April 9, 2021

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<pclass=”msonormal” style=”box-sizing: border-box; font-family: Roboto, sans-serif; font-size: 16px; background-color: rgb(255, 255, 255);”>LAWS7012 | Business Taxation</pclass=”msonormal”>

Assignment – Semester 1 | 2014

Important Facts to Note

1. The assignment is worth 40% of the assessment in this course.

2. The assignment has 2 questions.

3. You must submit your assignment before 4.00pm on Thursday, 17 April 2014.

4. Students must submit their assignment electronically via the Turnitin link [LAWS7012 |

2014 – Semester 1] in the Assignment Submission folder in the Assessment area of the

course website in Blackboard. Online assignments do not require a separate cover

sheet. Refer to documentation in the Assignment Submission folder on the naming

requirements of the assignment file.

5. There is no prescribed word limit for this assignment and no penalties will be applied for

students who exceed the suggested word limit. As a guide, your assignment could be

completed in approximately 3,500 words.

6. Students must retain a hard copy of their submitted work.

7. Students need to be aware of and abide by the university’s policy on plagiarism. More

detailed information on this issue can be found in:

a. UQ Student Integrity and Misconduct Policy

? http://ppl.app.uq.edu.au/content/3.60.04-student-integrity-and-misconduct

b. On-line Academic Integrity Tutorial

? https://www.uq.edu.au/integrity/Login.aspx?ReturnUrl=%25252fintegrity

c. Law School Resource | Avoiding plagiarism http://www.law.uq.edu.au/?page=103927

8. Also, review Sections 5.3, 5.5 & 6.1 of the Course Profile for information on assessment

procedures. In particular, note:LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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Where a non-examination item of assessment (including essays, assignments, take-home tests, etc.) is

not submitted by the due date and time, a penalty will be levied at the rate of 10% of the marks

available for the assessment item per day that the assessment is overdue.

Example: Where a piece of assessment is due at 4pm on Monday, assessment submitted after 4pm

Monday but before 4pm on Tuesday will receive a 10% penalty.

Assessment submitted more than 5 days after the due date and time will receive zero marks.

Example: Where a piece of assessment is due at 4pm on the 10th, any work submitted after 4pm on

the 15th will receive zero marks.

If the 5th day following the due date is a Saturday or a Sunday, assessment will be accepted until 9am

on the following Monday.

Example: A piece of assessment is due at 4pm on Monday the 9th

. In the normal course of events, to

receive any marks, a student must submit their assessment by 4pm on Saturday the 14th (the 5th day

following the due date) at the latest. As the 5th day is a Saturday, the student may submit anytime up

to 9am on Monday the 16th

No extension granted may exceed 14 days.

The Business Taxation Assignment examines a student’s ability to conduct research into

taxation issues and to provide advice to a client. The assignment will also examine an

understanding of statutory income, in particular the capital gains tax provisions of the

Income Tax Assessment Act 1997.

Question 1 requires students to clearly identify the relevant tax issues, reference all

applicable sections of the Income Tax Assessment Act 1936 and/or the Income Tax

Assessment Act 1997, related tax cases and/or rulings of the Australian Taxation Office. A

suggested format to answer Question 1 is the traditional ILAC approach:-

1. Identify the relevant issue(s)

2. State the relevant law

3. Apply the relevant law to the facts provided

4. Reach a conclusion based on the application of the law to the facts

Students can review past year examples of Business Taxation assignments in the Assessment

folder of the course website. These examples demonstrate some of the better formats used

to present answers, however they do not necessarily contain the correct answer.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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Question 1 | 20 Marks

Your client was born in Sydney on 23 June 1949 but completed all his schooling and

university studies in Brisbane. Your client graduated from the University of Queensland with

a Bachelor of Commerce in 1970 and then worked as an accountant for several major

accounting firms, until he commenced employment as a lecturer in accounting on 1 January

1992 with the Queensland Institute of Technology, now the Queensland University of

Technology (QUT). After nearly 22 years employment with the university your client is

considering a change of career as QUT is currently offering a generous early retirement

package to academic staff at the university. Your client would be eligible for a maximum 40

weeks’ pay under QUT’s early retirement scheme and based on your client’s current salary,

their gross payment under this scheme is approximately $140,000.

QUT’s Human Resources area has advised your client of the following information:

1. Year to date gross salary paid as at 1 April 2014 = $140,000

2. Projected full year gross salary as at 30 June 2014 = $160,000

3. Unused Annual Leave = $5,000

4. Unused Long Service Leave = $8,000

5. If your client was to resign rather than accept early retirement, they will only be

entitled to payments relating to any unused annual leave and long service leave.

6. To be eligible to participate in the early retirement scheme all relevant staff must

terminate their employment with the university on or before 4 July 2014.

In addition to the above information you have ascertained your client has been on

university approved study leave and long service leave since early 2013, travelling around

Europe and the Americas on a working holiday researching material for a new Accounting

and Finance textbook he is writing. He is currently in Seville, Spain but will return to

Brisbane if he decides to accept the early retirement offer from the university.

As part of your client’s research into their new textbook they have participated in several

financial spread betting activities offered by a company operating in Australia. This company LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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holds an Australian Financial Service Licence. Since 1 July 2013, as a result of these betting

activities, your client has managed to make a small profit of $3,000.

You have also ascertained your client received $2,000 in royalties from Thomson Reuters,

publishers of his current textbook on accounting and $1,000 in interest on a Term Deposit

with the Commonwealth Bank. You do not anticipate your client receiving any additional

income other than that detailed above, between now and 30 June 2014.

Based on all of the information provided determine which receipts, if any, are assessable

income for your client. In particular, your client is seeking your advice as to the taxation

consequences of participating in QUT’s Early Retirement Scheme. Your answer should

include exact dollar amounts and where applicable any relevant rates of taxation that will

be applied to this income. Calculations of tax payable are not required. Your answer should

reference all applicable sections of the Income Tax Assessment Act 1936 and/or the Income

Tax Assessment Act 1997, related cases and or rulings of the Australian Taxation Office.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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Question 2 | 20 Marks

Your client is a wealthy investor and property owner. Your client provides you with

information (as detailed below) on various transactions between 1 July 2013 and 30 June

2014. Many of these transactions were undertaken to raise funds for the purchase of a large

industrial complex, which is to be finalised in October 2014.

Your client seeks advice as to what amount(s), if any, must be returned as assessable

income for the year ended 30 June 2014. In particular, you are required to discuss the

capital gains tax consequences of these transactions and determine your client’s net capital

gain or net capital loss, if any, for the year ended 30 June 2014.

Your advice should include all calculations and references to applicable sections of the

Income Tax Assessment Act 1997 and if applicable related cases and or rulings of the

Australian Taxation Office.

1 | Holiday House in Blue Mountains. On 3 June 2014 your client signs a contract to sell

their holiday house in the Blue Mountains of New South Wales for $400,000. Your client

acquired this property on 8 January 1991 for $100,000. The property is used solely by

your client for holidays and family gatherings. They incur $120,000 in local council rates

and land taxes during the period of ownership. The contract of sale stipulates that a

deposit of $40,000 is payable to your client when the contract of sale is signed and the

balance is payable in three equal instalments on 3 September 2014, 3 December 2014

and 3 March 2015. On 4 June 2014 your client incurs $3,400 in real estate agent fees in

respect of the sale of the house.

2 | Rental Property | Your client purchased an investment property for $520,000 in

April 2007. The property was rented during the entire period of ownership through a

local real estate agency. Your client incurs the following costs since purchasing the

property:-

a) $10,000 in stamp duty when acquiring the property.

b) $3,000 in legal costs and search fees when acquiring the property.

c) $750 in repairs to lighting and plumbing.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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d) $10,000 to the real estate agency to collect rent and organise regular

maintenance of the property.

e) $3,000 to the local council as a levy to have overhead mains power converted

to underground power. This was the result of a joint state government and

local council project to remove power poles and power lines from certain

suburbs in the local council area.

f) $7,000 to construct a new concrete retaining wall on the property to prevent

erosion.

g) $1,500 to the local council for a fine for failing to obtain the required council

approval for construction of the retaining wall on the property.

In October 2012 your client was advised by the State Government they intended to

resume his investment property to make way for a new transport corridor for buses.

Your client incurs $7,000 in legal fees seeking advice about his legal options to resist

the property resumption. In November 2013, after significant negotiations between

your client, his legal representatives and the government, it was agreed the property

would be resumed for a price of $750,000. It was also agreed that the government

would pay interest at a prescribed rate between the original notified date of the

resumption in 2012 until the date compensation is finally paid. On April 2014 your

client receives the $750,000 compensation payment and an additional $20,000

representing the agreed interest payment.

3 | Land (#1) – Gold Coast Hinterland. In September 1984 your client purchased a 2

hectare block of land in the Gold Coast hinterland at a cost of $50,000. In July 2013 your

client received approval from the Gold Cost City Council to subdivide this land into two 1

hectare blocks. The costs associated with obtaining this approval and subsequent works

to subdivide the land amounted to $50,000. The titles to the new subdivided blocks

were registered on 15 April 2014. During your client’s period of ownership of the land

they incurred $30,000 in council rates. Both blocks of land went to auction in May 2014

with one block selling for $300,000 and the other block for $400,000. The auction costs

totalled $7,000.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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3 | Land (#2) – Gold Coast Hinterland. Your client also acquired an adjoining 5 hectare

block of land in November 2001 for $150,000. Your client constructed a house on this

land during 2002 at a cost of $250,000 and used the house as his main residence from

January 2003. In July 2013 your client received approval from the Gold Cost City Council

to subdivide the 5 hectares of land into four separate blocks, a two hectare block on

which his house and surrounding land were situated and three 1 hectare blocks. The

costs associated with obtaining this approval and subsequent works to subdivide the

land amounted to $200,000. The titles to the new subdivided blocks were registered on

15 April 2014. During your client’s period of ownership of the land they incurred $50,000

in council rates. The three one hectare blocks of land went to auction in May 2014 with

each block selling for $300,000. The auction costs totalled $9,000.

4 | Shares ABN Ltd. In June 2007 your client acquired 5,000 shares in ABN Ltd at a cost

of $15.00 each. On 31 May 2014 these shares were sold for $16.00 each. Your client

incurred $1,500 in stamp duty on the purchase and $500 in stockbroker’s fees on the

sale. The company has paid no dividend since the shares were purchased which was the

major reason for selling the shares. Your client borrowed $50,000 to help fund the

purchase of these shares, incurring $6,000 in interest between 2007 and 2014. The ATO

has advised that this interest cannot be claimed as a tax deduction.

5 | Inheritance. In June 2001 your client’s mother passed away and her will bequeathed

a family heirloom to your client. The item was a painting by Australia’s prominent

landscape painter Arthur Boyd. Your client’s mother was a close friend of Boyd and she

told her family Boyd gave her the painting in 1951. Your client had the painting valued

by a local art gallery for insurance purposes when their mother died. The valuation

indicated the painting was worth $700,000. In December 2013 your client decided to gift

the painting to the Queensland Art Gallery under the Cultural Gifts Program. Your client

had the painting expertly examined for valuation purposes by two approved valuers

recommended by the Gallery and the agreed average value of the painting was

$1,200,000. During your client’s period of ownership, they paid $30,000 in insurance on

the painting and $1,000 to have the painting valued in 2001 and $9,000 to have it valued

in 2013.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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Additional information relevant to your client:

? Your client also has a significant capital loss carried forward from the 2011-2012 tax

year. These losses total $180,000 and relate to losses from the sale of shares during

the 2008 Global Financial Crisis.

? You can assume your client is not an eligible Small Business Entity. Therefore the

Small Business CGT concessions do not apply to any capital gains made in the year of

income.

? You can also assume your client is not carrying on a business in respect of any of

these assets.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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Marking Guide for the Assignment

In marking the assignment answers will be graded on the criteria listed below.

Submitted assignments must be of a professional standard. When awarding a mark for each

question, consideration will be given to the standard of presentation. A professional

presentation contains no spelling, grammatical or formatting errors.

Assignments will be marked online and made available to students before the end of the

semester.

Question 1 | The general criteria for Question 1 are as follows:

0-1 Answer demonstrates a fundamental misunderstanding of the taxation issues

contained in this assignment and does not answer the questions asked.

2-8 Answer is partially incomplete; it includes a correct approach to the taxation

issues and would be acceptable if the answer was completed.

9-15 Answer includes a correct interpretation of some the relevant taxation issues.

The answer contains insufficient referencing to the relevant provisions of the

Income Tax Assessment Acts, or the answer contains insufficient identification of

any relevant cases and/or Australian Taxation Office rulings.

16-19 Answer includes a correct interpretation of most of the taxation issues. The

answer contains sufficient referencing to the relevant provisions of the Income

Tax Assessment Acts and the answer contains some identification of relevant

taxation cases and/or Australian Taxation Office rulings.

20 Answer includes a correct interpretation of all of the taxation issues. The answer

contains all pertinent referencing to the relevant provisions of the Income Tax

Assessment Acts, relevant taxation cases and/or Australian Taxation Office

rulings.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014

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Question 2 | The general criteria for each part Question 2 are as follows:

0-1 Answer demonstrates a fundamental misunderstanding of the taxation issues

contained in this assignment and does not answer the questions asked.

2-8 Answer is partially incomplete or it includes a partially correct interpretation of the

taxation issues. Issues associated with capital gains tax contain calculation errors.

For example:

? It fails to correctly calculate most of the relevant capital gains and or

capital losses.

? It fails to correctly calculate some of the relevant capital gains and fails to

determine the correct overall net capital gain or capital loss for the current

tax year.

The answer only references some of the relevant sections of the Income Tax

Assessment Act. The answer contains insufficient identification of any relevant

cases and/or Australian Taxation Office rulings

9-15 Answer includes a correct interpretation of some the taxation issues. Issues

associated with capital gains tax contain calculation errors. For example:

? It fails to correctly calculate some of the relevant capital gains and or

capital losses but uses the correct approach to calculate an overall net

capital gain or capital loss for the current tax year.

The answer also references most of the relevant sections of the Income Tax

Assessment Act. The answer contains identification of some relevant cases and/or

Australian Taxation Office rulings

16-19 Answer includes a correct interpretation of most of the taxation issues. Issues

associated with capital gains tax contain minor calculation errors. For example:

? It correctly calculates all of the relevant capital gains and or capital losses

but fails to correctly calculate the overall net capital gain or capital loss for

the current tax year.

? It fails to correctly calculate one of the relevant capital gains and or capital

losses, however it uses the correct approach to calculate an overall net

capital gain or capital loss for the current tax year.

The answer also references all or most of the relevant sections of the Income Tax

Assessment Act. The answer contains identification of most of the relevant cases

and/or Australian Taxation Office rulings.

20 Answer includes a correct interpretation of all of the taxation issues. Issues

associated with capital gains tax correctly calculate all of the relevant capital gains

and or capital losses. It determines the correct overall net capital gain or capital

loss for the current tax year.

The answer also references all the relevant sections of the Income Tax Assessment

Act. The answer contains identification of all of the relevant cases and/or

Australian Taxation Office rulings.