Question 1 – Residency (10 marks)

Taite arrived in Australia on 1 August 2017 from Europe to follow a boyhood dream. He has always dreamed of a gap year visiting Australia and experiencing the sun, sand and surf.  He has saved some money to finance his travels and plans to follow the various fruit picking and other casual non-government labour type employment opportunities.   

Taite does not stay in any one place for long before moving on to the next work opportunity.  He stays at a variety of places including backpacker hotels and accommodation offered by employers.  

Taite leaves Australia on 30 June 2018 and makes his way back home to Europe by following the “hippie trail” from Bangkok to Istanbul and then back home to recommence his University studies.

Required

Determine whether Taite is a resident of Australia for tax purposes and provide written advice in the form of a letter to Taite.  Construct your answer with reference to the four (4) residency tests, relevant case and relevant legislation

Question 2 – Deductions (20 marks)

Derek is a resident individual who has decided to start a business as a tax advisor trading as a sole trader business.  He decided to purchase an existing business for $450 000.

During the relevant income year the following transactions took place:

1) Paid a rental bond 1 July 2017 $3 600

2) Installed new internal walls on 1 August 2017 $8 000

3) Repainting existing walls 1 February 2018             $3 500

4) Repairs to fittings throughout the year $2 000

5) New carpet laid throughout on 1 March 2018 $5 000

6) Repaired computer system on 1 April 2018 $950

7) Installed computer upgrade on 1 January 2018 $12 500

8) Replaced unbroken front glass window with safety glass on 1 July 2017 $4 700

Derek has decided to use the diminishing value method and has established the effective life of the relevant assets to be:

· new internal walls to be 10 years,

· the carpet to be 8 years

· the computer upgrade to be 3 years.  

· The window to be 2 years

Derek also incurred the following costs:

1) Stamp duty on the transfer of the business name $2 750

2) Legal costs for preparing a new 5 lease of the business premises              $2 000

3) Borrowing fees for the 10 year loan financing the purchase $1 250

Read less