LAWS7012 Business Taxation

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LAWS7012 Business Taxation

Semester 2, 2024
LEGAL HYPOTHETICAL ASSIGNMENT
WEIGHTING:
 30%
DUE DATE:
  Thursday, 10 October 2024 by 2pm
SUBMISSION:
 Online via the Turnitin link provided on the Learn.UQ website for this course.
PURPOSE:
The purpose of this assignment is to assess each student’s ability to conduct research into the relevant taxation issues while clearly demonstrating an appropriate understanding of the relevant issues and the applicable law.
These issues predominantly involve capital gains tax.
INSTRUCTIONS:
In relation to the provided facts and using the provided Word document Assignment Answer template, you are required to work through the 3-step CGT process covered in Topics 8 and 9 to calculate the taxpayer’s net capital gain for the 2023/24 income year. This will entail working through Steps 1 and 2 for each of the taxpayer’s CGT events, before using the resulting capital gain and/or capital losses to calculate the taxpayer’s net capital gain (Step 3). To clarify, the steps referred to are as follows:

Note that students are not permitted to use the ILAC format for their answers. Rather the format should follow that used for the scenario-based questions in the Lecture 9 slides and the Suggested Solutions to the Revision Questions for Seminars 6 and 7 where the 3-step CGT process is demonstrated. That is, clear and consistent formatting and appropriate headings should be used, explanations should be provided where necessary, full calculations should be shown, and all application needs to be backed up by reference to the specific law applied and/or tax rulings relied upon.

Note that submitted assignments must be of a professional standard. A professional presentation is word-processed and contains no spelling, grammatical, or formatting errors. Note too that given the assignment is of a legal hypothetical style, rather than a report or an essay, it should not contain a coversheet, table of contents, a reference list, or similar. 

MARKING GUIDE: The Course Profile provides that assignment will be graded according to the following criteria:
1. Correct identification of the relevant taxation issue(s).
2. Correct application of the relevant taxation laws.
3. Correct referencing of relevant legislation, case law and tax rulings.
4. Correct calculations of any required amounts.

The table below can be used as a guide as to what will be expected:

0-4 marks
 Answer demonstrates a fundamental misunderstanding of the taxation issues contained in this assignment and/or does not relate to the issues raised.
5-14 marks
 Answer is partially incomplete; it includes a partially correct approach to the taxation issues and could have been acceptable if the answer was completed. The answer also contains insufficient referencing to the relevant law and/or tax rulings. Where applicable, it contains substantial calculation errors.
15-24 marks
 Answer includes a correct interpretation of some of the relevant taxation issues. The answer mainly contains sufficient referencing to the relevant law and/or tax rulings. It contains some calculation errors.
25-29 marks
 Answer includes a correct interpretation of most of the relevant taxation issues. The answer contains sufficient referencing to the law and/or tax rulings. It contains minor calculation errors.
30 marks
 Answer includes a correct interpretation of all relevant taxation issues. The answer contains all pertinent referencing to the law and/or tax rulings. It contains no calculation errors.
NOTE:
This is an INDIVIDUAL assessment item. This means that students must work alone on all aspects of their assignment submissions, including but not limited to analysing the facts, conducting research, applying the law, and writing up their application. Collusion, being working with others, is a serious breach of the Academic Integrity standards and constitutes Academic Misconduct.

This assessment task evaluates student’s abilities, skills, and knowledge without the aid of Artificial Intelligence (AI). Students are advised that the use of AI technologies to develop responses is strictly prohibited and may constitute student misconduct under the Student Code of Conduct.

ASSIGNMENT FACTS
Anna Wilkins is 35 years old (she was born on 16 September 1989) and is an Australian resident for tax purposes. She is employed as a nurse. She is currently single and lives in a rented apartment in in Herston in Brisbane.

During the 2023/24 income year, Anna disposed of some property as outlined below.

TRANSACTION 1: FORTESCUE LTD SHARES

Anna’s great uncle, Jim, bequeathed her a parcel of shares, which Anna inherited on 25 September 2023 (the date of Jim’s death).

The details of the share portfolio that Jim bequeathed to Anna are as follows:
Company name: Fortescue Ltd
Number of shares: 5,000
Jim’s acquisition date: 28 October 2019
Jim’s purchase price: $9.53 per share plus $150 in brokerage fees
Market value* on 25 September 2023: $20.54 per share
Market value* on 18 April 2024: $23.84 per share
* Note that Anna did not incur any costs in obtaining the market value of these shares as she simply referred to the historical share prices data available online.

Anna did not receive the shares until 18 April 2024, which is when the Executor of her great uncle’s estate settled his estate. Anna was pleased that the value of the shares had risen since September 2023.

In May 2024, Anna decided to sell the parcel of shares as she would rather have the money than the shares. Hence, she entered into a contract on 6 May 2024 to sell the shares for $25.98 each.

Note that Anna paid $100 (including GST) in brokerage fees to sell the shares. The contract was settled on 8 May 2024.

TRANSACTION 2:
SALE OF A RESIDENTIAL PROPERTY IN JOONDALUP, WA

Anna signed a contract to purchase a 3-bedroom house on a 490m2 block of land in Joondalup (a suburb in Perth, Western Australia) for $455,000 on 14 January 2013. Anna also paid $15,627 in transfer (stamp) duty and $990 (including GST) in legal fees at the time of purchase. To help fund the purchase price of the house, Anna borrowed $360,000 from a bank under a 30-year loan term beginning on 20 February 2013. Note that in relation to this loan, Anna had to pay a loan establishment fee and a valuation fee (to obtain the loan approval). These fees totalled $1,000 (including GST).

Anna moved into the Joondalup property on the settlement date (20 February 2013) and continued to live there by herself until mid-2015 when she decided to take 18 months off work and travel around the world. To help fund the travel, Anna advertised the property for rent through the local real estate agents and secured tenants who signed an 18-month residential lease that commenced on 16 July 2015. Note that Anna moved out of the property the day prior to the tenants moving in, and placed all her furniture, appliances, and personal effects into storage.

Prior to her return to Australia, Anna renewed the lease on her Joondalup property to the existing tenants for another 6 months as she had met a fellow Australian overseas and decided to follow him back to his hometown of Cairns in Queensland. There, the pair resided in his sister’s home for 6 months before renting a house in which to live together. Anna continued to live in Cairns with her new partner for nearly another 5 years before amicably parting ways in 2022. Anna then took up a job offer at a hospital in Townsville and lived there in a rented apartment for 1 year before moving back to Perth and into her Joondalup property on 15 July 2023. All up, Anna ended up renting out her Joondalup property for around 8 years (from 16 July 2015 to 14 July 2023) during her absence from Perth.

Note too that at the time of first renting out her Joondalup house, Anna obtained the services of a professional valuer who advised her that the market value of her home in July 2015 was $565,000 and provided her with a quantity surveyor report specifying that the house was built in 1996 at an estimated construction cost of $110,000. The valuer charged Anna $250 (including GST) for the valuation and $330 (including GST) for the quantity surveyor report.

In 2024, Anna decided to sell her Joondalup home and move back to Queensland. Hence, Anna placed the Joondalup property on the market and sold it for $824,900 under a contract dated 10 May 2024, with the ownership transferring on 15 June 2024. Anna incurred the following costs in relation to the sale of the Joondalup property (all costs include GST):

• $4,250 in advertising costs
• $21,075 in sales commission (paid to the real estate agent)
• $1,425 in legal fees

During Anna’s total ownership period, she incurred the following expenses in relation to the Joondalup property (note that all expenses include GST where relevant):

Expense
 Period cost incurred
 Total amount
Period 1:
[20/02/2013 – 15/07/2015]
Period 2:
[16/07/2015 – 14/07/2023]
Period 3:
[15/07/2023 – 15/06/2024]
Interest payments
$34,792
$122,478
$14,785
$172,055
Property insurance premiums
$2,880
$10,400
$1,455
$14,735
Council rates
$12,050
$38,800
$4,550
$55,400
Repairs and maintenance
$462
$2,845
$217
$3,524
Capital improvements*
$0
$0
$33,900
$33,900

* The capital improvement referred to in the table above relates to a kitchen renovation undertaken in late 2023.

FURTHER INFORMATION:
• For the Joondalup property, you may assume that the stated purchase and sale prices are already exclusive of the value of the depreciating assets that come with the property.
• As of 1 July 2023, Anna has net capital losses carried forward as follows:
Net capital loss $4,751
Net capital loss (collectables) $825

REQUIRED:

Using the Word document answer template provided on Learn.UQ:

Calculate Anna’s net capital gain for the 2023/24 income year using the 3-step process as per the assignment instructions. Your answer should include all calculations, as well as all explanations and references to relevant legislative provisions and/or tax rulings.

Hint: You may wish to refer to the textbook or a practitioner’s manual such the Australian Master Tax Guide, The Australian Tax Handbook, or the Australian CGT Handbook for assistance with some of the issues. Note that these books are available online through the UQ Library.




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