Fred, an executive of a British corporation specialising in management consultancy, comes to Australia to set up a branch of his company. Although the length of his stay is not certain, he leases a residence in Melbourne for 12 months. His wife accompanies him on the trip but his teenage sons, having just commenced college, stay in London. Fred rents out the family home. Apart from the absence of his children, Fred’s daily behaviour is relatively similar to his behaviour before entering Australia. As well as the rent on the UK property, Fred earns interest from investments he has in France. Because of ill health Fred returns to the UK 11 months after arriving in Australia.
Discuss whether Fred is a resident of Australia for taxation purposes.
Question 2 (5 marks)
Explain why the receipts in Egerton-Warburton & Ors v DFC of T (1934) 51 CLR 568 were assessable, but the receipts in IRC v Ramsay (1935) 1 All ER 847 were treated as capital amounts.
Question 2 (10 Marks)
Angelina is married to Bradley. They each have two houses: ‘house A’ and ‘house B’. Angelina and Bradley each own a 50% interest in house A. Bradley owns an 80% interest in house B and Angelina owns a 20% interest in house B. As Angelina and Bradley are both busy actors who lead their own lives, they quite often live apart. This year the sold both house A and house B. Angelina wants to nominate house A as her main residence and Bradley wants to nominate house B as his main residence. Advise Angelina and Bradley as to how the main residence exemption will apply to them assuming that (ignoring the exemption) a capital gain of $1m was made on the sale of each house.
Advise Angelina and Bradley on the capital gains tax consequences regarding the abovementioned transactions for the 2014/2015 income year.