LAWS20060 – TAXATION LAW OF AUSTRALIA
TERM 2 2018
Due date: Week 8 - Wednesday 5th September 2018
Weighting: 40% - 80 marks in total available
Length: 2500 – 3000 words
Submission: Online via Moodle
Format: One file in .doc or .docx (MS Word) format
This assessment item relates to learning outcomes 1, 2 and 3 as stated in the course profile.
This assignment is to be submitted in one (1) Word document only. This assignment is to be submitted online via Moodle by the due date stated. It is suggested that where necessary you put your calculations into columns or tables to improve readability in the assignment document
The method of referencing to be used in this assignment is the Australian Guide to Legal Citation (AGLC) 3rd Edition referencing method. Additional information regarding this method is available through the library and the Academic Learning Centre. When making a reference, cite the original source or authority in preference to a secondary source such as the textbook, especially when you are discussing various sections of legislation. This means you should make reference to legislation, cases and Tax Rulings as a priority to back up any arguments that you make in your assignment.
The university policy on extensions of time will be strictly enforced. Extensions will usually only be considered if made via the online system and based on medical or compassionate grounds. Any extension application should be made before the due date for submission. Medical conditions should be supported by a medical certificate, and, since students are expected to start the assignment early, temporary or last-minute conditions are usually not grounds for an extension. Professionals are expected to manage their time to meet their obligations, so work or personal commitments are insufficient grounds for an extension.
The university’s plagiarism policy will also be strictly enforced. If plagiarism is found, a minimum penalty is likely to be zero marks for the assignment. This assignment is the only assignment for this course, and it carries a weighting of 40% of the total assessment for the course.
While the assignment is largely based on material covered, you are free to research and seek advice as widely as you find necessary – there are no limitations as to sources. However, you must make sure that sources are appropriately referenced.
Students must complete all questions in the Assignment.
With reference to all questions - To support the analysis in your answers refer where appropriate to the ITAA97, ITAA36, Tax Rulings and/or case law.
a) What are the primary functions of taxation in Australia?
b) What does equity mean when discussing the design of a good tax system?
c) In what way does s4-15 Income Tax Assessment Act 1997 require you to work out your taxable income?
d) Briefly explain what a progressive tax system aims at achieving?
e) Which section of the Income Tax Assessment Act 1997 includes the value of allowances in assessable income?
f) What topic does Taxation Ruling TR 2004/15
g) Which two Divisions of the Income Tax Assessment Act 1997 provide deductions for capital expenditure?
h) What is the applicable tax rate for a taxpayer who has $80,000 of taxable income in 2017/18?
i) What sub-divisions of Income Tax Assessment Act 1997 list the provisions that treat amounts as Non Assessable Non Exempt income?
j) Tax Determination TD 2017/4 sets out the cents per kilometer rates for private use of motor vehicles for the FBT year starting 1 April 2017. What is the applicable rate for motor vehicles with an engine capacity over 2500cc.
(each question is worth 1 mark) Question 2
Martelle, is a designer, who came to Australia in November 2017 on an assignment creating colorful designs based on the vibrant colors of the Great Barrier Reef. The project is expected to take six and a half months. Martelle purchased a small boat so that she would be able to enjoy the islands she is using as inspiration for her designs and to take friends at weekends to the special locations she has discovered. Martelle’s salary is paid into the Australian bank account she opened when she arrived. Martelle intends to return to France, her country of domicile, and to her family when the contract is over. Her father has agreed to look after all her assets and investments for her while she is on assignment in Australia.
Martelle was hoping that she may be considered non-resident for Australian tax purposes and has come to you for advice.
Explain to Martelle the factors that the ATO will take into consideration and comment on her likely residency status. Explain the tax consequences of being classed a resident or not for tax purposes.
14 marks Question 3
Ellen, a web designer, earned the following amounts during the 2017/18-tax year.
• $9,000 per month, paid directly into her Westpac bank account.
• $425 interest on her Westpac bank account.
• $6,500 winnings as ‘Queensland Designer of the Year’.
• After winning ‘Queensland Designer of the Year’, her employer asked Ellen to sign a restrictive covenant saying that she would not start up in business on her own for one year, should her employment with them terminate. She received $10,000 upon signing the restrictive covenant.
• Ellen took out private health insurance for the last 60 days of the income tax year, costing her $500.
Assume Ellen is classified as an Australian resident for tax purposes.
Discuss the assessability of the above amounts with specific reference to legislation and case law where applicable. (8 marks)
Calculate Ellen’s net amount of income tax payable for the tax year ending 30 June 2018. (12 marks)
20 marks Question 4
Jennifer owns a hair dressing business. She purchases the following items for sole use in the hair dressing business:
• One special stand alone hairdryer on the 1st of July at a cost of
$8,000. It has an estimated life of seven years. (3 marks)
• A new computer software program, to manage her bookings and stock, with an effective life of three years costing $295. (2 marks)
• An Audi Q5 on the 1st July costing $85,000 with an estimated life of six years. (3 marks)
What amount is allowed as a deduction for the decline in value of the above items purchased during the current income year using both methods available?
8 marks Question 5
Julie is a very keen photographer and is considering setting up her own business. It has been a hobby of hers for many years but she now wants to take it more seriously.
Outline to Julie, the factors that she needs to take into consideration should she wish to ensure that her ‘new business’ is interpreted as such by the ATO. Use specific examples that relate to her photography business, reference to case law and any legislation.
8 marks Question 6
Chang runs his own marketing business. During the year he incurred the following expenses:
a) salary costs of $300,000.
b) salary costs of $4,000 for his son who did some graphic design work for him as he was studying graphic design at university. The work took approximately 9 hours to complete.
c) $900 on membership to the local bowls club where he entertains clients.
d) $2,000 on smart clothing that he considered necessary to portray the correct image to his clients.
e) $5,500 on meal expenses for his important clients.
f) Interest cost of $3,400 on a loan he took out to start up the business.
g) $3,000 in travelling from home to work.
h) $2,500 in telephone bills, of which he estimates 80% to be used for calling clients.
i) $6,000 on airfare and accommodation to a marketing conference.
j) $500 charged by his accountant to complete his tax return for the year.
Advise Change as to the deductibility of the above expenses. Ensure to make reference to relevant legislation. (each subsection is worth 2 marks)
Assessment criteria Evaluation Criteria
These criteria are a general guide as to the standard expected at the various levels. Characteristics indicative of the respective levels of achievement in the assignment are as follows. It is not necessarily the case that all these criteria will be met at a particular standard as there may be a superior performance on one of the criteria and not so satisfactory performance on another.
High distinction standard
• The answer is very well written and clearly expressed
• There is a demonstrated appreciation and understanding of the issues involved
• The answer is well structured and logically organised
• Demonstrated mastery of referencing system
• There is evidence of a comprehensive analysis of the issues
• Conclusions are backed by well-reasoned arguments demonstrating a detailed insight and analysis of issues
• Comprehensive coverage of all relevant issues
• References are made to the appropriated legislation for particular issues
• Statutory provisions are analysed and interpreted correctly
• The legislation is applied to the particular fact situation in a competent manner
• Consideration is given to the operation of the common law
• There may be consideration of issues not raised in the tutorials and answer guides
• The answer is well written and expressed
• The answer is structured and logical
• The issues have been reasonably well identified and appreciated
• There is correct use of referencing
• Issues have been analysed
• Reference is made to all appropriate legislation, although the analysis and interpretation is not as detailed and reasoned as for the high distinction standard
• The effect of the common law is considered
• There is a comprehensive coverage of the issues
• Occasional errors of law and legal reasoning may still be present
• The answer is generally well written and expressed
• The answer is structured and sequential
• Referencing is satisfactory
• Issues are identified and addressed
• There has been an attempt to analyse some of the issues
• The coverage of issues is reasonably comprehensive often with a good treatment and analysis of particular points
• Errors of law and incorrect reasoning may sometimes be present
• Statutory interpretation may require improvement
• Depth of treatment is often lacking in some of the issues
• The answer is able to be followed and understood
• The answer could perhaps be better organised and structured
• The referencing may need improvement
• Issues may need to be identified and addressed in more depth
• Analysis when present may be incorrect
• Some familiarity with the legislation and its application is demonstrated
• Sometimes the conclusions reached are simple
• There may be several errors of law
• There may be quantities of material of marginal relevance included in the answer
• The answer may be significantly short of the required length
• The written expression is poor and difficult to understand
• The answer is poorly organised
• There has been a failure to identify and address the issues in the question
• Referencing is generally inadequate
• There is a lack of familiarity with the legislation and its appropriate application
• The reasoning and application demonstrated is poor
• Frequently there is much irrelevant material
All parts of the assignment will be marked in accordance with the university’s Grades procedure (which can be accessed via the Course Profile). The following marking rubric incorporates that procedure.
MARKING RUBRIC GRADE MARK
GRADE - HD
MARK - 85%+
CRITERION Demonstrates proficiency in all the learning outcomes of the unit; work is well read or scholarly.
COMMENT: Here, the student will have done everything well and formulated their answer in a tight, efficient, thoroughly professional manner. Their explanations and arguments will have a strong logical flow and be convincing. Their research will be thorough.
GRADE - D
MARK - 75-84%
CRITERION Demonstrates awareness and understanding of deeper and less obvious aspects of the unit, such as ability to identify and debate critical issues or problems, ability to solve non-routine problems, ability to adapt and apply ideas to new situations. COMMENT: The student will demonstrate this by achieving all the outcomes for a Credit, but also some of the higher level standards for a High Distinction.
GRADE - C
MARK - 65-74%
CRITERION Demonstrates ability to use and apply fundamental concepts and skills of the unit, going beyond mere replication of content knowledge or skill to show understanding of key ideas, awareness of their relevance and some use of analytical skills.
COMMENT: Learning involves not only knowing principles or concepts but also the ability to apply them to a real-life situation.
GRADE - P
MARK - 50-64%
CRITERION Demonstrates the learning outcomes of the unit, such as knowledge of fundamental concepts and performance of basic skills; demonstrates sufficient quality of performance to be considered satisfactory or adequate or competent or capable in relation to the learning outcomes of the unit.
COMMENT: Students who get a mark in this range usually demonstrate some knowledge of principles and concepts, but do not explain or apply them accurately. Answers often look like little more than a summary of what someone else has written.
GRADE - F
MARK - 40-49%
CRITERION Fails to demonstrate the learning outcomes of the unit. COMMENT: Students in this range usually make some effort to perform the assignment task but fail to achieve what is prescribed for a Pass.
GRADE – Low F
MARK - 40%
CRITERION COMMENT: Students in this range usually fail to properly carry out the instructions or fully perform the tasks specified in the assessment.