Harry is an accountant who worked for a mid-tier accounting firm in Brisbane. In early 2017 his wife, Sally, got a job offer to work for a Canadian software company for four years. Harry and Sally decided that this career opportunity for Sally was too good to miss, and they would move with their two children to Toronto, Canada for four years so that Sally could take up the offer. They sold their house and put their furniture into storage. Harry resigned from his job and in May 2017 he moved to Toronto with Sally and their children aged 2 and 8 years. Prior to moving to Canada, none of the family had ever been overseas before. The family intends to stay in Canada for four years, although they might travel back to Australia in 2018 for a short holiday to visit friends and family. Upon arrival in Toronto they immediately rented a house to live in. Their 8 year old daughter was enrolled in a local school, and it was decided that Harry would not work in Canada so that he could look after their 2 year old son. Harry opened up a bank account in Canada to deposit his savings into.
Harry received the following receipts (all amounts are in Australian dollars):
(i) A cheque for $1,900 on 14 August 2017 from his former Australian employer for unpaid salary due to him.
(ii) A royalty cheque for $10,000 on 31 January 2018 in relation to an industrial property (a Western Australian coal mine) that he has an interest in. Harry has notified the mine of his change of address.
(iii) $100 interest paid by the Bank of Canada into his savings account with them on 31 March 2018.
(iv) $600 interest paid by Commonwealth Bank of Australia from a 2 year term deposit. Harry had initially deposited the money on 4 August 2016 and the term deposit matured on 4 August 2018.
(v) A $500 unfranked dividend from Blue Mine Ltd, an Australian mining company which was deposited into his Bank of Canada account on 22 October 2017. The dividend is paid out of accumulated company profits that Blue Mine Ltd earnt back early in the 2015 year.
(1) Determine the tax consequences for Harry in respect of these receipts for the 2018 tax year.
Hint: you should consider whether any of the receipts are income, and if so, when they have been derived in order to work out what Harry’s Australian tax consequences will be – there are 4 issues that you need to work through to arrive at a conclusion. The framework and application for the first issue is set out below to get you started. This is quite an involved problem, so please ensure that you work through all of the issues before attending your seminar.
(2) Consider whether your answer in (1) would change if Harry had to return to Australia for two weeks in November 2017 to be with his mother before she passed away.
Sub issue (1): Are any of the receipts a type of assessable income?
[Consider the material from Seminar #1 and #2]