ASSESSMENT BRIEF
Subject Code and Title LAW 6001 Taxation Law
Assessment Assessment 3: Case Study
Individual/Group Individual
Length 2000 words +/_ 10%
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
b) Explain ethical and professional responsibilities of tax agents under the including obligations under the Tax Agent Services Act 2009 (TASA) and Tax Agent Services Regulations 2009 (TASR).
c) Interpret and apply selected sections of the Income Tax Assessment Act ITAA36 and ITAA 97.
d) Identify and analyse the tax treatment of various types of income and deductions.
e) Effectively 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 50 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 law 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 (6 marks)
Explain the:
a) Constitutional basis of the Australian taxation system, ie what section(s) of the Australian Constitution confer taxation powers?
b) role of the Courts, the parliament and the ATO in developing taxation law in terms of the theory of the separation of powers in government
Question 2 (9 marks)
A non-resident manufacturer based in the US derives profits from sales to Australian customers. The US manufacturer has a sales representative in Australia operating out of a serviced office, and this sales representative has been instrumental in obtaining orders from Australian customers.
Required
With reference to the relevant Double Tax Agreement determine whether the profits from the Australian sales by this US manufacturer taxable in Australia?
Question 3 (15 marks)
Indianna is a resident individual taxpayer. She owns 22 hectares of land which has always been used for producing assessable income. She decides there is no longer the return required from owning the land and so she has decided to develop the land into residential housing.
She has thought about the three following scenarios:
a) Indianna undertakes all the activities necessary and sub-divides the property into 80 lots in addition to her 2 hectare area personal use area where the family home is situated. She then sells all 80 undeveloped blocks to a property developer
b) Indianna undertakes the same activities as above and holds an auction day to auction off all 80 blocks as separate packages to the highest bidders
c) Indianna does not subdivide the land and sells the land as an entirety to a development company, and pays a fee to the development company of 65% of the total sale proceeds for carrying out the entire development on her behalf. All of the balance is to be paid to Indianna on the sale of the last block.
Required Part 1
As Indianna’s tax advisor explain the potential assessable income issues involved for each scenario if:
a) The property has been owned by Indianna since 1 November 1976
b) The property has been owned by Indianna since 1 November 1986
Part 2
The land development project is likely to take place over at least two financial years. Discuss when Indianna will derive any assessable income she receives from each of the three scenarios.
Question 4 (10 marks)
Amity was looking for a life style change. She tired of the city life and decided she would like to develop an accommodation business in the Adelaide Hills. So she sold her catering business three years ago and found the perfect tract of land for sale. She investigated the zoning requirements and was advised by the council zoning should not be an issue.
As a result she entered into contract to purchase the land for $3m and paid a deposit and two instalments whilst interest accrues on the unpaid amount. He also bought some cattle and alpacas to run on the land. She intended to sell alpaca wool and occasionally sell a couple of the animals. The animals would all be sold once development was underway.
She engaged a team of architects and developers to plan the development and when the plans are drawn up she applied to the council for zoning permits. The council refused the request.
2 years ago following discussions with the council a further modified proposal was submitted to council who approved “in principle”.
Amity decided to bring in a partner and 18 months ago sold a quarter of her interest to Archie. During all of this time horses had been agisted on the land, and along with small amounts from cattle and alpaca sales, this was the only income earned.
However, Amity and Archie had a disagreement over the development and in disgust Amity sold her interest.
Required
With reference to applicable legislation and case law determine whether Amity is entitled to claim the interest on the loan as a deduction over the three year period?
Question 5 (15 marks)
Maurice is an individual tax resident of Australia for tax purposes. He has the following assets:
• His home was acquired on 20 February 1989 for $140 000. The home was never used for any income producing purpose. The estimated market value of the house on 1 March 2018 is $310 000
• Shares in FUL Pty acquired on 10 April 1984 at a cost of $15 000.
• Furniture acquired on 20 May 2010 for $9 500.
• Block of vacant land acquired on 20 June 1997 at a cost of $100 000. The estimated market value of the vacant block on 15 May 2018 is $475 000.
Maurice subsequently sold the following assets:
• His home was sold on 1 March 2018 for $325 000
• The FUL Shares were sold on 15 March 2018 for $19 000
• The furniture was sold on 1 May 2018 for $5 000
• The block of vacant land was sold on 15 May 2018 for $465 000.
Maurice also has a carry forward capital loss of $12 500 from the sale of an antique drumkit and a carry forward capital loss $5 000 from the sale of underperforming shares in an earlier income year. Maurice is not a share trader.
Maurice has also incurred interest expenses on the vacant block of land of $110 000 over the time he owned the vacant block. He never used the vacant block for any income producing purpose.
Required
With reference to relevant legislation and cases calculate the net capital gain or loss as applicable for Maurice for the 2017/18 income year.
Question 6 (10 marks)
Source two articles from the Australian Financial review or similar resource.
For each article provide:
a) a precis of the relevant facts in the article
b) a concise explanation of the taxation concept(s) discussed
c) an explanation of the connection between the concepts discussed in the article and the indicators of good tax policy.
Question 7 (5 marks)
Comment, with reference to the Tax Agent Code of Conduct, on the role the tax advisor has in ensuring their client’s compliance with all relevant taxation laws.
Learning Rubrics
Assessment Attributes Fail (Unacceptable) Pass (Functional) Credit (Proficient) Distinction (Advanced) High Distinction (Exceptional)
Grade Description (Grading Scheme) Evidence of unsatisfactory achievement of one or more of the learning objectives of the course,
insufficient understanding of the
course content and/or unsatisfactory level of skill development. Evidence of satisfactory
achievement of
course learning objectives, the
development of
relevant skills to a
competent level, and adequate
interpretation and critical analysis skills. Evidence of a good level of understanding, knowledge and skill development in relation to the content of the course or work of a superior quality on the majority of the learning objectives of the course.
Demonstration of a high level of interpretation and critical analysis skills.
Evidence of a high level of
achievement of the learning
objectives of the course
demonstrated in such areas as
interpretation and critical analysis,
logical argument, use of
methodology and communication skills. Evidence of an exceptional level of achievement of learning objectives across the entire content of the course demonstrated in such areas as interpretation and critical analysis, logical argument,
creativity, originality, use of methodology 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
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
from the 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.
9-1017-20
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
7-10
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
11- 15
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
15-20
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, Is well-written and adheres to the academic genre (e.g.
with introduction, conclusion or summary).
Is very wellwritten and adheres to the academic genre.
Consistently demonstrates Expertly written and adheres to the academic genre.
Demonstrates expert use of highquality, credible and
10%
Points for this criteria
There are mistakes in using the APA style.
0-2 grammar, sentence 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.
5-6
Point range 7-8 9-10
Points for this criteria 3-4