Question 1
Amber owned and operated a boutique chocolate shop in Sydney that she purchased for $240,000 in August 2010. The purchase price consisted of equipment and stock worth $110,000 and the balance being goodwill. Following the birth of her child, Amber decided to sell the shop in February 2018 for $440,000 of which $280,000 was attributed to goodwill.
Amber was also required to sign a contract restricting her from opening another similar business within a 20km radius for the next 5 years. She received an additional sum of $50,000 for this contract.
Due to their expanding family, Amber and her husband purchased a four bedroom home in the outer suburbs of Sydney in June 2018. The purchase was partly funded by the sale of the business but also by the sale of Amber’s one bedroom inner-city apartment. Amber had lived in the apartment since she inherited it from her Uncle in October 2013. He had purchased it in September 1992 for $180,000 and lived in it until he died. At the time of his death the apartment was valued at $390,000. Amber signed a contract for the sale of the apartment in May 2018 for $550,000 and settlement took place in July 2018.
Required
Advise Amber of the taxation consequences of these transactions. You are not required to calculate any capital gains or losses. (20 marks)
Question 2
Jamie is a real estate agent working for ‘Houses R Us’ real estate. As part of his employment contract, Jamie receives a base salary of $50,000 per annum plus 10% of the agency’s commission on sold properties where he has had a direct connection with the sale. He is also provided with a car, a Toyota Kluger costing $48,000. He is not required to contribute to the running costs of the car which total $13,500 per year and is allowed to use the car outside of work hours and on weekends.
Jamie’s salary package also includes a laptop which cost $2,300 and a mobile phone costing $1,200 per year. His employer also reimburses his annual professional subscription of $550 and provides him with an entertainment allowance of $2,000 per year.
Jamie was also lucky enough to achieve the highest sales for the previous six month period and was rewarded with a high tech home entertainment system worth $4,800.
‘Houses R Us’ also offer their staff loans of up to $100,000 towards purchasing their own house at a rate of 4% per annum. Jamie is considering taking up this offer to purchase his first home.
Required
Advise Jamie and ‘Houses R Us’ of the taxation and FBT consequences of these transactions. You are not required to calculate any FBT liability.(15 marks)
QUESTION 1 Notes
INTRODUCTION
- Introduction of the topic (CGT)
- CGT events generally
- How the tax is imposed
SALE OF SHOP
- No calculation needed, only description and amounts
- Distinction on sale of assets and goodwill
- Don’t exclude info it is past CGT event, does discount method apply and why, how long the asset was held for
RESTRICTIVE CONVENANT
- Refer to Dickenson v FC of T (1958) 98 CLR 460
- Is it income nature or capital nature
- Do discounts apply
SALE OF UNIT
- Event
- Market value
- Timing
- Market value
QUESTION 2 Notes
No calculation, descriptions only along with amounts to refer to.
INTRODUCTION
- Issues
- Income s 6-5
- FBT: s136(1), specific FBT
- Car
- Method of calculation (s7)
- Reimbursement: expense payment
- Loan FBT: s 16
- Highest sales: residual FBT
INCOME
- Refer to Dean & Anor v FC of T 97 ACT 4762
- Brent v FC of T 71 ACT 4195
FBT
- Car
- Reimbursement
- Loan
- Sales
I haven’t worked on this part detailed enough yet, so my notes are poorer here, would need an extra support.
NO CALCULATIONS REQUIRED! Only amounts to be referred to.
Assessment covers the following topics:
- Statuory income
- CGT
- Tax timing
- FBT
- Exempt income and non assessable non exempt income
- General deductions
- Statutory deductions
RATIONALE
| Identification of relevant legal issues | Correctly identifies all legal issues and formulates them clearly with consideration of all links to relevant law, with no errors. |
| Compliance with the Style Guide, tax computation format and overall structure. | Uses Style Guide comprehensively, accurately and consistently. Uses ILAC model and tax computation format. Extremely well structured and organised, with one main argument introduced per paragraph, supported by well-written supporting sentences. |
| Explanation of law and citation of relevant legal authority | Provides a complete explanation of the law, justified by relevant taxation law, with no errors. Discussion identifies key statute and case law stating relevant principles and shows insight in identification and discussion of potentially hidden issues. Research of relevant legal authority shows a breadth of investigation through detailed analysis, discussion and tax computation. |
| Application of legal principles to the facts and tax computation | Applies the law to the facts so as to reach a correct conclusion on all issues, with no errors. Argument discusses linkages between facts and the law and considers counter-arguments, completes tax computation correctly if required and evaluates the impacts of applying the law to the situation considering a broad range of factors that may affect the application. Conclusion draws together advice for client. |
| Written expression, calculation and editing. | Uses appropriate academic writing which is formal, impersonal and which contains no spelling, grammar, punctuation and calculation errors. Paper demonstrates careful proofreading. |
Also note the following style guide:
- Use the ILAC styleof essay writing for this assignment
- Do not re-state the question as part of your answer. This often gets repeated in the ‘issue’ section, however that is incorrect.
3. Use in-text referencing. Do not use footnotes.
4. Names of cases or statutes should be italicised, and followed by the jurisdiction not in italics, for example: Acts Interpretation Act 1901. Note the abbreviation for ‘Commonwealth’ is ‘Cth’ not ‘Cwlth’.
- Do not start a new line simply because you are starting a new sentence.
- Start each paragraph on a new line, and leave a clear line gap after the preceding paragraph. Don’t make your paragraphs too long.
- You must end your assignment with a bibliography that is divided into three separate parts, listing statutes, cases and books / articles / on-line Modules.
PLEASE NOTE THAT YOU WILL LOSE MARKS IF YOU DO NOT COMPLY WITH THIS STYLE GUIDE.
Prescribed Texts:
- Barkoczy, S. Foundations of Taxation Law 2018, (10th edition), Oxford University Press
This is my main resource
- Barkoczy, S. Core Tax Legislation & Study Guide 2018 (21st edition), Oxford University Press
- Barkcozy, S. Australian Tax Casebook 2018 (14th edition), Oxford University Press
Highly Recommended Texts:
- Australian Master Tax Guide 2018(62nd edition), CCH Australia
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