澳洲公司税法案例

Take Home Exam

● What is David’s residency status in 2013/2014?

David is non-resident of Australia on tax purpose in 2013/2014.

Section 6(1) ITAA36 defines a “resident” for Australian tax purpose. Considering David’s residency status in 2013/2014, the domicile test can be applicable here. Applying FCT v Applegate and FCT v Jenkins, it can be concluded that David is non-resident of Australia. David has been working in London since 1 July 2013, and he intends to back to Australia after 3 years in early 2016. During his absence, he lives with his mother who is a permanent immigration of UK since 2000, which means that David has a permanent abode outside Australia in 2013/2014 and also he has a family tie in UK to some extent. According to Ruling IT 2650, David is non-resident of Australia on tax purpose in 2103/2014.

● What amounts are assessable income and what outgoings constitute allowable deductions?

Section 6-1(1) ITAA97 provides that assessable income comprises ordinary income and statutory income. As for David’s assessable income and allowable deductions, there are some analysis as follows.

Section 6 ITAA97 requires that non-residents should have their ordinary and statutory income derived from all Australian sources taxed. Due to David’s non-residency of Australia on tax purpose in 2013/2014, the salary of £150,000 from his London employment is excluded in his assessable income.

Although David never worked on his family farm and either registered as a shareholder, he also made substantial financial contributions toward farm assets and technology, and shared in the farm profits. Under Section 43B(1)(b) of the ITAA 1936, holders of “equity interest” are treated in the same way as shareholder. Considering the definition of dividend in Section 6(1) of the ITAA 1936 as well, David’s share of $100,000 in the company’s profit should be treated as dividends and is assessable as statutory income under Section 44 of ITAA 1936.

As for the outgoings David provided to purchase new machinery for the farm and to fix the fence that had broken, different treatments are applied. Applying the 3 tests in distinguishing capital and revenue expense: the “once and for all” test derived from Vallambrosa Rubber Co Ltd v Farmer (1910) 5 TC 529, the “enduring benefit test” der ived from British Insulated & Helsby Cables Ltd v Atherton[1926] AC 205, and the “business entity” test derived from Sun Newspaper v FCT (1938) 61 CLR 337, the amount of$200,000 is incurred as a “one off” and produced an asset of lasting value, therefore meet the first negative limb under Section 8-1(2) of ITAA 1997, which means that it was capital in nature and thus can not be deducted on tax purpose. However, another outgoing of $4,000 was used to fix the fence that had broken, so that it should be treated as a deduction for