Mary-Anne Mayfield is a 25 year-old Australian citizen who has recently completed a Master’s…

Complete assignment tasks one to three inclusive. Your responses to task one and task two should take the form of a professional correspondence directed in person to the applicable taxpayers. Limit your written response to task one to 500 words and task two to 750 words. In grading task one and task two examiners will focus on 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.
ACFI3004 Taxation
Case Study 2017
Assignment Task 1 8 marks
Mick Remaes is a resident taxpayer who is employed full-time as a lecturer at the University of Newcastle. In 2016 Mick became aware of an opportunity to purchase a large parcel of vacant land in the now defunct railway corridor in Newcastle West. With the opening of the University’s NewSpace building in the adjacent area, Mick sees potential for the building of a multi-story complex that will provide private, short-term student accommodation and a mix of retail and café spaces. On July 1, 2016 he borrowed $3,2000,000 from CBC Bank and acquired the land. Mick has commenced the process of gaining approval for the development however that process will not be complete until at least March 2018. The building project is not expected to commence until September 2018. Mick has not previously been involved in property development.
On 1 August 2016 Mick was approached by Bruno who owns a neighbouring earthmoving business regarding renting Mick’s vacant land as a site to store his earthmoving equipment. Mick agreed to rent the land to Bruno for a period of two years for $175 per week. During the 2017 taxation year annual interest, council rates and insurance in respect of the land amounted to $335,000. Mick also paid $29,000 to a firm of architects to develop some preliminary plans for the proposed building. Receipts from Bruno for use of the land amounted to $8,400.
Required
In the form of a professional correspondence (not exceeding 500 words) advise Mick which payments relating to the land (if any) are allowable as an income tax deduction for the year ended 30 June 2017. Refer to case law, income tax rulings and sections of the Income Tax Assessment Acts.
Assignment Task Two 12 marks
Mary-Anne Mayfield is a 25 year-old Australian citizen who has recently completed a Master’s degree in Accounting at the University of Swansea, Australia. She is single, born in Australia and has always lived with her parents at Pelican Flat, NSW.
Mary-Anne’s ambition is to pursue a career as a university academic however she has found her opportunities in Australia limited by the fact she does not have a PHD. After canvassing many international Universities she was successful in securing a six month teaching contract with the University of Great Britain based in Coventry, England. The University has advised they may consider a further 12 month extension to the contract provided they are satisfied with her performance. Mary-Anne has been granted a 12 month UK working visa and will apply for an extension to the visa if offered further work at the University. She left Australia on 1 March 2017 to commence her contract on 1 April 2017. Mary-Anne travelled to the UK on a one-way ticket and has left sufficient funds with her mother to pay for a return flight if she decides to return home. Mary-Anne is unsure of her actions if the UK contract is not extended. At that time she will make a decision to either apply for another teaching position in the UK or return to Australia to commence PHD studies.
Although Mary-Anne has few contacts in the UK she has keep in touch with Wendy, a UK resident she met on a recent holiday to Bali. Wendy lives near Coventry and has assisted Mary-Anne in securing a six-month lease on a one-bedroom apartment close to the University. She has also arranged for Mary-Anne to open an account with a UK bank to receive her University salary. Mary-Anne has few assets in Australia other than a $10,000 term deposit with the Bank of Blacksmiths and a motor vehicle valued at $15,000 (which will be garaged at her parent’s house until she decides her future). Mary-Anne intends to purchase a cheap car in the UK for transport.
Required
In the form of a professional correspondence (not exceeding 750 words) advise Mary-Anne whether at 30 June 2017 she will be classed as a resident of Australia for income tax purposes. Also advise Mary-Anne how her income will be assessed given both scenarios of her being deemed a resident and a non-resident. Calculations are not required. Ignore any consequences of the Double Tax Agreement between Australia and the UK.
Assignment Task Three 5 marks
Ms Adder is a 28 year old individual resident of Australia (Melbourne) for taxation purposes. She was employed as an accountant for the full 2017 financial year with the exception of 2 months spent in the United States on a working holiday and a period of 4 weeks on her return unemployed. The following information relates to the year ended 30 June 2017:
Receipts
Gross Salary as per Payment Summary (note 1) $75,524
Fully Franked dividends received 3,800
Unfranked dividends received 1,350
US Gross Salary (note 2) 8,240
Gross rent received 5,200
Centrelink Unemployment benefit (NewStart Allowance) 1,950
Gift from her grandmother 5,000
Payments
Expenses relating to the rental property (all deductible) 8,500
Purchase (02/02/17) of a computer used 80% for business
with an effective life of 5 years 1,850
Purchase (01/01/17) of a briefcase used 100% for business
with an effective life of 4 years 280
Personal contribution to a complying superannuation fund 2,500
Airfares to the US 2,000
Other deductible expenditure relating to Australian income 1,000
Other information At 30 June 2017 Ms Adder had an accumulated HELP (HECS) debt of $7,900 Ms Adder is single with no dependants and did not have any private hospital cover.
Notes
1. The Payment Summary also showed $28,000 PAYG deducted, a Reportable Fringe Benefit amount of $4,200 and a Reportable Employer Superannuation Contribution amount of $3,500.
2. The US salary was received from employment during her 2 month stay in Las Vegas as a casino card dealer. US tax deducted (in Australian Equivalent dollars) was $995.
Required
Calculate the taxpayer’s taxable income and net tax payable/refundable for the year ended 30 June 2017. Show all workings. Referencing to the Income Tax Assessment acts is not required.

 

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