw/Browse.htm?ImA=fake&Node=0~0~0&OpenNodes=,0~0,0&DBTOC=05%3APLR%3ATaxation%3AINCOME%20TAX%20ASSESSMENT%20ACT%201936%3AView%20list%20of%20provisions%3B#0~0~0

ITAA 1997:
http://law.ato.gov.au/atolaw/Browse.htm?ImA=fake&Node=0~0~1&OpenNodes=,0~0,0&DBTOC=05%3APLR%3ATaxation%3AINCOME%20TAX%20ASSESSMENT%20ACT%201997%3AView%20list%20of%20provisions%3B#0~0~1
income tax rulings:
http://law.ato.gov.au/atolaw/Browse.htm?ImA=folder&Node=5~2~1~0&OpenNodes=,0,5,5~2~1,5~2&DBTOC=05%3AATO%20Rulings%20and%20Determinations%20(Including%20GST%20Bulletins)%3ABy%20Type%3ARulings%3ATaxation#5~2~1~0
ACFI3004 Taxation
Case Study 2016

Assignment Task One- (350 words – 5 Marks)

Mick Remeas is an Australian resident taxpayer employed as a university lecturer by the University of Newcastle (UoN). As part of his employment duties the University sends Mick annually to teach for two weeks at their UoN campus in Singapore. The University pays for all Mick’s travel expenses including return economy airfares. This year the only return flight from Singapore is an overnight flight departing Singapore at 8pm and arriving in Sydney at 6am the following day. On the day of arrival in Sydney, Mick has a full day of teaching at UoN’s Sydney campus (including a night class). Mick always has trouble sleeping in economy airline seats and is concerned he will be too fatigued to function adequately whenhe teaches on the day of his return. As he result he upgrades to a 1st Class “Flatbed” seat on the same flight so he can sleep comfortably and arrive in Sydney refreshed. The cost of the upgrade is $750. Mick pays this personally as University travel regulations only cover the cost of economy travel.

Required

Advise Mick whether he can claim an income tax deduction for the cost of the $750 upgradefrom economy to 1st class on the flight. Refer to relevant case law, Australian Taxation Office taxation rulings and sections of the Income Tax Assessment Acts.

Assignment Task Two (800 words – 10 marks)
Ooday is a 38 year old Japanese citizen and recently retired world professional champion surfer. She is single with no dependents. On 1 February 2016 Ooday accepted a position with Fox Sports Television Australia to commentate on the upcoming professional world surfing tour. The contract will involve Ooday broadcasting on location at surfing events throughout the world. The contract with Sydney based Fox Sports coincides with the current professional surfing season (1 April 2016 to 31 December 2016) with an option to extend for the following season if both parties agree.

The contract will require Ooday to travel overseas with the tour for at least two weeks in every month. She will also spend one week per month at Fox TV’s Sydney studio. Ooday has decided to make Australia her base for the term of the contract. On arriving in Australia on a one-way ticket on 1 March 2016 she secured a 12 month lease on an apartment in Sydney. While in Australia she will lease her fully furnished Tokyo apartment to friends. Her mother and father will store her personal possessions (including her world cup trophy) at their Koyoto home.

Ooday is confident she can make a career as a professional sports broadcaster. If the Fox Sports contract is not renewed in January 2017 she intends to seek employment with other sports broadcasting networks either in Australia or internationally.

Required

In the form of a professional correspondence advise Ooday on whether she will be classed as a resident of Australia for tax purposes at 30 June 2016. Also advise Ooday how her residency classification will affect the Australian taxation treatment of her contract income from Fox Sports.

Assignment Task Three (5 marks)
Penny Farthing is 52 years old and an Australian resident for tax purposes. Following the death of her spouse in 2013she has remained single and assumed sole care of their two children Kim (aged 11) and Kerry (aged 3). The children receive no income. On October 31, 2015Penny resigned from her job as a nurse at Newcastle’s John Hunter Hospital and moved her family to commence new employment at the Alice Springs Base hospital in the Northern Territory.She had worked at John Hunter Hospital since 2012. Her employment at Alice Springs base hospital commenced on 15 November, 2015- the date she settled with her family in rented accommodation in the town of Alice Springs. Penny is leasing the home she owns in Newcastle through a real estate agent.

Details of Penny’s receipts and payments for the year ended 30 June 2016 are as follows (all amounts are inclusive of GST where applicable):

Receipts
Family Tax Benefit Part A $3,890
Family Tax Benefit Part B $3,358
Gross Salary (John Hunter Hospital) note 1 $25,240
Gross Salary (Alice Springs Hospital) note 2 $76,180
Fully Franked Dividend received $4,200
Bank Interest received 520
Gross Rental Income $10,400

Payments
Airfares and removal costs to Alice Springs $3,400
Annual subscription Australian Nurses Association $700
Purchase laptop computer note 3 $2,200
Other expenses (all deductible s8-1) $2,230
Expenses relating to the rental property (all deductible) $17,100
Personal contribution to a superannuation fund note 4 $5,000

Other information:
a. Penny does not have private hospital cover.
b. At 30 June 2016Penny had a HELP/ (HECs) debt of $9,000 relating to her nursing degree that she completed in 2012 at the University of NSW.
c. Penny also received $7,000 as her share of her Grandmother’s deceased estate.

Notes:
1. Penny’s payment summary (group certificate) from the John Hunter Hospital Newcastle also showed the following details:

Gross Lump Sum Annual Leave paid $3,850
PAYG Deducted $8,000
Reportable Fringe Benefits $4,100
Reportable Employer Superannuation Contributions $2,750

2. Penny’s payment summary (group certificate) from the Alice Springs Base Hospital also showed the following details:

PAYG Deducted $28,000
Reportable Employer Superannuation Contributions $3,250

3. The laptop was purchased new on 15 March 2016. It has an effective life of 3 years and is used 90% for her employment and 10% privately.
4. Penny paid the superannuation contribution to her employer sponsored superannuation fund from her personal savings on 29 June 2016.

Required

Calculate Penny’s minimum taxable income and her net tax payable/refundable for the year ended 30 June 2016.

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