UNSW

THE UNIVERSITY OF NEW SOUTH WALES

AUSTRALIAN SCHOOL OF BUSINESS

SCHOOL OF TAXATION AND BUSINESS LAW

TABL2751 BUSINESS TAXATION

SEMESTER 2, 2017

ASSIGNMENT

DUE DATE AND TIME Tuesday, 3 October 2017, 5pm.

LATE LODGEMENT Late lodgement not accepted unless prior

arrangements have been made with the lecturer-in-
charge.

PLACE OF LODGEMENT You must submit your assignment both

electronically and in hard copy.
Electronic lodgement: via Course Moodle site.
Hard copy lodgement: Designated Assignment Box
in the School of Taxation and Business Law - Quad
Building Level 2, (next to room Quad 2055 which is
opposite the school office).

VALUE OF ASSIGNMENT 20% of Course marks

LENGTH OF ASSIGNMENT 2,000 words (plus or minus 10%)

 ASSIGNMENT INSTRUCTIONS
Read all instructions before completing and submitting the assignment.

1. You are required to submit an answer to the attached assignment question by the due date and time
for lodgment. Any requests for extension must be made prior to the due date via e-mail to the
lecturer-in-charge.

2. Your assignment must be submitted both in hard copy and soft copy via the link that will be made
available on Moodle.

3. All hard copy assignments must include a completed copy of the assignment coversheet that will be
made available on Moodle. Provided that you agree with the terms of the declaration, you must sign
the declaration regarding plagiarism on the assignment coversheet.

4. You should follow the quick presentation and referencing guide which immediately follows the
marking criteria at the end of this list of instructions. Failure to do so will be reflected in your mark
for the assignment.

5. The word limit will be strictly enforced. Words in excess of the word limit will not be marked.

6. In preparing an answer, you will inevitably discuss issues raised by the assignment with other
students. There is nothing in the UNSW rules prohibiting such discussions. However, in the end, you
must be able to state that the work that you have submitted is your work. Importantly, you should
ensure that you have not committed (either deliberately, or without intent) an act of plagiarism (e.g.
presenting anothers work or ideas as your own, failing to acknowledge the source of a quotation,
submitting the same or similar version of work to that of another student).

7. Although the broad topics raised in the assignment will be topics covered in the course, the
assignment will raise issues that will not necessarily have been discussed in lectures or tutorials. This
means that you may have to go beyond the prescribed materials for the course in relation to some
issues. Whilst you will not be given a separate mark for research, reading beyond the textbook /
required readings may assist you in writing your answer.

8. Given that this assignment is a problem type question that may require you to undertake research, no
staff member working on this course, or any staff member in the School of Taxation & Business Law,
will provide assistance to you in writing and researching your answer. Accordingly, please do not ask
a staff member questions related to the assignment. If you require clarity in relation to any facts
contained in the assignment question, these should be directed to the lecturer-in-charge.

9. If you are dissatisfied with your grade, you should first collect your assignment and review the
feedback given. Discussions regarding grades will not be entered into until you have reviewed your
marked assignment. You should then discuss your grade with the lecturer-in-charge. If you are still
dissatisfied with your grade, you are allowed to request a formal re-mark. Please note that such a re-
mark can result in your grade either (i) staying the same; (ii) being increased; (iii) being reduced.
MARKING CRITERIA

Markers will be evaluating you assignments based on the following criteria:

Knowledge/Critical thinking and problem solving

For each transaction, have you:
correctly identified the issue;
correctly identified appropriate law (legislation and/or cases as appropriate);
correctly applied the law to the facts;
clearly argued points that may be in doubt;
reached a conclusion as to the taxation treatment.

Written communication/presentation:
Does your assignment have a clear structure?
Is it free of errors (such as spelling, grammatical or typographical errors)?
Does your assignment follow the presentation and quick reference guide included in this document?

PRESENTATION AND QUICK REFERENCE GUIDE

Presentation

1. For hard copy submissions: Please print your answer single sided. Staple all pages (including the
cover sheet) once in the top left hand corner. Do not use plastic sleeves; comb binding; other forms
of binding or paper clips.

2. Your answer must be typed. You must use one and a half (1.5) spacing and a font size of 12. You
must leave at least a 2.54 cm margin from both sides of the A4 page (note that this is the normal
margin setting in Microsoft Word). Please print your assignment single sided.

3. Ensure each page of your answer contains your student number and a page number as a header or
footer.

4. Your assignment is required to be referenced. You should use footnotes and your assignment should
also include a reference list. The School of Business and Taxation Law generally follows the
Australian Guide to Legal Citation (AGLC). Some examples of this referencing style are provided
below. You can also refer to the quick guide to the AGLC system of referencing available at
http://law.unimelb.edu.au/mulr/submissions/quick-aglc.

5. Footnotes are not generally counted in the word count. However, you must not place substantive
parts or central parts of your answer or argument in footnotes.

6. Calculations are not included in the word count. We encourage you to use tables to present
calculations. These can be included in the body of your assignment.
7. Quotations are included in your word count. The reason for this is that we do not want you quoting
large portions of the legislation in your assignment. The markers know what the legislation says.
(Similarly, although you will at times need to refer back to specific facts given in the question, we do
not want you to restate all the facts in your assignment. This is a waste of words).

8. You are encouraged to use headings in your assignment.

9. You should carefully proof-read your answer (a number of times) before submission.

Referencing

Your assignment must be fully and properly referenced. Failure to reference your sources is plagiarism
and amounts to academic misconduct.

In your assignment, you will need to refer to, at a minimum, legislation and cases. You may also want to
refer to a range of other material including government documents, books and websites. Provided in the
below tables are some examples of how to cite these sources. Note that these are examples only some
of these will not be relevant for your assignment, and you will be expected to refer to sources that are not
included in the table.

Table 1 (Reference examples) contains examples of how you should reference sources in your reference
list. Table 2 (Pinpoint reference examples) contains examples of pinpoint referencing. This is when you
refer to a specific page, paragraph or section. Your assignment should utilise pinpoint references as much
as possible. Table 3 (Subsequent reference examples) contains examples of how you are allowed to
reference the sources provided in Table 2 if you have already given the full reference in an earlier
footnote.

Please note that for this assignment, certain abbreviations and modifications that do not strictly follow the
AGLC style guide will be allowed. This is to simplify the referencing process for you. If you are
studying further courses in the School of Taxation and Business Law, you should you follow the AGLC
(or the referencing guide given in that course).
 Table 1: Reference examples
Legislation Income Tax Assessment Act 1997 (Cth).
Cases Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR
337.
AusNet Transmission Group Pty Ltd v Federal Commissioner of Taxation
[2015] HCA 25.
Taxation rulings Australian Taxation Office, Income Tax: Carrying on a Business as a
Professional Artist, TR 2005/1.
Books Frank Gilders et al, Understanding Taxation Law 2017 (LexisNexis, 2017).

(Note: et al is used following the first author as there are more than three
authors. Where there are two or three authors, the names of authors should be
included).
Journal articles Diane Kraal, University teaching: A reflection of tax teaching and cultural
diversity (2014) 9 Journal of the Australasian Tax Teachers Association 215.
Websites Australian Taxation Office, Income you must declare (20 May 2016)
Australian Taxation Office <https://www.ato.gov.au/Individuals/Income-and-
deductions/Income-you-must-declare/>

(Note: the first reference to Australian Taxation Office is as the author of

the webpage. The second reference to Australian Taxation Office is the title
of the general website on which the document is located. The date is the last
date the webpage was updated. Where there is not a full date available, as
much of the date that is available should be included).
 Table 2: Pinpoint reference examples
Legislation Income Tax Assessment Act 1997 (Cth), s 8-1(2)(a).
Cases Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR
337, 363.
AusNet Transmission Group Pty Ltd v Federal Commissioner of Taxation
[2015] HCA 25, [72].
Taxation rulings Australian Taxation Office, Income Tax: Carrying on a Business as a
Professional Artist, TR 2005/1, para 34.
Books Frank Gilders et al, Understanding Taxation Law 2016 (LexisNexis, 2016)
412.
Journal articles Diane Kraal, University teaching: A reflection of tax teaching and cultural
diversity (2014) 9 Journal of the Australasian Tax Teachers Association 215,
218.
Websites Australian Taxation Office, Income you must declare (20 May 2016)
Australian Taxation Office <https://www.ato.gov.au/Individuals/Income-and-
deductions/Income-you-must-declare/>

(Note: there is generally no requirement to use a pinpoint reference for a

webpage. If pinpoints (such as paragraph numbers) are available, these
should be included).

Table 3: Subsequent reference examples

Legislation ITAA97, s 8-1(2)(a).
Cases Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR
337, 363.
AusNet Transmission Group Pty Ltd v Federal Commissioner of Taxation
[2015] HCA 25, [72].
Taxation rulings TR 2005/1, para 34.
Books Frank Gilders et al, above n X, 412.
X is the footnote number where you have first referred to this source. For
example, if you had first referred to this source at footnote 10, the reference
would be: Gilders et al, above n 10, 412.
Journal articles Kraal, above n X, 218.
Websites ATO, Income you must declare, above n X.
ASSIGNMENT QUESTION
Charlotte Harrison is an Australian resident taxpayer. The following information relates to the
year ended 30 June 2017.

Charlotte is a lecturer in the medical faculty of a university based in Sydney. She receives a
salary of $90,000 per year. She works full-time (5 days a week) but only teaches classes 3 days
per week. On the other two week days, she chooses to work from home. Her employer allows
her to do this.

Charlotte has a room in her home that she uses as her office, which takes up 10% of the floor
area of her home. She spends approximately 20 hours per week working from this home office
preparing for lectures and doing other university work. Charlotte occasionally uses her home
office for activities not related to her employment with the university, but estimates this would
be no more than 1 hour per week. Charlotte pays $600 per week in rent for the home, and her
electricity bill is $500 each quarter. For the 2016-17 tax year, the costs incurred by Charlotte
were $31,200 on rent and $2,000 on electricity.

In order to complete work at home, Charlotte uses a laptop which she purchased on 1 July 2015
at a cost of $3,100. Charlotte estimates she uses the laptop 70% for work purposes. She has
been using the diminishing value method for calculating decline in value (depreciation). (It can
be assumed that Charlotte will continue to use this method).

On 1 September 2016, Charlotte pays $180 to have the internal wireless card in the computer
replaced as it stopped working, and she was unable to access the internet.

Other expenses Charlotte incurred during the year ended 30 June 2017 were:
$850: public transport costs to and from work.
$2,900: income protection insurance (insurance that gives Charlotte $1,500 per week if she is
sick or injured).
$1,000: the cost of attending a series of seminars on educating children, as teaching children
is on Charlottes personal agenda.

Charlotte owns a small share portfolio, with each shareholding having been acquired to obtain
returns in the form of dividends. On 1 April 2017, she sold shares in Green & Gold Co Ltd (an
Australian company) for $20,000. This shareholding was no more than a 1% shareholding
interest in that company. Brokerage fees associated with the sale were $500. Charlotte had
purchased the shares on 1 April 2006 for $16,000. During the years of ownership, she had
received dividends from the shares totalling $4,500. For the year ended 30 June 2017, (prior to
her selling the shares), she had received a dividend of $800 (you can assume this is unfranked
and can ignore franking credits/dividend imputation system for the purpose of answering this
question). Charlotte had borrowed from a bank to buy the shares, and the total interest paid to
the bank on this loan during her period of ownership of the shares was $3,000. Of this, $300 was
incurred from 1 July 2016 to 1 April 2017. On 1 April 2017, the loan was repaid in full from the
sale proceeds.
Also during the 2016-17 year, Charlotte sold a painting for $2,000 having purchased it for
$3,000. Both transactions i.e. purchase and sale were at auction, but Charlotte incurred no
commission or brokerage costs on either transaction.

In the 2015-16 income year, Charlotte had a net capital loss (from the sale of shares) of $3,000.

On 1 August 2016, Charlottes mother died unexpectedly. Under her mothers will, Charlotte
received a property (a house) located on the south coast of New South Wales. The property was
transferred to Charlotte on 1 October 2016. The property was valued at $520,000 on 1 August
2016 and $535,000 on 1 October 2016. Her mother had purchased the property on 1 August
2005 for $280,000. It had been her mothers main residence (i.e. the only house where the
mother resided) at all times from purchase up to her death on 1 August 2016.

Charlotte advertised the property for sale on 1 November 2016. She incurred $2,000 in
advertising expenses. On 1 December 2016 a buyer offered her $530,000 for the property and a
contract for sale was signed on that date. A deposit of $50,000 was paid on that day.
Settlement (i.e. transfer of ownership) was due to occur on 31 December 2016. The buyer was
delayed in obtaining finance, with the result being that 15 February 2017 was the earliest time
that the buyer would be in a position to complete the purchase. To avoid losing the property
through failure to settle on 31 December 2016, the buyer agreed to pay $15,000 to Charlotte for
Charlottes agreement that she would not terminate the sale contract for breach until 15 February
2017. This non-refundable amount was paid to Charlotte on 5 January 2017. The remaining
$480,000 for the property was paid on the date of settlement which occurred on 15 February
2017. On that day, Charlotte also received $39,000 from the real estate agents trust account,
being the $50,000 deposit less the commission payable to the real estate agent in the amount of
$11,000. Charlotte incurred no legal costs in relation to these property matters, as a lawyer friend
acted for her and did not charge any fees.

On 1 July 2016, Charlotte signed a contract for purchase of a block of land, with Charlottes
motivation being that the land would be used by Charlotte for her personal use and enjoyment as
a future holiday retreat. The cost of the land was $100,000, and Charlotte borrowed this amount
from the bank. After settlement of the purchase on 31 August 2016, Charlotte decided to transfer
the land to her son for family reasons, and on 30 June 2017, she entered into a contract with her
son for sale of the land to him for the nominal amount of $100, despite the market value of the
property being $120,000. This sale settled on 1 July 2017, and using monies won on Aussie Big
Lotto, Charlotte paid the bank the $100,000 that she had originally borrowed. The interest on the
loan from inception up to the time of repayment amounted to $6,000. This interest was paid to
the bank on or before 30 June 2017.

Required:
Based on the above transactions, calculate what will be Charlottes taxable income for the year
ended 30 June 2017. This includes calculating any net capital gain based on the assumption
that Charlotte makes any choice available to her under the capital gains tax rules in the income
tax law which would have the effect of legitimately minimising the amount income tax payable
by Charlotte for the year. Ensure that you fully explain your answer with reference to
appropriate legislation and cases. (I.e. you need to explain why a receipt will/will not be
assessable income, why any outgoings will/will not be deductible and on what basis
transactions are taken into account or not taken into account in calculating the net capital gain (if
any).

You can ignore goods and services tax (GST) for the purposes of answering this question.

You can assume that Charlotte would be able to substantiate any deductions as required by the
substantiation rules in the income tax law.