ACFI3004: Taxation - Newcastle Business School - Dr Scott Piner - Paula - Max Lowe - Case Study Assessment Answer

Subject Code: ACFI3004

Case Study Assessment Answer

Assignment Task: ACFI3004 Assignment Task One Dr Scott Piner 1 Eberstadt Brussels, Belgium 10 April 2019 Ms Paula Uptrum Uptrum Business Services PO Box 2 Newcastle NSW Australia 2308 Dear Paula, As you see from the above address I have safety made my transition to Belgium.  Firstly, let me thank you for your personal assistance in what, for me, has been a most difficult time.  The divorce from my wife was finalised last month and our property settled. Having no children, we can be thankful the separation was not complicated. The divorce has marked a turning point in my life and (call it a mid-life crisis) I am determined to follow my dream of being an author of historical war novels.  I have just started writing my first book based on the World War 1 battlefields of Belgium and living here with access to the actual battlefields is essential to my research. Of course, there can be no certainty of the ultimate success of my book writing venture, but I believe one must follow their dreams.  However, there have been promising developments with two publishers showing interest in my concept, with one paying an option to read my first drafts. I was becoming fatigued practising medicine at the John Hunter Hospital and I am now feeling invigorated by the break.  If my writing venture comes to nothing I will probably have to return to Australia as Belgian regulations prevent me from practising medicine here.  The John Hunter Hospital has promised to keep my job open for two years so there is always that to fall back on.  In saying that though I am confident I can be a successful author and my long-term goal is a series of European war stories which I can research from my base here.  I have recently signed a 12-month lease on an apartment in Belgium that has a good study area. I have also purchased a cheap car although it doesn’t compare with my Porsche which is at home with mother.  She has been wonderful in looking after my Australian affairs, paying my bills etc. I assume my tax for the year ended 30 June 2019 will be a little out of the ordinary. I would appreciate your early advice on certain matters to enable me to collect the necessary information to prepare my 2019 income tax return when it becomes due.  In particular, could you respond to the following issues?

1.  I departed Australia on the 22nd January 2019 for Belgium.  How will this affect my residency for tax purposes and what are the implications for the 2019 year?

• My Australian income for the 2019 year will comprise:

- Australian Salary from the hospital 1/7/18 to 31/12/18 - Interest from a $60,000 Australian term deposit (still active) - Net rent from my Melbourne rental property (full year) I cancelled my Australian medical fund insurance cover on 31 December 2018 as it does not provide cover while I am residing overseas.  If I return to Australia I am prepared to pay the extra premium charged for re-joining the fund.

• My income from Belgium sources for the 2019 tax year will be:

Interest from a $60,000 term deposit with a Brussels bank $1000 (AUD equivalent) received from an English publisher as a non-refundable payment entitling them to the first option to publish my book. -    Approximately $10,000 (AUD equivalent) gross salary from part-time employment as a bartender in a Brussels bar.

2.  Will the receipt from the British publisher be assessable income?  While I intend writing to be my business I am not sure if the outcome will be profitable.  Are there any guidelines to establish whether this is a business or a hobby and what is your opinion of its status?

My expenses so far regarding the book are as follows: - Airfares & removal expenses to Belgium $5000 - Hire of a computer for 12 months $1200 - Sundry purchases $290 I would appreciate your advice on the above matters and again express my thanks for your ongoing assistance with my financial affairs. Regards Dr Scott Piner Assignment Task Two Max Lowe is a 37-year-old Australian resident for income tax purposes.  Max has two children with his spouse, Lara (33 years old) - Craig (aged 3 years) and Troy (aged 1-year-old). Lara’s 2019 taxable income is comprised solely of $12,300 in gross salary she received from part-time employment. On October 15, 2018, Max resigned from his position as a Senior Lecturer in Marine Biology at the University of Newcastle, NSW.   On leaving the University Max was successful in obtaining employment as a Marine Biologist with the Australian government science organisation (CSIRO) based in Cairns, Queensland.  He and his family moved permanently to Cairns to commence his employment on 1 November 2018.  Max is also the sole owner of a Sydney rental property that was tenanted for the whole year. Details of Max’s receipts and payments for the year ended 30 June 2019 are as follows (all amounts are inclusive of GST where applicable): Receipts

• Gross Salary - University of Newcastle note 1 $32,750
• Gross Salary – CSIRO note 2 $88,000
• Received Fully Franked Dividend (ASX Listed)   $3,500
• Received Unfranked Dividend   $1,300
• Gross Rental Property Income $10,400
• Net Interest Income from New Zealand note 3  $1,800

Payments made by Max

• Airfares and accommodation costs relating
•    to the initial job interview with CSIRO   $1,860
• Annual subscription Australian Marine Biology Society $700
• Purchase of equipment note 4   $4,399
• Expenses relating to the rental property (all deductible) $17,100
• Other amounts – all deductible under s8-1   $1,500
• Deductible Superannuation Contribution paid to Max’ Superannuation Fund note 5   $3,500
• Superannuation Contribution paid to Lara’s
•  Superannuation Fund note 5  $4,500

Other information:

1. Max does NOT have private hospital insurance cover for either himself or his family.
2. At 30 June 2019, Max had a HELP (HECs) debt of $7,200 relating to an Ancient History degree he completed for personal interest purposes in 2016 at the University of NSW.

Notes:

1. Max’s 2019 Payment Summary from the University of Newcastle also showed the following details:

• PAYG Tax Deducted $10,000
• Reportable Fringe Benefits      $3,700

2.  Max’s 2019 Payment Summary from the CSIRO also showed the following      details:

• PAYG Tax Deducted $28,000
• Reportable Fringe Benefits   $3,200
• Reportable Employer Superannuation Contributions   $5,900

3.  The NZ gross interest was $2,000 (AUD equivalent) with $200 AUD tax deducted by the NZ taxation authorities.
4.  During the year Max acquired the following equipment:

• 1/8/18 Computer $3,200 effective life 5 years (used 80% for business)
• 1/05/19 Microscope $910 effective life 10 years (used 100% for business)
• 1/06/19 Binoculars $289 effective life 3 years (used 100% for business)

5. On the 20 June 2019 Max paid $3,500 from his after-tax salary to his superannuation fund and advised the fund this was a concessional superannuation contribution.  On the same day, he also paid $4,500 to Lara’s superannuation fund, on her behalf, and advised her superannuation fund this was not a concessional contribution. The only other concessional contributions received by Max’s fund for the year were the Reportable Employer Superannuation Contributions ($5,900) and Superannuation Guarantee contributions from both employers.

Required Calculate Max’s minimum taxable income and net tax payable/refundable for the year ended 30 June 2019.

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