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Heath is a consulting engineer from Canada who has been offered an 18 month contract with an Australian construction company, Apartment World Pty Ltd. His wife, Hayley will accompany him to Australia for the whole 18 months and plans to find casual work as an accountant once she arrives. She will leave her business in Canada in the hands of her business partners for the time she is away and will receive no income from the business during her absence. Heath and Hayley have no children. The Holly’s envisage returning to their home in Montreal once Heath’s contract finishes. They rent out their home in Montreal for the period of their absence. Apartment World Pty Ltd will provide a furnished house for the Holly’s to live in for the duration of the contract. Heath and Holly also had a number of other relevant transactions during the year ended 30 June 2015:
•Heath works at his usual job in Montreal until November 2014 and the couple travel to Australia on 1 December 2014. In Australia Heath earns salary of $80,000 for his work with Apartment World Pty Ltd to 30 June 2015.
•Hayley earns $23,000 during her time in Australia for accounting contract work she undertakes. In addition, Hayley was due to receive $3,000 in wages during the week ended 30 June 2015. Hayley directed the pay officer to instead pay the amount directly onto her credit card as it was over the limit. The amount was paid onto her credit card on 29 June 2015.
•Heath and Hayley have a number of investments in companies listed on the Canadian Stock Exchange. They received dividends of $15,000AUD in October 2014 and $5,000AUD in March 2015. Once in Australia, they also acquire some Australian shares which earn them dividends of $3,000AUD in 2015. The dividends were declared by the Australian company on 15 June 2015 and Heath received the credit in his bank account on 10 July 2015.
•Through Hayley’s accounting connections, Heath and Hayley purchased a parcel of land in QLD on 1 February 2015 for $200,000. They had good advice it would be the perfect location for a motel given substantial passing traffic travelling to mines in Western QLD. They spent some time and $8,000 gaining relevant development approvals and having plans drawn up. However, in May 2015 they were advised by the local council that the plans would only be approved on the condition that the motel was built at least 50m away from the highway. This condition would substantially reduce the number of units
able to be built and thus Heath and Hayley decided to abandon the project. They signed a contract to sell the land for $230,000 on 25 June 2015. The contract settled on 1 August 2015.
•Hayley also purchased a commercial property located in Australia on her arrival. She has agreed with her current tenant that provided the rent does not increase during the period, the tenant will pay 2 years rent in advance to Hayley. Under the lease agreement, rent is non-refundable except at the discretion of the lessor. In accordance with this agreement, the tenant paid Hayley an amount of $104,000 on 28 March 2015, being two years rent in advance from 1 April 2015.
Required:
Provide advice to Heath and Hayley as to whether they would be considered Australian residents for taxation purposes at any time during the 2015 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.
Heath is a consulting engineer from Canada who has been offered an 18 month contract with an Australian construction company, Apartment World Pty Ltd. His wife, Hayley will accompany him to Australia for the whole 18 months and plans to find casual work as an accountant once she arrives. She will leave her business in Canada in the hands of her business partners for the time she is away and will receive no income from the business during her absence. Heath and Hayley have no children. The Holly’s envisage returning to their home in Montreal once Heath’s contract finishes. They rent out their home in Montreal for the period of their absence. Apartment World Pty Ltd will provide a furnished house for the Holly’s to live in for the duration of the contract. Heath and Holly also had a number of other relevant transactions during the year ended 30 June 2015:
•Heath works at his usual job in Montreal until November 2014 and the couple travel to Australia on 1 December 2014. In Australia Heath earns salary of $80,000 for his work with Apartment World Pty Ltd to 30 June 2015.
•Hayley earns $23,000 during her time in Australia for accounting contract work she undertakes. In addition, Hayley was due to receive $3,000 in wages during the week ended 30 June 2015. Hayley directed the pay officer to instead pay the amount directly onto her credit card as it was over the limit. The amount was paid onto her credit card on 29 June 2015.
•Heath and Hayley have a number of investments in companies listed on the Canadian Stock Exchange. They received dividends of $15,000AUD in October 2014 and $5,000AUD in March 2015. Once in Australia, they also acquire some Australian shares which earn them dividends of $3,000AUD in 2015. The dividends were declared by the Australian company on 15 June 2015 and Heath received the credit in his bank account on 10 July 2015.
•Through Hayley’s accounting connections, Heath and Hayley purchased a parcel of land in QLD on 1 February 2015 for $200,000. They had good advice it would be the perfect location for a motel given substantial passing traffic travelling to mines in Western QLD. They spent some time and $8,000 gaining relevant development approvals and having plans drawn up. However, in May 2015 they were advised by the local council that the plans would only be approved on the condition that the motel was built at least 50m away from the highway. This condition would substantially reduce the number of units
able to be built and thus Heath and Hayley decided to abandon the project. They signed a contract to sell the land for $230,000 on 25 June 2015. The contract settled on 1 August 2015.
•Hayley also purchased a commercial property located in Australia on her arrival. She has agreed with her current tenant that provided the rent does not increase during the period, the tenant will pay 2 years rent in advance to Hayley. Under the lease agreement, rent is non-refundable except at the discretion of the lessor. In accordance with this agreement, the tenant paid Hayley an amount of $104,000 on 28 March 2015, being two years rent in advance from 1 April 2015.
Required:
Provide advice to Heath and Hayley as to whether they would be considered Australian residents for taxation purposes at any time during the 2015 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.
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