BLO2206 TAXATION LAW AND PRACTICE
ASSIGNMENT
SEMESTER 1 - 2015
INSTRUCTIONS TO STUDENTS
Length: Total word length should be approximately 2000 – 2,500 words. It is in the discretion of students the word length for each answer. ALL questions should be answered.
Marking: Mark allocation is set out for students in the introductory work notes. Students must refer to appropriate sections of legislation where applicable. Reference to cases should be made where there is a case that is important to the answer.
Due Date: To be handed in on WEDNESDAY 22 APRIL. Submission time is 5 pm. An electronic copy must be submitted through collaborate on the homepage of the website for this unit. The electronic copy will be taken as proof of submission and date and time of submission. A hard copy must also be placed in the assignment box at your campus. If you cannot upload your assignment to collaborate please email a copy to ian.henry@vu.edu.au by the due time and date.
Plagiarism A student who plagiarizes will have their assignment returned with a zero mark. Students should familiarize themselves with the university policy on plagiarism.
Note: Please do not place assignment answers in plastic sleeves.
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PART A
Michael Rage was a train driver. However, his real passion was photography. Michael owned an SLR digital camera and lenses worth $12,000. He spent a lot of his spare time looking for and taking exciting and unusual photographs. He particularly enjoyed taking photographs of people, and the night skies. He also owned a $5,000 telescope for the purpose of photographing the night sky.
Michael had set up a web page on which he placed some of his most spectacular photos. Michael was approached by NASA after having seen his web site. NASA asked Michael to join a team of other amateur photographers to photograph designated portions of the night sky. NASA agreed to contribute $3,000 per annum to the maintenance of his photographic equipment.
A regular science programme on TV did a special feature of Michael as a result of his invitation to be amongst a select few to help NASA. Also, Michael had established a strong following as a result of his web site. Because of these two factors request were often made of Michael by other photographers to teach them better photographic techniques generally and of astronomical bodies in particular. Michael was also often approached by people who wanted to take up photographer to teach them the basics of photography.
As a result of these requests Michael began running small classes for basic and advanced photography. Michael would run these classes once every month for beginners over 2 days, and once every month over 2 evenings, for 4 hours each evening, for those wishing to learn the technique of night sky photography. In fact Michael simply incorporated these classes into his usual photographic routine. Thus, on most Friday and Saturday evenings Michael would take photos of the evening sky. Now, every fourth Friday and Saturday he would also teach the art of photography. To help in his lessons Michael bought two new telescopes each worth $3,000, an overhead projector worth $3,500 and a computer worth $1,800 to help in the lessons he gave.
Michael charged the people who attended his classes $175. Each class was restricted to six people. He held ten classes a year for beginners and six classes a year for those wishing to learn how to photograph the night sky. In total Michael received $16,800 in fees.
The salary from train driving is clearly income. However, are the other amounts Michael received assessable income? You can assume all income was over a financial year.
15 marks
Part B
(i) Calculate tax payable in the following circumstance. Adrian was employed as a cleaner. He earned $45,000 from this job. He had no expenditure which could be classified as being for the purpose of generating his income form cleaning. However, he was also a keen gambler. For the current financial year he won $75,000, although he lost $10,000. Over the last three years he had won more than he lost at gambling.
(ii) Clara Lees cakes Pty Ltd manufactured biscuits and cakes. Many of the biscuits and cakes it made were actually brand names of overseas companies who did not want to set up in Australia. Clara Lees had agreements with these overseas companies to be the exclusive maker of the biscuits or cakes in Australia. Most of these agreements were for a 10 year period. It had about 25 of these agreements. Clara Lees also had its own ‘brand name’ biscuits and cakes. One overseas company it had an agreement with, which still had 8 years to run, decided to cancel its agreement with Clara Lees. It paid Clara Less $500,000 to obtain Clara Lees approval for canceling the agreement. How will the payment be taxed to Clara Lees. Fully explain your answer.
(iii) Roger Whiskey owned three hotels. He was approached by Carlingwood Breweries. The brewery agreed to pay Roger the sum of $50,000 every year for 5 years if Roger sold only those drinks manufactured by Carlingwood Breweries. Roger agreed. Is the $50,000 assessable to Roger? Fully explain your answer.
[3 x 5 marks = 15 marks]