Peter, an Australian, was employed by Sussex Bank, an investment bank incorporated and managed in Australia, as a finance manager in 2016. His employment contract was negotiated and concluded in Australia. Peters salary was deposited into his bank account in Hong Kong by Federal Credit Ltd., the subsidiary of Sussex Bank, who recovered the amount from Sussex Bank. Peters job involved a great deal of travelling around Asia. While in Hong Kong, Peter accepted the post of director of Federal Credit Ltd. The directors meetings of Federal Credit Ltd were normally held in Hong Kong.

On 31 October 2019, Peter successfully completed his contracts and received a gratuity of $360,000 and $98,000 for his posts of finance manager and director respectively (which are chosen to be fully assessable in the year of reception). Peter migrated to Australia in December 2019.

The following information in respect of Peter is available:

1. The time spent by Peter at various places was as follows.

	1/4/18 31/3/19	1/4/19 31/10/20
	Days	Days
Working in Hong Kong	201	96
Working in Australia	46	38
Working in other Asian countries	88	58
Vacation outside Hong Kong	30	22
	365	214

2. The basic salaries from Sussex Bank were $890,000 and $560,000 for the years 2018/19 and 2019/20 respectively.
3. On 6 April 2019, profit sharing of $250,000 was received by Peter from Sussex Bank, though it was declared in a Board of Directors meeting to be payable on 30 March 2019.
4. On 10 May 2019, Sussex Bank paid Peter a prize of $60,000 for winning an internal competition relating to the risk management of various financial products. (Hint: The award is related to work.)
5. Peter lived in a flat in Hung Hum while he stayed in Hong Kong. The flat was leased by Sussex Bank at a cost of $288,000 and $165,000 for the years of assessment 2018/19 and 2019/20 respectively. Sussex Bank deducted 2% of Peters basic salary every month as his rent contribution.
6. As a director, Peter was granted an option to acquire 6,000 shares at $8 each of Federal Credit Ltd on 10 May 2019. He paid $12,000 for the option. On 13 June 2019, he sold the option for 2,000 shares for $7,000. On 20 August 2019, he exercised the option on all the remaining shares and sold the shares on the same day. The market values per share were as follows:

10 May 2019: $11

13 Jun 2019: $9

20 August 2019: $13

7. Peter received living allowances of $92,000 (for 2018/19) and $50,000 (for 2019/20) from Sussex Bank. The allowances were granted to Peter for his services rendered in Hong Kong.
8. Peter received directors fees of $280,000 and $165,000 from Federal Credit Ltd for the years of assessment 2018/19 and 2019/20 respectively.
9. Federal Credit Ltd paid school fees amounting to $68,000 (for 2018/19) and $42,000 (for 2019/20) for the education of Peters daughter in Australia. Under an arrangement entered into by the school with the company, Peter was not liable at all for the payment of those fees.
10. Federal Credit Ltd provided him with the use of car which it leased at a cost of $120,000 and

$70,000 for the years of assessment 2018/19 and 2019/20 respectively. He used the car 80% of the

time for business purpose which was essential for performing his employment duties and the remaining 20% of the time for private purpose.

11. At all relevant times, Peter used his own portable computer in his work. The Assessor agreed that 70% of the usage of the computer was essential for business purposes in Hong Kong. Depreciation allowances (before apportionment) for the years of assessment 2018/19 and 2019/20 were agreed to be $6,000 and $4,000 respectively.
12. In June 2019, Sussex Bank paid $35,000 to a travel company to purchase a package tour to Japan to be taken by Peter and his wife for holiday purposes. The package tour could not be transferred to other persons.
13. In August 2019, Peter was diagnosed with the early stage of liver cancer. He underwent various medical treatments and incurred medical expenses of $82,500 without any reimbursement.
14. Peter has a daughter who was 20 years old and was a full-time university student in Australia. Peters wife, who lives in Australia, had no income during the years.
15. Peters father (aged 68) is living in Canada during the years. Peter arranged an auto-transfer of $7,000 per month from his bank account to his fathers bank account for his living expenses.Compute Peters salaries tax liabilities for the years 2017/18 and 2018/19. Comment specifically upon the tax treatment you have accorded to the items 3- 7, 9-10, 12-13 and 15 above.

(Ignore provisional salaries tax and the relating back of lump sums. Peter was exempt from joining the MPFS.)

Peters salaries tax computation

	Note	2018/19	2019/20
		$	$