Response to the following questions:
Question 1:
Mick is a resident taxpayer who is employed full-time as a lecturer at the University of Newcastle. In 2016 Mick became aware of an opportunity to purchase a large parcel of vacant land in the now defunct railway corridor in Newcastle West. With the opening of the University's NewSpace building in the adjacent area, Mick sees potential for the building of a multi-story complex that will provide private, short-term student accommodation and a mix of retail and café spaces. On July 1, 2016 he borrowed $3,2000,000 from CBC Bank and acquired the land. Mick has commenced the process of gaining approval for the development however that process will not be complete until at least March 2018. The building project is not expected to commence until September 2018. Mick has not previously been involved in property development.
On 1 August 2016 Mick was approached by Bruno who owns a neighbouring earthmoving business regarding renting Mick's vacant land as a site to store his earthmoving equipment. Mick agreed to rent the land to Bruno for a period of two years for $175 per week. During the 2017 taxation year annual interest, council rates and insurance in respect of the land amounted to $335,000. Mick also paid $29,000 to a firm of architects to develop some preliminary plans for the proposed building. Receipts from Bruno for use of the land amounted to $8,400.
Required
In the form of a professional correspondence (not exceeding 500 words) advise Mick which payments relating to the land (if any) are allowable as an income tax deduction for the year ended 30 June 2017. Refer to case law, income tax rulings and sections of the Income Tax Assessment Acts.
Question 2:
Mary-Anne Mayfield is a 25 year-old Australian citizen who has recently completed a Master's degree in Accounting at the University of Swansea, Australia. She is single, born in Australia and has always lived with her parents at Pelican Flat, NSW.
Mary-Anne's ambition is to pursue a career as a university academic however she has found her opportunities in Australia limited by the fact she does not have a PHD. After canvassing many international Universities she was successful in securing a six month teaching contract with the University of Great Britain based in Coventry, England. The University has advised they may consider a further 12 month extension to the contract provided they are satisfied with her performance. Mary-Anne has been granted a 12 month UK working visa and will apply for an extension to the visa if offered further work at the University. She left Australia on 1 March 2017 to commence her contract on 1 April 2017. Mary-Anne travelled to the UK on a one-way ticket and has left sufficient funds with her mother to pay for a return flight if she decides to return home. Mary-Anne is unsure of her actions if the UK contract is not extended. At that time she will make a decision to either apply for another teaching position in the UK or return to Australia to commence PHD studies.
Although Mary-Anne has few contacts in the UK she has keep in touch with Wendy, a UK resident she met on a recent holiday to Bali. Wendy lives near Coventry and has assisted Mary-Anne in securing a six-month lease on a one-bedroom apartment close to the University. She has also arranged for Mary-Anne to open an account with a UK bank to receive her University salary. Mary-Anne has few assets in Australia other than a $10,000 term deposit with the Bank of Blacksmiths and a motor vehicle valued at $15,000 (which will be garaged at her parent's house until she decides her future). Mary-Anne intends to purchase a cheap car in the UK for transport.
Required
In the form of a professional correspondence (not exceeding 750 words) advise Mary-Anne whether at 30 June 2017 she will be classed as a resident of Australia for income tax purposes. Also advise Mary-Anne how her income will be assessed given both scenarios of her being deemed a resident and a non-resident. Calculations are not required. Ignore any consequences of the Double Tax Agreement between Australia and the UK.