TAXATION 1 - LAW2453

PROBLEM

TAXATION 1 - LAW2453 ASSIGNMENT 1

Helena and Maxwell were living in Edinburgh, Scotland. They moved there after Helena graduated as an architect two-years prior, subsequently finding work at a local architecture business shortly after. They had previously lived in a flat in Glasgow. They kept their Glasgow flat as an investment, renting it out soon after moving. Maxwell was working part-time at the local pub, whilst he completed his university study.

One Saturday morning, whilst they were catching up for coffee with their friends, they noted an advert online regarding an opportunity for an architect to join an architecture project in Australia. Helena was intrigued by this and followed up the next week. It turns out that the project was of 12-months duration, based in Tasmania, working with a team to redevelop a dilapidated office block. After negotiating with her current employer to take the 12-months leave, Helena submitted her application and before long she received the call to inform her that she was successful in her application. Helena was heading to Australia!

Due to Maxwell’s studies, they agreed that he would remain in Edinburgh and visit on occasion. Helena signed the 12-month contract with Van Diemen’s Architecture Ltd, the Tasmanian based architecture firm, which then subsequently brought Helena to Tasmania on 30 April 2017. As well as maintaining her joint interest-bearing account with Maxwell, Helena set up an Australian interest-bearing bank account, where her wages were paid into. Helena would then transfer some of her wages back to Scotland to continue contributing to their flat in Edinburgh and other ongoing expenses. Van Diemen’s Architecture Ltd provided Helena with an apartment inHobart, Tasmania, for the duration of the contract.

Whilst in Hobart, Helena decided to join Evolution Runners, a local running group, to keep active. Through the running groups’ charitable connection, Helena also became actively involved in a local charity campaigning for women’s rights. During the Christmas and Easter breaks, Maxwell would travel over to Tasmania to visit Helena, where they would then travel across Tasmania exploring the sites. They even took the Spirit of Tasmania to Melbourne over the Easter break.

Van Diemen’s Architecture Ltd itself was incorporated in England in 1952, however did not begin operating in Tasmania until February 2017. The head office continued to be located in England, with the majority of shareholders residing across the United Kingdom. The board of directors had met monthly at the head office to discuss the objectives and the running of the firm. In February 2017, three key directors transferred to the newly opened Tasmanian office, including a handful of the firms architectural and administrative staff. All decisions continued to be formally signed off in England, however the three Tasmanian directors would determine the direction of the company at a local level.

Interest is strong in Tasmania for the architecture firm, with the new clientele base building rapidly. By late-June 2017, the firm had already completed several jobs, subsequently sending

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out three invoices to clients with 14-day payment terms. In addition, the firm received a prepayment from a fourth client for a job scheduled to be undertaken in July 2017.

Due to the continuing demand for Van Diemen’s Architecture Ltd, in February 2018 Helena was offered a permanent position. After thorough discussion with Maxwell, they decided to accept. Helena returned for a short duration to Scotland in March 2018 to organize their affairs before return to Tasmania in April 2018 with Maxwell. They retained their properties in Scotland, as well as their joint bank account. Helena negotiated to continue living in the apartment provided by the architecture firm for an additional 3-months to provide time to find an alternative house in Hobart. Maxwell by this point had completed his degree and was submitting applications for graduate roles in Hobart.

REQUIRED:

Advise Helena, Maxwell and Van Diemen’s Architecture Ltd 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: Students are NOT required to consider International Double Tax Agreements or foreign taxation law.

(20 marks)