ASSESSMENT BRIEF
Subject Code and Title LAW 2002 Introduction to income tax law
Assessment Assessment 4: Case Study
Individual/Group Individual
Length 1500 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
c)Interpret and apply selected sections of the ITAA 36 and ITAA97 covering ordinary and statutory income, general and specific deductions and the taxation of entities and their associates.
d) Formulate a piece of written advice for a client about the tax implications of their residency status and business activities with reference to applicable case law and legislation e) Compare and contrast the tax outcomes for the sole trader, partnership, trust and company structures, including the tax outcomes for associated entities.
f) Analyse and apply tax legislation to authentic scenarios.
Submission By 11:55pm AEST/AEDT Sunday of Week 10
Weighting 20%
Total Marks 70 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 – Residency (10 marks)
Taite arrived in Australia on 1 August 2017 from Europe to follow a boyhood dream. He has always dreamed of a gap year visiting Australia and experiencing the sun, sand and surf. He has saved some money to finance his travels and plans to follow the various fruit picking and other casual non government labour type employment opportunities.
Taite does not stay in any one place for long before moving on to the next work opportunity. He stays at a variety of places including backpacker hotels and accommodation offered by employers.
Taite leaves Australia on 30 June 2018 and makes his way back home to Europe by following the “hippie trail” from Bangkok to Istanbul and then back home to recommence his University studies.
Required
Determine whether Taite is a resident of Australia for tax purposes and provide written advice in the form of a letter to Taite. Construct your answer with reference to the four (4) residency tests, relevant case and relevant legislation
Question 2 – Deductions (20 marks)
Derek is a resident individual who has decided to start a business as a tax advisor trading as a sole trader business. He decided to purchase an existing business for $450 000.
During the relevant income year the following transactions took place:
1) Paid a rental bond 1 July 2017 $3 600
2) Installed new internal walls on 1 August 2017 $8 000
3) Repainting existing walls 1 February 2018 $3 500
4) Repairs to fittings throughout the year $2 000
5) New carpet laid throughout on 1 March 2018 $5 000
6) Repaired computer system on 1 April 2018 $950
7) Installed computer upgrade on 1 January 2018 $12 500
8) Replaced unbroken front glass window with safety glass on 1 July 2017 $4 700
Derek has decided to use the diminishing value method and has established the effective life of the relevant assets to be:
• new internal walls to be 10 years,
• the carpet to be 8 years
• the computer upgrade to be 3 years.
• The window to be 2 years
Derek also incurred the following costs:
1) Stamp duty on the transfer of the business name $2 750
2) Legal costs for preparing a new 5 lease of the business premises $2 000
3) Borrowing fees for the 10 year loan financing the purchase $1 250
Required
Identify and calculate all general and specific deductions Derek can claim with reference to relevant legislation and case law.
Question 3 - Capital Gains Tax (15 marks)
Sherlock is a resident individual and has sold some of his share portfolio in the 2017/18 income year. The relevant details are:
a) Shares in LSD Ltd were sold on 6 September 2017 for $150 000. These had been purchased on 12 April 2017 for $110 000
b) Shares in Mirage Pharmaceuticals Pty Ltd were sold on 8 November 2017 for $80 000. These had been purchased on 1 April 1988 for $140 000
c) Shares in Wondersoft Instruments were sold on 15 May 2018 for $120 000. These had been purchased on 10 October 1984 for $10 000
Sherlock also has a trading loss from his sweet shop sole trader business of $15 000 for the 2017/18 year.
Required
Part A (10 marks)
With reference to relevant legislation calculate Sherlock’s net capital gain for the 2017/18 income year
Part B (5 marks)
Calculate the net capital gain if the taxpayer is Sherlock Pty Ltd and is also a resident of Australia for tax purposes. Sherlock Pty Ltd is also a sweet shop.
Question 4 - Assessable income (15 marks)
Frankie is a resident individual and he received the following amounts in the 2017/18 year.
Gross wages $150 000
Lottery win $1 200 000
Prize from amateur baseball team $500
Army Reserve payments $10 000
Personal Loan from bank $15 000
Business loan
75% Franked dividends from shares held. The dividends were reinvested in the paying company under a dividend reinvestment plan $10 000
Capital gain from shares held more than 12 months $10 000
Frankie also runs a business as a sole trader.
Gross receipts $277 500
Prepaid amounts $20 000
Frankie has a strict policy of returning all prepaid amounts if clients ask for their money back prior to services being provided.
Frankie also has investments overseas.
Gross amount of interest paid on money saved in India in an Indian bank. A$ 5 000
Required
With reference to relevant legislation and case law determine which of the receipts listed are classified as ordinary income or statutory income and if necessary calculate the amount to be included in Frankie’s assessable income.
Question 5 – Research (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.
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
30%
Points for this criteria
Limited understanding of required concepts and knowledge
Key components of the assignment are not addressed.
0-2
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 substantiated by evidence from the research/course materials.
3-4
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 and apply relevant concepts.
5-6
Highly developed understanding of the field or discipline/s.
Discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading.
Well demonstrated capacity to explain and apply relevant concepts.
7-8
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 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.
0-0-3
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
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
10%
Points for this criteria
Poorly written with errors in spelling, grammar.
Demonstrates inconsistent use of good quality, credible and relevant research sources to support and develop ideas.
There are mistakes in using the APA style.
0-2
Is written according to academic genre (e.g. with introduction, conclusion or summary) and has accurate spelling, 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
Is well-written and adheres to the academic genre (e.g. with introduction, conclusion or summary).
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
Is very well-written and adheres to the academic genre.
Consistently demonstrates 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
Expertly written and adheres to the academic genre.
Demonstrates expert use of high-quality, credible and 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%
Points for this criteria
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
3-4
Information, arguments and evidence are well presented, relevant and show a clear flow of ideas with logical development
5-6
Point range
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
7-8
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.
9-10