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1 TAXATION 1 - LAW2453 ASSIGNMENT – SEMESTER XXXXXXXXXX WORD LIMIT The word limit is approximately 2,000 words (but students can elect to write more). PRESENTATION: Students must keep a copy of the...

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TAXATION 1 - LAW2453

ASSIGNMENT – SEMESTER XXXXXXXXXX

WORD LIMIT
The word limit is approximately 2,000 words (but students can elect to write more).

PRESENTATION:
Students must keep a copy of the assignment they submit.

Assignments will be marked down for poor presentation, poor grammar, punctuation
and spelling.

The assignment must be typewritten and double spaced with a generous margin.

All Students must upload a soft copy through Turnitin on Canvas before 8.ooam
on Monday 9 April 2018.(This will be before classes begin on Monday 9 April
2018). Students may also have to also give a hard copy to their lecturer in class
during the teaching week beginning Monday 9 April 2018. Students should check
with their lecturer to see if they also require a hard copy. Students should submit
the assignment on Turnitin using Microsoft Word - Not as an Adobe File.

If students submit their assignment late on Turnitin they will be penalized (see
Course Manual). If students are having problems submitting on time, they should
apply for special consideration with the special consideration unit at RMIT.

SUBMISSION DATE: 9 April 2018 (see above instructions)


PROBLEM

ABC Ltd is a palm oil company incorporated in Hong Kong where the majority of its shareholders
eside. It has operated palm oil plantations in Brunei since XXXXXXXXXXAll the members of the Board
of Directors reside in Australia. The board meets on a monthly basis in Sydney. The board of
directors exercises control of general and corporate affairs of the company and its policy, including
exercising supervision over operations of all its palm oil plantations.

On 1 July 2015, Peter, an Australian accountant and citizen, became the company’s plantation
manager in Brunei. In his position as the company’s plantation manager, he is empowered to hire
and fire staff, buy raw materials, enter into leases for the rental of plantations, ship palm oil from
Brunei to Australia and sell a certain percentage of production locally. His responsibility as
manager does not extend to control of general and corporate affairs of the company or policy but
only to day to day conduct of the company's trading operations in Brunei.

By 2016, the Brunei operation had become so successful, and had grown to such an extent, that
in July 2016 the company’s board of directors decided that some of the decisions made at the
monthly board of directors meeting in Sydney, affecting the company would only be tentative, and
that one of the Sydney based directors would need to visit Brunei to speak to Peter. During these
2
discussions ultimate operative decisions affecting some of the company’s overall general and
corporate policy were a
ived at in conjunction with Peter. The company continued to adopt this
form of decision-making in respect of the company’s operations while Peter remained its
plantation manager. All other decisions affecting the company’s general and corporate policy
continued to be made by the board of directors in Sydney.

In June 2015 Peter had signed an agreement in Melbourne with ABC Ltd to act as the company’s
plantation manager in Brunei until June XXXXXXXXXXAt the time of signing the agreement, Peter was
advised that it was possible that at the end of his two year contract the company would offer him
a one year extension. Peter advised the company, at the time of signing, that he had no definite
view of accepting or rejecting the possible extension but would consider it at the end of his two
year posting. He rented his house in Melbourne for two years. He a
ived in Brunei on 1 July 2015.
He and his family resided in a large house they leased near the plantation, which was provided
as part of his employment package. His younger daughter Mary, aged 9, accompanied him and
his wife to live in Brunei, where she attended boarding school. His older ma
ied daughter Anne,
aged 23, remained in Australia with her husband. While in Brunei, Peter and his wife joined the
local
idge and golf club. He also rented a holiday apartment at a nea
y beach resort for two
years. During the time the family was in Brunei, his wife took a part-time job teaching English.

In June 2017, Peter was offered a one year extension of his contract, but decided to reject it and
eturned to Melbourne on 20 June 2017. While in Brunei, the rent from his house in Melbourne
was paid into his interest earning Australian bank account, which he accessed using his Australian
credit card. His salary was paid into an interest earning bank account that he had opened in
Brunei. He drew upon his Brunei bank account from time to time at local ATMs in Brunei.

During his stay in Brunei, Peter bought some shares in a Singapore investment company. The
company is incorporated in Singapore, where its Board of Directors meets and receives its
dividends from its investments. It invests in mining companies in Australia. Peter received
dividends from the Singapore Company while he was in Brunei.

On returning to Australia, Peter decided to open an accounting practice as a sole practitioner. His
wife assisted him, by acting as the receptionist. Fortunately, he was able to provide a service to
a client shortly after beginning business. He billed this client for fees of $8,000 on 28 June 2017,
ut did not receive the cash payment from his client for these services,until August 2017. This
was the only client he billed for the year ended 30 June 2017.


REQUIRED:

Advise ABC Ltd, Peter and his wife of the Australian taxation issues arising from the above fact
situation. Reference should be made to appropriate legislation, case law and rulings. Calculations
are not required.


Note: Australia does not have an International Double Tax Agreements with Brunei and
students are not required to discuss the operation of Brunei taxation law.

(20 marks)
Answered Same Day Apr 01, 2020 LAW2453

Solution

Abr Writing answered on Apr 06 2020
149 Votes
TAXATION 1 - LAW2453
Introduction
Income tax assessment act was enacted in 1997 in Australia. The act covers all the sources of income that can be earned by the individual, partnership, HUF, company, etc. A person can earn from different sources and he has to pay tax on that income. The income tax is collected by the income tax department and the amount of tax charged from the public is utilized for the welfare of public. This case study involves the different sources of income and the tax issues related to that income. The tax issues related to the income earned by the Peter is discussed.
Case analysis
Income tax assessment act 1997 deals with the taxation issues in Australia. Tax should be paid on the income earned in Australia. Tax is also paid on the income earned outside Australia if you are a resident of Australia. The payment of tax is affected by the residential status. If a person is resident of Australia then different tax rate will be applied or vice-versa. A person is treated as an Australian resident when he is the citizen of the country or he has a permanent visa of the country.
ABC Ltd is palm oil Company incorporated in Hong Kong; the majority of its shareholders are from the Hong Kong but the board of the directors and members reside in Australia. The board meeting of the company commenced in Sydney. In the board meeting, all the matters regarding the operations of palm oil plantations were discussed. The head office of the company is situated in Brunei.
Peter who is an Australian citizen became the plantation manager of the company on 1 July 2015. He has the authority to appoint the staff and fire them at his will. He also has the power to buy the raw materials, enter into a lease on the behalf of the company. He can also sell a certain percentage of the production to the local retailers. The operations of Brunei had become successful and the board of the directors of the company decided that some of the members will have to go Brunei to speak with Peter. Peter signed an agreement with the company where he decided that he will remain plantation manager in Brunei until June 2017. The company told him that they might increase his tenure for further one year. He told them that he does not sure about the offer of the company and he will take that decision at the end of his agreement. He has a house in Melbourne which is given on rent for two years. They received employee’s benefits in Brunei as they resided in a large house they leased near the plantation (ATO, 2017). The expense related to the large house will bear by the company as it is included in his employment package. He lives in Brunei with his wife and younger daughter. His older daughter does not come to Brunei as she decided to live in Australia for some time. His wife started a part-time job of teaching English.
At the end of his tenure, he has to take a decision whether he will live in Brunei for one more year or he will go back to Australia. He rejects the offer of the company and came back to Australia. The rent income from his house is transfe
ed into his bank account. The salary earned by him during the period of his job is also transfe
ed to his bank account. When he was in Brunei he purchased the shares of Singapore Investment Company. He received a dividend from the investment company (ATO, 2017). He also invested some of his money in Australian mining company.
After his a
ival in Australia, he decided to open an accounting practice where he will work as a sole practitioner. His wife agrees with him and she works as a receptionist in his office. After starting his business in Australia, he gives services to the client and billed a client for $8000 on 28th June 2017. The payment from the client...
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