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LAW 6001 Taxation Law

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ASSESSMENT BRIEF
Subject Code and Title LAW 6001 Taxation Law
Assessment Assessment : Case Study
Individual/Group Individual
Length 2500-3000 words
Learning Outcomes This case study must be presented as an individual effort. The case study requires individual research. The course manual and set texts are intended to be the starting point of the research. It is expected the student will survey the relevant literature, including decided cases, and select appropriate additional resources. The case study is designed to incorporate uncertainty. The student is expected to develop a piece of work which is written advice for their client. It must therefore identify the facts and issues presented by each aspect of the case study, identify and apply the relevant legislation and/or case law, come to a conclusion and make a recommendation to the client. Specific learning outcomes   Interpret and apply selected sections of the Income Tax Assessment Act ITAA36 and ITAA 97.Identify and analyse the tax treatment of various types of income and deductions.Explain and apply the basic features of the capital gains tax provisions and calculate net capital gains/lossesEffectively apply taxation law in determining tax outcomes in various scenarios and structures.
Submission By 11:55pm AEST/AEDT Sunday of Week 10
Weighting 20%
Total Marks 55 marks

Context:

This assessment assesses your research skills, your ability to synthesise an original piece of work to specific content requirements and your ability to produce a comprehensible piece of advice which addressing the client’s needs.

It also assesses your written communication skills. The ability to deliver to a brief is an essential skill in the workplace. Clients may well approach advisors seeking a combination of specific information needs and advice on the tax implications of a particular arrangement in the Australian tax jurisdiction. It is therefore important to be able to identify all the issues presented by an arrangement and to think about the potential consequences of different approaches to addressing the client’s needs.

Instructions:

Your case study needs to identify and discuss the tax implications of the various issues raised. In order to produce your case study, you will need to review relevant case and legislation. The subject manual and set texts are starting points only; you will be expected to use these initial materials to identify potential useful resources. You will then need to review your selected resources to see if they value add to your analysis.

Your case study is not just a list of answers. Your reasons for your conclusions and recommendations must be based on your research into the relevant cases and legislation.

Question 1 (10 marks)

Adam Collins was born in Australia and works as an international airline pilot. He is married to Narelle and they have two school aged children. Adam and Narelle own a house in Sydney and receive interest on savings from their joint Australian bank account. Adam pays for Australian private health insurance for the family and has share investments in the airline on which he receives dividends. From 1 November 2017 until 1 April 2018, Adam was based at the airline’s hub in Dubai and lived in an apartment leased by the airline. The airline paid five months of Adam’s $500,000 annual salary directly into a bank account that he established in Dubai. Adam took annual leave in December and returned to Australia to spend Christmas with the family.

In May 2018, Adam accepted an offer to relocate with Narelle to Dubai for an indefinite period. The couple flew to Dubai on 1 July 2018. They established a joint bank account with a local bank and in November 2018 purchased an apartment close to Dubai airport. The children moved to a boarding school in Sydney. Adam and Narelle maintained their joint bank account and private health insurance in Australia and rented out their Sydney home. Adam took six weeks of annual leave during December 2018 and January 2019 and returned to Australia with Narelle to spend time with their children and inspect their home.

Required Law 6001 Taxation Law

Advise Adam Collins as to whether he is an Australian resident or non-resident for tax purposes for the 2017/18 and 2018/19 years. You must include relevant section numbers and cases in your explanation.

In June 2018 Orpheus Parker purchased a ground floor two-bedroom townhouse in Neutral Bay, Sydney. He decided to rent out part of his townhouse on Airbnb while still living in the property. The total floor area of the townhouse is 850 sq feet (79 m2). The floor space of Orpheus’ bedroom and his private area is 250 sq feet (23.2 m2). The rented second bedroom area is 200 sq feet (18.6 m2). The shared area comprising lounge, kitchen and laundry cupboard is 400 sq feet (37.2 m2).

The property has been listed since 1 September 2018 and Orpheus has achieved consistent occupancy rates. During the period of 1 September 2018 to 30 June 2019, the room was rented for 150 days. Orpheus only offered the room to solo travellers and he has received a total of $22,500 in rental income. During this period, expenses relating to occupancy costs, such as mortgage interest, municipal rates, strata levies and home insurance amounted to

$50,000. Orpheus also spent $250 on expenses relating to renting the room, i.e., advertising fees and consumables supplied for the room.

Required

Advise Orpheus Parker of the tax consequences of using his townhouse to produce rental income for the 2018/19 income year. Does Orpheus need to register for GST by doing Airbnb? You must include relevant section numbers in your explanations.

Question 3 (15 marks)

In 1975, Joe Messina purchased five hectares of land 40 km from Sydney’s CBD. The land was used for agricultural pursuits, with produce sold through Sydney markets. In the year 2000 the government proposed construction of an airport adjacent to Joe’s land. Subsequently, in 2005 Joe sold the land for $700,000 and used this entire amount to acquire a large block of land closer to Sydney with the intention of keeping the land as a retirement nest-egg. In 2016, Joe was approached by a real estate developer to construct eight townhouses on the land. Joe accepted the proposal and employed architects, builders and obtained development approval from the local council. Joe oversaw the development and engaged real estate agents to market the townhouses for sale upon completion. During the course of the 2018/19 income year seven townhouses were sold for $650,000 each. Joe retired to the remaining townhouse.

Required

Advise Joe Messina about whether the proceeds from his land and building transactions constitute assessable income and the basis on which they may be assessed. You must include relevant section numbers and cases in your explanation.

Harrison Carter, an Australian resident, seeks advice on the CGT consequences of the following events.

  1. He exchanged contracts for the acquisition of an investment property, at market value, on 24 January 1999, paying a 10% deposit of $80,000. Property settlement was deferred until 5 December 2001, when the balance of $720,000 was paid, title transferred, and his name was recorded as the registered proprietor. At the time of settlement the market value of the property was $1m. He sold the property on 14 June 2018 for $1.3m.
  2. He acquired 10,000 shares in Star Entertainment Ltd in October 1985, paying $4 per share. He decided to sell his entire shareholding, for $12 per share, and signed a share transfer document and handed the transfer and share script to the Stock Exchange on 20 June 2018. The transfer was not registered with Star Entertainment Ltd until 10 July 2018.
  3. He incurred a capital loss in 2018/19 amounting to $65,000.

Required

Advise net capital gains (losses) to be included in Harrison Carter’s tax return for the years ending 2018 and 2019. Include ALL available methods for calculating a capital gain for both years. You must explain the timing of a CGT event with relevant section numbers and cases.

Learning Rubrics

Assessment Attributes Fail (Unacceptable) Pass (Functional) Credit (Proficient) Distinction (Advanced) High Distinction (Exceptional)
Grade Description Evidence of unsatisfactory Evidence of Evidence of a good Evidence of a Evidence of an
(Grading Scheme) achievement of one or more of the satisfactory level of high level of exceptional level of
  learning objectives of the course, achievement of understanding, achievement of achievement of
  insufficient understanding of the course learning knowledge and skill the learning learning objectives
  course content and/or unsatisfactory objectives, the development in objectives of the across the entire
  level of skill development. development of relation to the content course content of the
    relevant skills to a of the course or work demonstrated in course
    competent level, and of a superior quality such areas as demonstrated in
    adequate on the majority of the interpretation and such areas as
    interpretation and learning objectives of critical analysis, interpretation and
    critical analysis skills. the course. logical argument, critical analysis,
      Demonstration of a use of logical argument,
      high level of methodology and creativity, originality,
      interpretation and communication use of methodology
      critical analysis skills. skills. and communication
          skills.
           
Knowledge and understanding Limited understanding of required concepts and knowledge   Key components of the assignment are not addressed. Knowledge or understanding of the field or discipline.   Resembles a recall or summary of key ideas.   Often conflates/confuses assertion of personal opinion with information Thorough knowledge or understanding of the field or discipline/s. Supports personal opinion and information substantiated by evidence from the research/course materials.   Demonstrates a capacity to explain Highly developed understanding of the field or discipline/s.   Discriminates between assertion of personal opinion and information substantiated by robust evidence from the A sophisticated understanding of the field or discipline/s.   Systematically and critically discriminates between assertion of personal opinion and information substantiated by robust evidence from the


          30%     Points for this criteria                   0-2 substantiated by evidence from the research/course materials.           3-4 and apply relevant concepts.             5-6 research/course materials and extended reading.   Well demonstrated capacity to explain and apply relevant concepts.   7-8 research/course materials and extended reading.   Mastery of concepts and application to new situations/further learning.   9-10
Critical reasoning, presentation and defence of an argument and/or position             30%     Points for this criteria Specific position (perspective or argument) fails to take into account the complexities of the issue(s) or scope of the assignment.   Makes assertions that are not justified. Specific position (perspective or argument) begins to take into account the issue(s) or scope of the assignment.   Justifies any conclusions reached with arguments not merely assertion.                 4 -7 Specific position (perspective or argument) takes into account the complexities of the issue(s) or scope of the assignment. Others’ points of view are acknowledged.   Justifies any conclusions reached with well-formed arguments not merely assertion.       8-11 Specific position (perspective or argument) is expertly presented and accurately takes into account the complexities of the issue(s) and scope of the assignment.   Justifies any conclusions reached with well-developed arguments.     12-16 Specific position (perspective or argument) is presented expertly, authoritatively and imaginatively, accurately taking into account the complexities of the issue(s) and scope of the assignment. Limits of position are acknowledged.   Justifies any conclusions reached with sophisticated arguments.   17-20
  0-0-3        
           
Formation of recommendations based on the identification of the issues and the application of case law principles and relevant legislation identified in the research process.         20%     Points for this criteria     Difficulty in formulating own opinion and a lack of recognition of the various issues. A lack of application of the relevant case law and/or relevant legislation             0-3     Difficulty in justifying own opinion. Some recognition and discussion of the various issues. Some application of the relevant case law and/or relevant legislation             4 – 6   Own opinion is partly justified with reference to case law and/or relevant legislation. Recognition and discussion of the various issues identified in the question Application of the relevant case law and/or relevant legislation to these issues     Own opinion is justified with reference to case law and/or relevant legislation. Recognition and discussion of the various issues identified in the question plus others identified by the student Application of the relevant case law and/or relevant legislation to these issues   Sophisticated arguments supporting own opinion is justified with reference to case law and/or relevant legislation. Recognition and discussion of the various issues identified in the question plus others identified by the student and problems identified Application of the relevant case law and/or relevant legislation to these issues
        11- 15  
          16-20
      7-10    
Use of academic and discipline conventions and sources of evidence Poorly written with errors in spelling, grammar.   Demonstrates inconsistent use of good quality, credible and relevant research sources to support and develop ideas. Is written according to academic genre (e.g. with introduction, conclusion or summary) and has accurate spelling, grammar, sentence Is well-written and adheres to the academic genre (e.g. with introduction, conclusion or summary). Is very well- written and adheres to the academic genre.   Consistently demonstrates Expertly written and adheres to the academic genre.   Demonstrates expert use of high- quality, credible and
  10%                           Points for this criteria   There are mistakes in using the APA style.                           0-2 and paragraph construction.   Demonstrates consistent use of credible and relevant research sources to support and develop ideas, but these are not always explicit or well developed.   There are no mistakes in using the APA style.     3-4 Demonstrates consistent use of high quality, credible and relevant research sources to support and develop ideas.   There are no mistakes in using the APA style.               5-6 expert use of good quality, credible and relevant research sources to support and develop appropriate arguments and statements. Shows evidence of reading beyond the key reading   There are no mistakes in using the APA style.   7-8 relevant research sources to support and develop arguments and position statements. Shows extensive evidence of reading beyond the key reading   There are no mistakes in using the APA Style.           9-10
Effective communication         10%     The reader has difficulty following the points being made, lack of logical/clear Structure, poor flow of ideas, argument lacks supporting evidence             0-2     The arguments and supporting evidence are not always presented in clear and logical manner.   Spelling errors and sentence structure makes meaning unclear     Information, arguments                        and evidence     are                   well presented,                     relevant and show a clear flow of ideas with logical development     The information, arguments and evidence are very well presented, with clear logical development of ideas            which answer the issue as set, with some consideration of related or flow issues     Excellent presentation              with clear           and  logical arguments supported                    by relevant and varied evidence.                  The student answers the issue and considers in         detail               some related       or             flow issues with possible ramifications.
                Points for this criteria       3-4 5-6 Point range 7-8 9-10

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