Reference no: EM132294505

Part A - The James Family

Jenny is a management consultant from the U.S who has been offered an 18 month contract with an Australian bank, Total Financial Services Pty Ltd. Her husband, John will accompany her to Australia for the whole 18 months and plans to find casual work as an accountant once he arrives. He will leave his current accounting practice in Los Angeles in the hands of his business partners for the time he is away and will receive no income from the business during this absence. Jenny and John have no children. The James's envisage returning to their home in Los Angeles once Jenny's contract finishes. They rent out their home in Los Angeles for the period of their absence. Total Financial Services Pty Ltd will provide a furnished house for the James's to live in for the duration of the contract. Jenny and John also had a number of other relevant transactions during the year ended 30 June 2019:

• Jenny works at her usual job in Los Angeles until November 2018 and the couple travel to Australia on 1 December 2018. In Australia Jenny earns salary of $130,000 for her work with Total Financial Services Pty Ltd to 30 June 2018.

• John earns $38,000 in Australia for accounting contract work he undertakes. In addition, John was due to receive $3,000 in wages during the week ended 30 June 2019. John directed the employer to instead pay the amount directly onto his credit card as it was over the limit. The amount was paid onto his credit card on 29 June 2019.

• Jenny and John have a number of investments in companies listed on the U.S stock markets. They received dividends of $5,000AUD in October 2018 and $6,000AUD in March 2019. Once in Australia, they also acquire some Australian shares which earn them dividends of $5,000AUD in 2019. The dividends were declared by the Australian company on 15 June 2019 and Jenny received the credit in his bank account on 10 July 2019.

• Through John's accounting connections, the James's purchased a parcel of land in NSW on 1 February 2019 for $200,000. They had good advice it would be the perfect location for service centre and petrol station. They spent substantial time and $8,000 gaining relevant development approvals and having plans drawn up. However, in May 2019 they were advised by the local council that the plans would only be approved on the condition that the access be from a side street and not the main highway. This would substantially reduce the traffic access and flow and they decided to abandon the project. They signed a contract to sell the land for $230,000 on 25 June 2019. The contract settled on 1 August 2019.

• John purchased a commercial property located in Brisbane on his arrival. He has agreed with the current tenant that provided the rent does not increase during the period, the tenant will pay 2 years rent in advance to John. Under the lease agreement, rent is non-refundable except at the discretion of the lessor. In accordance with this agreement, the tenant paid John an amount of $104,000 on 28 March 2019, being two years rent in advance from 1 April 2019.

Required:

Provide advice to Jenny and John as to whether they would be considered Australian residents for taxation purposes at any time during the 2019 income tax year. Based on your conclusion, advise them regarding the assessability of each of the types of income they have received (either separately or jointly). You should state and apply any relevant residency, source of income, derivation, general income rules and cite relevant legislation, case law and rulings in answering approaching this question.

Part B

You are required to prepare a written research assignment that addresses one of the provided topics below. The purpose of the task is for you to demonstrate high level critical reflection and analytical reasoning skills in the context of the application of Australian taxation law and taxation law policy. You must undertake academic research which demonstrates the following:
• An in-depth your understanding of how the specific tax law applies,
• The policy context of the law and if relevant how other jurisdictions deal with similar issues,
• Critical reflection as to whether the law achieves its stated purpose, aligns with principles of good tax policy or could be improved/amended. These critical reflections should be supported by the research you have undertaken as well as your own independent thought.

Topic Choices

1. Deductions - discuss and critically evaluate the extent to which Australia's deduction regime satisfies the principles of a good tax system (specifically simplicity and fairness). Provide an international comparative analysis (choosing 1 other jurisdiction) of our deduction regime (New Zealand might be a good choice).

2. Division 7A (treatment of private company loans) - discuss and critically evaluate Division 7A as a specific anti-avoidance provision. You should include a discussion of the overall policy objectives and your evaluation of whether the Division currently meets these objectives or whether further amendments are necessary.

4. International Tax Avoidance - The avoidance and/or minimisation of tax by large multi-national corporations is of great concern to Governments and tax administrators. Identify and discuss at least one common method multi-national corporations might use to avoid tax in Australia. Then identify and critically evaluate at least one current strategy implemented by the Government and/or the ATO that is used to prevent this.

5. The current Liberal Government has a policy of reducing small business taxation through the reduction in corporate tax rates for those with turnovers under a certain threshold. Provide an international comparative analysis (choosing 1 other jurisdiction) of whether the taxation rate for small businesses should be reduced and why.

6. Another tax technical or tax policy topic of your choice. Must be approved by course examiner.