RECENT ASSIGNMENT

The Faculty of Business
BULAW 3731 Income Taxation Law & Practice

Assignment: Semester 1/2014

INSTRUCTIONS
1. See the Instructions and Assessment Criteria in the Course Description and make sure you follow them!

2. Please answer all parts of the question

3. Attached to this document is a Checklist to be filled in by you and attached to your essay/assignment. Read this now before you start your research. If you have followed this checklist, there is a good chance you will do well.

4. All work presented for assessment in this course must comply with the
format outlined in the University's Presentation of Academic Work
publication, available from the bookshop or on-line at
www.ballarat.edu.au/generalguide.

5. All essays must be accompanied by a signed official cover sheet ('Plagiarism Declaration Form'), available at www.ballarat.edu.au/ard/business/student_info_webct.shtml and lodged as appropriate for your campus.

6. You MUST reference in the body of the essay every time you use information from other people. This requires you to keep a track of where you are taking information from and then writing the reference up. You should use the Harvard/APA style; and use the University’s new Presentation of Academic Work. The Library’s website also has a citation style guide site. If you plagiarise (intentionally OR unintentionally) you will be given zero: see Regulation 6.1.1 for more details.

7. DUE DATE:……. Please check with the Course Description for details of where and when to submit your assignment. If you need an extension you must ask for one BEFORE the due date (unless this is impossible).

8. The assignment should not exceed approximately 2000 words.

9. The assignment is worth 25%.


Part A [Approx 2/3rd of marks]
Basil arrived in Australia on 28 August 2013 from his usual domicile in England. He obtained a working visa that permits him to work in Australia for three years. He is a specialist in information technology and is employed by Systems Ltd, a resident UK company that has secured a contract in Australia. His wife Sybil and two school aged children accompany him. For the present he proposes to rent accommodation in Adelaide but he may buy a property if he likes the country and spots a real estate bargain.

Basil is paid a base salary of $12,000 per month plus a rent subsidy of $600 per month. Half of the net (after tax) salary is credited to an Adelaide bank account, the balance to an account at the Bank of England. He is also provided with a fully maintained motor vehicle for his private use. His employer pays half his phone account. The amounts are $A125, $A460, $A440 and $A475 in September, December, March and June, respectively.

His England home, owned jointly with his wife Sybil, is rented out for $A800/month, in advance on the 1st of every month, and paid into the England bank account. Each quarter, interest is credited to the bank account in the joint names of Basil and Sybil.

In December 2013 Basil received a performance award from his employer consisting of a fully paid trip for the family to Hong Kong. The trip is valued at $A10,000, is non-transferable and must be taken before August 2014. It has not been taken by June 30, 2014.

In October 1990 Basil acquired a parcel of speculative shares in an English company for $A14,000. The price had not changed for some time and then in March 2014 suddenly jumped to $A23,000 and Basil sold the shares immediately. In November 2013 he purchased Australian shares for $8,250 and sold them in April 2014 for $6,400.

At an auction in Adelaide in December 2013 he purchased four dining chairs that Sybil liked. The total price was $550. Later, a friend visiting their house saw the chairs and was sure they were Queen Anne antiques. He contacted a collector who inspected the chairs and offered Basil $14,000 for the set.

Required:
1. Is Basil a resident of Australia for tax purposes? [You should consider the definition in ITAA36 s6(1), the evidence and the leading authorities (Applegate and Jenkins cases).] Suggested maximum: 500 words.

2. Assume Basil is an Australian resident. Advise him of his tax position and the assessability of the following:
i) Salary and rent subsidy
ii) Motor vehicle, phone account and holiday
iii) English rent
iv) English shares and Australian shares
v) Chairs.

Part B [Approx 1/3rd of marks]
Family Value Stores [FVS] is a large department store in a Melbourne. Sales are made on the following terms:
Cash;
Lay-by;
By what is called “take-now; pay-later”.

Required 1
Under the Lay-by sales conditions customers pay a non-refundable deposit of 10% and agree to pay off the balance within 12 months. The goods are taken from the store’s inventory and set aside at the time the deposit is made.

i) Should FVS return on a cash or accrual basis? Cite relevant case law.
ii) When is income derived in a lay-by sale?
iii) What is the tax treatment of a) the deposit; and b) progress payments?
iv) What is the tax treatment of the trading stock the subject of a lay-by?

Required 2
Under the ‘take now, pay later’ contract customers pay a 10% deposit and may take the goods on condition that a further 8% of the sale price is added to the balance owing which the customer then pays off in 12 equal monthly instalments. [See example] The contract notes that title passes to the customer at the time of sale and, if the customer defaults on any payment, the whole debt is immediately payable and recoverable.

Example: List price $3000; deposit $300; balance $3000 + (3000 x 8%) 240 – 300 = $2940/12 = $245 per month. [Total paid: $3,240]

For the year ended June 30 records show sales of $1,125,000:
Deposits received $112,500
8% interest charged 90,000
Progress payments received 700,000
Balance owing 515,000
(Cost of goods subject to contracts $690,000)

i) Advise FVS what income is derived and when.
ii) What tax consequences follow on default?


Federation University – The Faculty of Business

CHECKLIST TO BE ATTACHED TO ASSIGNMENT IN BULAW 3731

Name: ……………………………………………………………..
Student No. ………………………………..

Please check that you have done the following. Tick the boxes to show you have!

? Submitted an assignment that is your own work. (You may discuss the essay topics with others but you cannot copy another’s work, give your work to someone else to copy, or work closely with another student on how to structure or write the essay.)

? The assignment is no more than 2000 words long (excluding abstract, references, bibliography).

? Read and tried to address the criteria in the Course Description.

? Read and addressed the issues raised in the University’s Presentation of Academic Work

? Read Regulation 6.1.1, Plagiarism and asked questions if you are unsure about what it means.

? Referenced direct quotes (use quotation marks or indent) AND summarising from another person’s work in the body of the essay. (This includes internet sources).

? Indicated what referencing style you have chosen Harvard/APA and USED IT.

? Answered all parts to the question.

? Used headings (even though this is not a report, headings are encouraged to assist structure and flow).

? Proof read the assignment for spelling, punctuation and grammar errors.

? Where required, used relevant sections of legislation, legal rules/principles

? Where required, used cases to support your points or arguments. These cases can be obtained from textbooks, or the CCH online libraries, articles found via AGIS PLUS TEXT database etc.

? Put case citations in the body of the work as well as listing the case in the List of References.

? Discussed the issues as required and put arguments and gave your view.

? Used a range of resources.

? Included a title page with your name, student number, course code and name and lecturer’s name.

? Have a margin so comments can be added; put page numbers and your name and student number on each page.

Signed by student: ____________________________________________