question 3 of examNicholas is excited as he is new graduate accountant and he has been contracted to work for a large accounting firm in Abu Dhabi. He has spent all of his life in Adelaide and so is very excited that he will now be working abroad. He looks forward to the opportunity to use this time to travel overseas. In July 2019 Nicholas signed a contract for 2 years. Nicholas leaves Australia on 1 August 2019 and spends the first few days checking into a hotel and working out his whereabouts. Over the next month he develops a friendship with a co-worker who has a 2-bedroom apartment on the coast and lives with him until the contract expires. Nicholas is single and prior to his departure lived with his parents and only returns to Australia for each Christmas for one week to visit his parents and catch up with friends. He has 6 weeks of holidays under the contract but spends the remaining 5 weeks of holidays touring the Middle East and Europe. Nicholas brought from home his sporting trophies, his cricket bat and ball and photos to adorn his bedroom, but over time they became obscured by the numerous souvenirs of his travels. Although, he has been motivated by the large salary in Abu Dhabi, he misses home and towards the end of his contract has negotiated a position back in Adelaide with Adelaide accounting firm KPMG. Required For the 2019-2020 year of tax, advise whether Nicholas is a resident of Australia within the meaning of that term in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the 2019-20 income year. QUESTION 3 Part 2 (18 marks) Graham is 68 years old and recently retired as an accountant after 23 years as a partner in a prestigious Adelaide accounting firm KPMG. Graham and his wife Sarah are retiring to the south of France and have sold a number of assets. Calculate the net capital gain for Graham in relation to the following events and advise the impact on his taxable income. Provide a full explanation citing relevant statute law and case law to support your answers. 1. Sale of Grand Piano Graham purchased the Piano for $10,500 in June 2005, which was in their drawing room. The piano was sold during the move for $7,500 on 1 November 2019. 2. Sale of the family home in Glen Osmond. Graham purchased the home in June 1987 for $240,000, incurring $10,000 incidental costs on the purchase. Graham and Sarah lived in the home with their three children. Graham sells the property for $1,400,000, incurring costs of Course ID 102238 Page 7 of 8 PLEASE SEE NEXT PAGE $5,000. He entered into a contract for the sale of the property in May 2020, however settlement does not happen until July 2020. 3. Sale of holiday home at Willunga. Graham purchased the home in September 1991 for $130,000, incurring $7,000 incidental costs on the purchase. Graham and Sarah used the home on weekends and in latter years had begun renting the home out for holiday letting. The property underwent a renovation in 2003 at a cost of $20,000. Graham sells the property for $840,000, incurring costs of $4,000. He entered into a contract for the sale of the property in May 2020, however settlement does not happen until June 2020. 4. Sale of a business Graham sold his interest in the accounting firm KPMG. The buy in price when he joined the partnership was $60,000 as shown in the contract entered into dated March 1996. Fees on the purchase of $2,000 were incurred in bank and legal fees. He sells his interest to another solicitor at the firm for $700,000 which settles on 1 August 2019. Costs incurred in relation to the sale were $10,000. 5. Sale of Car Graham sold his 1968 Jaguar for $58,000 in June 2020, which he purchased in 2000 for 23,000. The car is a well-regarded classic and highly collectable. 6. Sale of Paintings Graham sold a number of oil paintings by various Australian artists. The paintings were all purchased separately between 2001 and 2008 for between $1,000 and $2,500 for a combined total of $10,000. They were sold for $20,000 in June 2020. 7. Sale of Jewelry. Graham sold a set of pearls he inherited from his great aunt in England. His Aunt had purchased the jewellery in 1980. Its market value when received in June 2010 was $15,000. Graham auctioned the jewellery in June 2020 for only $5,000. 8. Sale of antiques Graham sold the following antiques from the Willunga property: -A set of 8 Dinning Chairs purchased for $3,000 and sold for $1,000 -A Georgian Hall Table purchased for $1,500 and sold for $600 The antiques were both purchased at an auction in June 2013. All the antiques were sold in June 2020. 9. Capital losses from prior years Graham has prior year capital losses of $25,000. (End of Question 3 – Total Marks 25) Course ID 102238 Page 8 of 8 END OF EXAMINATION CAPITAL GAINS TAX INDEX NUMBERS Year Quarter ending 31-Mar 30-Jun 30-Sep 31-Dec 1985 – – 71.3 72.7 1986 74.4 75.6 77.6 79.8 1987 81.4 82.6 84 85.5 1988 87 88.5 90.2 92 1989 92.9 95.2 97.4 99.2 1990 100.9 102.5 103.3 106 1991 105.8 106 106.6 107.6 1992 107.6 107.3 107.4 107.9 1993 108.9 109.3 109.8 110 1994 110.4 111.2 111.9 112.8 1995 114.7 116.2 117.6 118.5 1996 119 119.8 120.1 120.3 1997 120.5 120.2 119.7 120 1998 120.3 121 121.3 121.9 1999 121.8 122.3 123.4 N/A* CAR EXPENSE “CENTS PER KILOMETRE RATES” for 2019-2020 Income Year For the 2019-2020 income year the rate is 68 cents/km. CAR LIMIT For the 2019-2020 income year is $57,581. RESIDENT INDIVIDUAL INCOME TAX RATES for 2019-2020 Income Year Taxable income Tax on this income 0 – $18,200 Nil $18,201 – $37,000 19c for each $1 over $18,200 $37,001 – $90,000 $3,572 plus 32.5c for each $1 over $37,000 $90,001 – $180,000 $20,797 plus 37c for each $1 over $90,000 $180,001 and over $54,096 plus 45c for each $1 over $180,000

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