Assignment
ABC Co. is incorporated in Hong Kong and operates a number of hotels in Australia. It does not operate any hotels outside Australia. All the company’s directors reside in Hong Kong and all of the directors’ meetings are held in Hong Kong. However, all the company’s shareholders are Australian residents and all the annual general meetings are held in Sydney
Recently one of its corporate client decided to cancel their contract with ABC Co. Under the contract, ABC Co. will provide all accommodation needs for that client in all major capital cities in Australia. ABC Co received $200,000 from the client as a result of cancelling the contract.
One of its hotel in Sydney recently caught on fire and had to be shut down for 2 months for repairs. ABC was able to claim insurance for the damage bill and the lost of income.
ABC also recently sold a vacant land for $3m. The land was purchased 2 years ago for $1m. ABC intended to subdivide the land into smaller lots to build some commercial buildings and sell them. However, as approval could not be obtained, the land was sold as it is.
During the 2015 income year, ABC Co also incurred the following significant expenses:
• $500,000 in legal fees in suing the newspaper who published an article accusing ABC Co. of employing illegal foreign workers in its hotels.
• $30,000 in purchasing and giving away Ipod Touch to each employee at Christmas 2014.
• $4,000 in purchasing 2 tailored made business suits for its CEO on 2 May 2015.
REQUIRED: Discuss whether ABC Co is a resident of Australia and the income tax consequences of the above for the year ended 30 June 2015. Support your answer with reference to case law and legislation. Ignore CGT and FBT implications.