Problem
Sarah is a resident of Malaysia for tax purposes.
She is employed and paid by a Malaysia company. She often visits Australia to see her brother who resides in Perth.
Last year she managed to convince her employer to assign her to the Perth branch of her Malaysian employer for five months.
Sarah would like to live permanently in Australia and is trying to convince her employer to extend her contract.
During the current tax year, Sarah received the following income:
• Dividend from AustCo Ltd (an Australian company) $8,000
• Employment income from services carried on in Australia for five months $40,000
• Interest from an Australian Bank $5,000
• Profit on sale of AustCo Ltd shares $2,500
• Employment income from services carried on in Malaysia for eight months $80,000
You should assume AustCo Ltd is an Australian resident company for the purposes of this question and that Sarah has held these shares for five years. You should also assume the dividend from Austco was fully franked. You should further assume that the Malaysian employer paid all her wages.
Advise Sarah on the following:
A. Would Sarah's residence change as a result of her assignment to Perth?
B. How the amounts may be taxed and in which jurisdictions?
C. Whether the Malaysian company would have a permanent establishment in Australia and what the significance of this would be?