ASSESSMENT -
QUESTION 1:
Australian citizen and tech genius, Marty Goodson, set up "Planks Pty Ltd", a tech business in Silicon Valley USA in 2012 developing new platforms for web designers and companies throughout the world. He incorporated the company in the USA and issued five shares to himself and five shares to five of his friends. His friends now reside in the US, Europe, Asia, Australia, and New Zealand. Each share was worth $100,000. Marty and his team used the $1,000,000 equity capital to develop a successful tech company in only a few years.
During the 2012/2013 financial year, Marty's income was $100,000, and he did not return to Australia. During the 2013/2014 financial year, Marty's income was $200,000 and he returned to Australia during the Christmas period for four weeks to spend time with his mother, father, and sister. His sister and her husband live in his residential home rent free. He met with his accountant to discuss the status of his three commercial investment properties in Brisbane, Sydney, and Melbourne. He also attended a friend's birthday party and fell in love. During the 2014/2015 financial year, Marty's income was $400,000 and he returned to Australia from the 1stSeptember to the 1st April to spend time with his girlfriend. During the 2015/2016 financial year, Marty earned $100,000 before he returned to Australia permanently to marry the love of his life and start a family.
During the 2012/2013 financial year, Marty was the sole director and made all the management decisions for the company. The company made $1,000,000 profit. During the 2013/2014 financial year, the company expanded and the shareholders appointed a board of directors who all reside in the USA. However, it was widely assumed by the staff that Marty still made all the important decisions. The company made $10,000,000 profit. During the 2014/2015 financial year, Marty was appointed managing director. From 1st September to the 1stApril, Marty made all his management decisions from Australia, and carried out all associated business activities such as signing contracts, and trading Platforms from Australia. The company made $25,000,000 profit. During the 2015/2016 financial year, Marty resigned as managing director, sold his shares to another tech company for $50,000,000, and returned to Australia a very rich man. The company made $50,000,000 profit.
Solve the following issues:
a. Is Marty an Australian resident for tax purposes?
b. Is Planks an Australian resident company for tax purposes?
c. If any, calculate the Australian tax liability relating to Marty's employment income?
d. If any, calculate the Australian tax liability relating to Planks' company profit?
QUESTION 2:
Rommy bought a country property in rural New South Wales in 2000 for $500,000. Initially it was used as a weekend retreat and later as a weekend hobby farm producing a relatively small quantity of grapes which made a few crates of reserve quality wine.
Rommy ultimately drank 5 boxes throughout the year, gave 10 boxes away to friends, sold another 20 boxes at the local market on the one occasion he had a stall, and sold another 20 boxes on the side of the road outside his property with the assistance of an honesty box. Each bottle was worth $20. In 2015, Rommy subdivided his property and sold it for a total price of $1,500,000.
Solve the issue as to whether Rommy should include any financial amounts in his assessable income.