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2019 S1 Assignment 1 - Main TAXATION You have just begun a graduate role at the tax advisory firm, Malory & Co. Consulting. Your line manager, Markus, is keen to get you started right away and approaches you about a new client he recently spoke with: Mr Dave Granger. Dave is an ex pat of Australia and is seeking advice on his tax residency status due to his activities abroad. The following outlines the notes taken from a recent Skype phone call with Markus. Date:22 March 2019 Client Number:75432.001 Client Name:Dave Granger Dave is an Australian citizen, born in Cowes, the main township on Phillip Island, two hours from Melbourne. Dave holds both an Australian passport and a French passport. He is currently married to Jenna; however, was previously married to Olivia. After moving to Paris in 2001 for a structural engineering role, he met and married Olivia in 2007. Due to a job offer, Dave and Olivia moved from Paris to Nepal in 2007. Between approximately 2007 and 2013, Dave worked in Nepal as a project engineer. During this time Olivia lived with Dave, where they had one child, Alexis. They returned to Paris for the birth, staying for approximately 12 weeks. They regularly returned to Paris and Australia in the following years to visit their respective parents. In 2011, they decided to return to Australia due to Dave’s mother having health issues. They considered the move to be temporary only and planned to return to Nepal when his mother’s health improved. They purchased a property near Phillip Island and Olivia and Alexis moved into the property first, in late-2011. Dave moved in, in 2013. Dave lived and worked in Australia until early 2016, when he received an offer for a project engineering position in India by a French based company. It was a 9-month contract, with favourable opportunities for extensions despite the risk of termination with 2- months’ notice. Dave continues to work in the role. Dave and Olivia agreed that Dave would accept and relocate to India permanently; however, Olivia and Alexis would not relocate until early 2018. Olivia had been undertaking a university degree and wished to complete it on campus first. Despite working in India, Dave in fact leased an apartment across the border in Nepal, after determining that the travel would be feasible to do so. This way Dave could continue enjoying the culture and hiking opportunities they previously enjoyed. ( 1 ) When Dave arrived in Nepal in 2016, he brought all his clothing and personal effects. He sold his car, whilst any remaining belongings he left for Alexis and Olivia to use as required and did not anticipate to ever use them again. He did not intend to ever reside in their Phillip Island property again nor ever work in Australia again. Since 2016, Dave worked in India and lived in Nepal. His role required Dave to travel around India for various projects. During this time, when working conditions allowed it, Dave would return to Australia to visit Olivia and Alexis and saw this as only visiting Olivia and Alexis. The apartment Dave was renting in Nepal was leased fully furnished but was not serviced. Dave was responsible for utility charges to the extent they exceeded 12,000 Nepalese Rupee as well as telephone and internet charges. Dave secured the services of a cleaner once a fortnight, a facility offered by the apartment complex. Dave could change apartments relatively quickly and at short notice. All the apartments were owned by the same person. He first rented a two-bedroom apartment so that there was room for Olivia and Alexis to visit. He had exclusive possession of the apartments as per the lease agreement and as such left his personal belongings at the apartment when he visited Australia. In Nepal, he formed relationships, went hiking and was involved in Engineers without Borders in relation to community projects arising after the 2015 earthquake. Neither Dave nor Olivia saw the apartment building as where they would settle though. As such, when Olivia visited Dave, they spent time looking for a house to purchase. Dave did not use his residence in the apartment building as an address for correspondence. Despite making various plans to relocate Olivia and Alexis to Nepal, they ultimately separated in mid-2018. As such, Dave moved from his two-bedroom apartment to a single bedroom apartment in mid-2018. More recently, Dave has met and began a relationship with Jenna and at the beginning of this year has moved back into a two-bedroom apartment with Jenna. They are considering plans to move to Tibet. He plans to continue making yearly trips back to Australia to visit Alexis. During the income year ending 30 June 2018, Dave: · Transferred A$80,000 from an overseas account to an Australian jointly held interest bearing account for family living expenses (including childcare and early learning expenses, mortgage payments, utilities and so forth); · Purchased an investment property with Olivia in Inverloch, Victoria; · Acquired 400 shares in ANZ Bank, an ASX listed company, with Olivia; · Maintained his Australian private health insurance and Victorian drivers’ licence; and, · Made four trips to Australia and stayed at his Phillip Island property, totalling 91 days in Australia. REQUIRED: There are three parts to this assessment. You are required to complete ALL three parts. Part A – Research Report13 Marks Markus has asked you to research Dave’s Australian tax residency status and related taxation issues arising from his situation. Prepare a research report for Markus. To get you started, Markus has made the following suggestions: · Markus indicates your report structure should include: · An overall introduction; · The body should include sections for each tax issue with section headings and section conclusions; · An overall conclusion; and, · A listing of the sources of tax law referred to in the document. · Ensure you clearly identify the key tax issues. · Ensure you include reference to appropriate legislation, case law and rulings. · Markus wants to be sufficiently persuaded by your analysis, which will require your analysis to incorporate sufficient supporting evidence obtained from the sources of tax law. · Ensure your conclusion is clear and logically arising from your analysis and Ensure you include an explanation of what that conclusion means. · Ensure your report is presented in a professional manner as Markus will use the final version as the basis for advising the client. · You should aim for 1,000-1,500 words. Note: You are not required to consider International Double Tax Agreements or foreign taxation law. Part B – Timesheet2 Marks Markus reminds you that you need to input the time spent into the timesheet against the client. He explains that your time is billable, therefore your time will contribute to the fees that will be charged to the client. Use the Excel timesheet provided to record your time spent on the report. Markus further explains that it is important that the time sheet is filled out in a professional manner, as if a client queries a bill received, the timesheet is presented as evidence of time spent on client matters. You will find in the timesheet that there are already billable hours associated with the client. The timesheet should include any time spent researching, reading and writing your report, as well as any discussions you have with other parties in your preparation. Ensure you provide sufficient description of what you have done in that time. You will need to record the date, your name, description of what you were doing (e.g. reading textbook, reading case, analysing Dave’s situation etc.), the category of activity (selected from the drop-down box, e.g. researching), start time, end times, and your advisor category (e.g. Graduate, selected from the drop-down box). The required fields you will see are coloured in blue. You will then see that the spreadsheet does the rest. Once your entries are input, you will be able to see the time spent and the billable fees building up. You will need to submit the excel spreadsheet. Part C – Guided Reflection5 Marks This assessment part requires you to prepare a short, guided reflection on your experiences undertaking this assessment. As a guided reflection, you are required to respond to the following five questions: 1. How did you resolve the uncertainty and ambiguity in Australian tax law when responding to the client brief? For example, do you feel you adequately supported your analysis with evidence? What evidence did you rely on? 2. Would you feel comfortable in giving your report to your employer? Think about quality of presentation and content here. What are your strengths and weaknesses? What would an employer be looking for to begin with? 3. How much do you feel, as a tax advisor, that you must rely on the word of a client? Consider, for example, how is your accountability is affected by this, about conflicts of interest and what actions you can take. 4. Based on your completed timesheet, and therefore the work completed to date, how much would you charge the client for this advice? Think about, for example, whether you think this is reasonable, about what happens billable hours that cannot be charged to clients. 5. What grade would you give for your report component (out of 13 marks)? Think about how you would decide this and do not forget the rubric can also be of use. It is recommended that you consider this reflection as you progress through the assignment. Length: You should aim for 400-600 words. (13 + 2 + 5 = 20 marks)