Assignment question
Part (a)
On July 1, 2012, Sarah Simpson, a retired librarian and an Australian citizen, left Australia to visit her relatives in England. As she was not expecting to return to Australia for two years, Sarah rented out her Melbourne home (on a one-year lease) and sold her car. Sarah did not have any family members in Australia. During her stay in England, Sarah rented a cottage in Oxford. As it happened, the English weather did not agree with her and she returned to Australia on September 1, 2013. She has remained in Australia ever since, living in her Melbourne home.
Your task
Advise Sarah whether she was a resident of Australia for tax purposes for the income years ended (i) 30 June 2013 and (ii) 30 June 2014. Give reasons for your advice. If you need more facts be sure to indicate those that are needed and consider the potential tax consequences if those facts apply.
[8 marks]
Part (b)
During each of the income years in part (a) Sarah received interest payments from a U.S. bank in which she had deposited money.
Your task
Advise Sarah of the tax implications arsing from the receipt of the interest. Give reasons for your advice. If you need more facts be sure to indicate those that are needed and consider the potential tax consequences if those facts apply.
[4 marks]
Part (c)
On 1 October, 2013, soon after Sarah had returned to Australia, she was re-employed by the library where she used to work before she left for England. The position required Sarah to visit different branches of the library and to this end her employer gave her a car allowance of 50 cents per kilometre to cover the costs of using her own car for these visits.
Your task
Advise Sarah on the tax implications arising from the receipt of the car allowance. Give reasons for your advice. If you need more facts be sure to indicate those that are needed and consider the potential tax consequences if those facts apply.
[5 marks]
Part (d)
To supplement the income she received from her employment in the library, on 1 July 2014 Sarah began a venture in which every weekend she took tourists on a guided tour of the most historic buildings in Melbourne. It has become clear to Sarah that for the income year ended 30 June 2015 the outgoings on this venture will far exceed the fees she receives from the tourists.
Your task
Advise Sarah on how the predicted financial results of her venture will affect her income tax position for the income year ended 30 June 2015. Give reasons for your advice. If you need more facts be sure to indicate those that are needed and consider the potential tax consequences if those facts apply.
[8 marks]
Part (e)
Needing to have her home painted and being short of funds, on 1 December 2014 Sarah sold her favourite painting for $13,000. She purchased the painting on 1 January 1992 for $1,000.
Your task
Advise Sarah on the tax implications arising from the sale. Give reasons for your advice. If you need more facts be sure to indicate those that are needed and consider the potential tax consequences if those facts apply.
[5 marks]
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