LAW3130 : Catherine and Mrs Green Case Study - Assessable Income in Australia - Law Assignment Help

Assignment Task :

Question 1 

Catherine is a champion snowboarder who wants to train fulltime to prepare for the next winter Olympics. Catherine was born in Brisbane and had been living near the snowfields in Victoria for the past 5 years so she could work and train in Australia. She accepted an offer to train with a leading coach in Calgary, Canada, for three years after the Australian ski season ended in September 2019. She left Australia on 1 October 2019 for Calgary, and moved into a house with another snowboarder training with the same coach. When Catherine was not training she worked part-time as a ski instructor in Calgary. 

Catherine returned to Australia for two weeks in April to visit her parents and attend her friend’s wedding. Other than the trip to Australia, Catherine was in Calgary from the time she arrived on 2 October 2019. 

Catherine provided you with the following financial information for the year ended 30 June 2020: 

• Salary from employment in Australia up to 1 October 2019: $9,000. 

• Salary from employment in Canada after 1 October 2019: AUD$48,000. 

• Prizemoney of $10,000 for winning a snowboarding competition in August 2019 in Australia. 

• Sponsorship from a Canadian company for Catherine to use and advertise the company’s brand of snowboard in March 2020: AUD$30,000. 

• Interest on her Australian bank account of $50 credited 30 June 2020. 

• Interest on her Canadian bank account AUD$80, from which $20 withholding tax had been deducted by the bank prior to crediting her account on 30 June 2020. 

Required: 

i) Discuss with reference to legislation, case law and/or rulings whether Catherine would be considered a resident of Australia for tax purposes for the income year ended 30 June 2020.

ii) Discuss what amount Catherine should include in her assessable income in Australia? You should state whether the amounts are ordinary income, and discuss source of income and derivation, and reference legislation, case law and rulings. 

Question 2 

Mrs Green has been working in Australia in the childcare sector as an early childhood educator from 2015. During the 2020 income year Mrs Green worked as a casual employee for 25 and 30 hours per week and earned approximately $40,000 in wages from a childcare centre. 

During 2019 and 2020 Mrs Green became worried that as a casual worker she did not have job security, so she started looking at ways she might earn some more money and save for her retirement. 

Mrs Green commenced buying shares in late 2018 utilising funds sourced from her savings of approximately $60,000 and a loan of $40,000. She used an online stockbroking service for all her share transactions. 

Mrs Green purchased shares in banks and mining companies as well as some smaller listed companies. She held seven parcels of shares with a total value of approximately $50,000 as at 30 June 2019. During the 2020 income year Mrs Green made: 

(a) 20 purchases at a cost of approximately $130,000; and 

(b) 8 sales with gross proceeds of approximately $80,000. 

The bulk of the transactions took place between July and December 2020, before COVID-19 caused share prices to fall. Mrs Green purchased five (5) parcels of shares after March 2020 while prices were low. 

The gross dividends paid to Mrs Green in the 2020 income year were $6,500. Mrs Green made a small profit on her share transactions during the 2020 income year in the order of $16,000. 

Mrs Green said that her investment strategy involved tracking the price of certain high-quality shares and buying them whenever the price dipped down below a certain price range. She said that she would check the share price history and read the reports of analysts in financial newspapers and also watch “The Business” program on the ABC, before making purchases and sales. She would additionally discuss her strategy with her husband. She also said that the amount invested was based on her available funds. 

Mrs Green usually spent 5 to 10 hours on research and share trading per week. She used a home office for researching and transacting shares. 

Mrs Green stated that she had no written business plan but believed she was investing as an individual in a planned manner to earn some profit. 

Required: Discuss with reference to appropriate legislation, case law and/or rulings whether the receipts from shares sales will be considered ordinary income under s 6-5 ITAA97 during either the current or future income year. You do need to apply the CGT rules here – focus your discussion on ordinary income issues. 

Question 4 

Your client, Loretta purchased an apartment in Brisbane on 1 July 2019. The purchase price was $595,000. Loretta paid $95,000 from her savings and borrowed the remaining $500,000 from a bank. 

Loretta listed the property for rent with the real estate agent who had arranged the sale to Loretta. The apartment was rented for $450 per week for 50 weeks during the year ended 30 June 2020. The real estate agent charged commission of 10% for managing the property. 

Loretta incurred the following expenses during the year ended 30 June 2020 in respect of the apartment: 

a) Queensland Government stamp duty on the purchase of the apartment, $17,500. 

b) Legal and search fees on the purchase of the apartment, $900. 

c) Loan application fee paid on 1 July 2019 to the bank for the loan, $700. Interest on the loan totalled $25,000. 

d) A quantity surveyor’s report estimated that the construction costs for the apartment were $300,000. The quantity surveyor charged $495 for the report on 15 July 2019. 

e) Some of the tiles in the bathroom were damaged at the time Loretta purchased the apartment. She paid a tiler $1,200 to replace the bathroom floor tiles prior to tenants moving into the apartment on 15 July 2019. 

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