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LAW 3521 Income Tax Law

tag 0 Download 7 Pages / 1,573 Words tag 28-06-2021


Part 1

Dale Teal and her husband Trent Teal have the following tax related information

Sole trader Activities

Dale was born on 01/11/1966 and runs a successful holistic health business as a sole trader with the following details

Cash receipts from sale of trading stock for the year 110 000

Cash receipts from holistic health services 100 000

Amounts received in advance as at 30/6 (not included in cash receipts) 15 700

(Dale has a policy of refunding these amounts if clients choose not to go through with the treatment)

Invoices issued but not paid     12 000

Opening trading stock      37 500

Closing trading stock 30 000

Wages paid to part time staff 56 112

Rent expenses paid 15 600

Legal expenses incurred in renewing the lease        1 750

Superannuation Guarantee paid for all employees 5 190

Tax Agent’s Fees     6 50

Bank/Merchant Fees 7 00

Business Insurance (continuity insurance) 2 950

Business Phone 1 780

Scented oils etc used up 11 150

Electricity 4 000

Postage, printing & stationery 1 600

Interest on loan 2 520

(Dale has all of the necessary paperwork to substantiate claims and receipts)

Employee activities

Dale is also a prison guard at a high security facility with Blackhand, a private enterprise noted for its involvement in conflict areas.

Salary 85 000

PAYG withholding 14 200

Other information

Her home phone bills totalled $1,200 with 55% business use.

Dale paid $7,390 during the year for income protection insurance to ensure an income stream if she should be unable to work.  She also paid a further $755 for life insurance providing a capital payment on her death or diagnosis of terminal illness.

Dale also had a number of CGT events during the year.  She owns all these assets herself.

  • She sold a rental property purchased on 15/5/96 for $180 000 on 27/3/17 for $340 000
  • She sold a stamp she picked up at a garage sale for $5 on 15/7/17 on 25/8/17 for $25000.  Dale has an expert knowledge of stamps and recognised it as a very rare stamp she could quickly sell to a collector.
  • She sold a boat acquired on 1/11/04 for $17 500 on 1/4/17 for $9 000.
  • She sold 500 shares acquired on 1/4/12 for $10 000 on 1/4/17 for $2 000
  • She sold 1000 shares acquired on 3/4/84 for $10 000 on 1/4/17 for $2000
  • She sold 2500 shares acquired on 25/5/96 for $18 000 on 1/6/17 for $18 750

Dale and Trent have a shared bank account which paid $2180 interest

Dale and Trent also own a share portfolio of ASX listed shares which paid a fully franked dividend of $14350, 65% partially franked dividend of $9500 and unfranked dividends of $4000.  

During the year Dale paid 4 PAYG Instalments to the ATO of $8,500 each

Dale and the family are covered by full private health insurance.


  • Calculate Dale’s taxable income
  • Calculate the balance of her assessment
  • Prepare a statement of advice for Dale explaining your decisions and calculations based on the legislation and relevant case law.

Part 2

Amity has been employed as a tax advisor by the mid-tier private accounting firm YoungPWC and Associates in their Adelaide branch for 7 years.  In January 2016 she was selected to be sent to Kiribati for two years to advise the Kiribati government on the design and implementation of a new VAT.  The placement was for a 2 year period with an option exercisable by Amity to extend the period for a further 3 years.  

Amity jumped at the opportunity and left Australia in January 2016 with her husband Martin. Amity intended to stay in Kiribati for at least the initial 2 years and then make a decision about staying longer if the lifestyle was enjoyable, the work enjoyable and financially rewarding.

On first arriving in Kiribati, Amity and Martin took out a small mortgage on a house on the beach and planned to furnish it with furniture bought from the local furniture stores.  However, they underwent extreme culture shock when they discovered there were no local furniture shops selling anything they wanted and the cost of shipping their furniture over was prohibitive. They decided to sell the house after 4 months and take up a serviced apartment in the capital.  

This was acceptable accommodation and it worked well enough as there were no children. They were able to take out 12 month rent agreements as there were many expats on one year placements. They made the apartment relatively homely with their few belongings.  However, Martin found getting any sort of reasonable employment was essentially impossible and started to get dispirited.

Amity’s salary was paid into an account she opened with the Asia-Pacific Bank. Amity and Martin kept their home in Adelaide and rented it out through agents for 12 month periods.

They discontinued their health insurance membership, however Amity maintained her Chartered Tax Advisor membership.  Their only relatives are their elderly parents who resided in Australia.

Martin contracted a form of food poisoning from eating a toxic fish and after only 18 months away the disenchanted couple returned to Adelaide at the beginning of July 2017.


You are required to advise Amity on whether or not she was an Australian resident during the income year ended 30 June 2017 by reference to the relevant legislation and case law.

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