TAXATION 1 - LAW2453
ASSIGNMENT – SEMESTER 1 - 2018
WORD LIMIT
The word limit is approximately 2,000 words (but students can elect to write more).
PRESENTATION:
Students must keep a copy of the assignment they submit.
Assignments will be marked down for poor presentation, poor grammar, punctuation and spelling.
The assignment must be typewritten and double spaced with a generous margin.
All Students must upload a soft copy through Turnitin on Canvas before 8.ooam on Monday 9 April 2018.(This will be before classes begin on Monday 9 April 2018). Students may also have to also give a hard copy to their lecturer in class during the teaching week beginning Monday 9 April 2018. Students should check with their lecturer to see if they also require a hard copy. Students should submit the assignment on Turnitin using Microsoft Word - Not as an Adobe File.
If students submit their assignment late on Turnitin they will be penalized (see Course Manual). If students are having problems submitting on time, they should apply for special consideration with the special consideration unit at RMIT.
SUBMISSION DATE: 9 April 2018 (see above instructions)
PROBLEM
ABC Ltd is a palm oil company incorporated in Hong Kong where the majority of its shareholders reside. It has operated palm oil plantations in Brunei since 2010. All the members of the Board of Directors reside in Australia. The board meets on a monthly basis in Sydney. The board of directors exercises control of general and corporate affairs of the company and its policy, including exercising supervision over operations of all its palm oil plantations.
On 1 July 2015, Peter, an Australian accountant and citizen, became the company’s plantation manager in Brunei. In his position as the company’s plantation manager, he is empowered to hire and fire staff, buy raw materials, enter into leases for the rental of plantations, ship palm oil from Brunei to Australia and sell a certain percentage of production locally. His responsibility as manager does not extend to control of general and corporate affairs of the company or policy but only to day to day conduct of the company's trading operations in Brunei.
By 2016, the Brunei operation had become so successful, and had grown to such an extent, that in July 2016 the company’s board of directors decided that some of the decisions made at the monthly board of directors meeting in Sydney, affecting the company would only be tentative, and that one of the Sydney based directors would need to visit Brunei to speak to Peter. During these discussions ultimate operative decisions affecting some of the company’s overall general and corporate policy were arrived at in conjunction with Peter. The company continued to adopt this form of decision-making in respect of the company’s operations while Peter remained its plantation manager. All other decisions affecting the company’s general and corporate policy continued to be made by the board of directors in Sydney.
In June 2015 Peter had signed an agreement in Melbourne with ABC Ltd to act as the company’s plantation manager in Brunei until June 2017. At the time of signing the agreement, Peter was advised that it was possible that at the end of his two year contract the company would offer him a one year extension. Peter advised the company, at the time of signing, that he had no definite view of accepting or rejecting the possible extension but would consider it at the end of his two year posting. He rented his house in Melbourne for two years. He arrived in Brunei on 1 July 2015. He and his family resided in a large house they leased near the plantation, which was provided as part of his employment package. His younger daughter Mary, aged 9, accompanied him and his wife to live in Brunei, where she attended boarding school. His older married daughter Anne, aged 23, remained in Australia with her husband. While in Brunei, Peter and his wife joined the local bridge and golf club. He also rented a holiday apartment at a nearby beach resort for two years. During the time the family was in Brunei, his wife took a part-time job teaching English.
In June 2017, Peter was offered a one year extension of his contract, but decided to reject it and returned to Melbourne on 20 June 2017. While in Brunei, the rent from his house in Melbourne was paid into his interest earning Australian bank account, which he accessed using his Australian credit card. His salary was paid into an interest earning bank account that he had opened in Brunei. He drew upon his Brunei bank account from time to time at local ATMs in Brunei.
During his stay in Brunei, Peter bought some shares in a Singapore investment company. The company is incorporated in Singapore, where its Board of Directors meets and receives its dividends from its investments. It invests in mining companies in Australia. Peter received dividends from the Singapore Company while he was in Brunei.
On returning to Australia, Peter decided to open an accounting practice as a sole practitioner. His wife assisted him, by acting as the receptionist. Fortunately, he was able to provide a service to a client shortly after beginning business. He billed this client for fees of $8,000 on 28 June 2017, but did not receive the cash payment from his client for these services,until August 2017. This was the only client he billed for the year ended 30 June 2017.
REQUIRED:
Advise ABC Ltd, Peter and his wife of the Australian taxation issues arising from the above fact situation. Reference should be made to appropriate legislation, case law and rulings. Calculations are not required.
Note: Australia does not have an International Double Tax Agreements with Brunei and students are not required to discuss the operation of Brunei taxation law.
(20 marks)