Subject Code : LAW5230
Assignment Task:

Case Study One 

Peter (55 years old) was born in and remains a citizen of Canada. He has lived in Australia for the last 15 years and was granted Australian citizenship 10 years ago (i.e. he is a dual citizen). Peter owns a business in China which provides the main source of income for him and his family. He departed Australia on 1 July 2017 to live and work in China and operate his business. Peter’s wife and 2 children remain in Australia and live in the family home as his children are still in school or university. He supports the family financial with money from his business in China. Since his departure he has returned to Australia several times and generally spends around 35 days per financial year in Australia with his family. His family also often travel to China to visit him. Peter has a working visa in China that is valid for 5 years (from 1 July 2017). He is considered a tax resident in China. He has bought an apartment in China that he lives in. Peter and his wife still own their family home in Australia, a rental property, several bank accounts in Australia and most of his personal effects remain in the family home. Peter intends to live and work in China until he retires and then return to Australia. 

During the income tax year ended 30 June 2020, Peter earned $8,500 in net rental income from his Australian rental property and interest income of $420 from money in an Australian bank account. He also earned $200,000 in distributions from his business in China as well as $1,000 in interest on Chinese investments (from which tax was paid in China). Provide advice to Peter as to whether he is a resident of Australia for tax purposes for the income year ended 30 June 2020 and based on this conclusion, also provide advice as to any amounts of income that would be included in his assessable income in Australia for the year ended 30 June 2020. 

2 Marzena.

Marzena inherited a very large parcel of land (approx. 8 acres) at the Sunshine Coast from her parents when they passed away 3 years ago. The land is around 6 kms from the main tourist area of the Coast and also contains a large family home. Since acquiring the land and home, it has been used by herself and extended family members as a holiday home at various times throughout the year. The intention since acquisition has been for the home to remain in the family for everyone’s shared private use. 

However, around 18 months ago, a very large scale housing development commenced at an adjoining area of land. The developers approached Marzena to sell her land and home to that development. Marzena declined this offer as she wished to retain the home for her private use. In declining the offer to sell it became apparent that the development would substantially reduce Marzena’s peaceful outlook and result in a large amount of increased traffic past the property. Therefore, through negotiations she entered into an agreement for some boundary realignments that ensured the new development would have a reduced impact on Marzena’s enjoyment of the house and land. Unfortunately, as part of these realignments, all of Marzena’s land was rezoned which resulted in a large increase in council fees and holding costs of the land. 

During the current income year, a family friend suggested subdivision and development of the land by Marzena herself might be the best outcome. As a result, Marzena has found a separate property developer and has entered into a development agreement. The agreement assigns all responsibility for the development to the developer in exchange for a fee. Marzena will retain ownership of the land until it is subsequently sold. There will be over 30 subdivided lots as well as a park and landscaped entry and exits. Due to the scale of the development, the whole development will take approximately 2 years to complete once all the lots have been completed with water, sewerage, power, streets, pathways, landscaping and a central communal park. In total, the expected net profit from the subdivision taken into account the development fee is expected to be in excess of $3 million. This amount will be realised in part over the course of the 2020, 2021 and 2022 income years.

 

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  • Uploaded By : Alex Cerry
  • Posted on : July 16th, 2019

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