ASSESSMENT 2 BRIEF
Subject Code and Title LAW 6001 Taxation Law
Assessment Assessment 2: Case Study (Individual Taxpayer)
Length (2000 Words +/- 10%)
Learning Outcomes c) Effectively apply taxation law in determining the tax outcome in various client’s scenarios
d) Critically assess differences between the tax treatment of individuals, partnerships, companies and trusts and evaluate the effectiveness of each structure in meeting various client needs.
e) Analyse, evaluate and recommend taxation strategies to develop comprehensive solutions in order to maximise client financial outcomes.
f) Research, interpret and effectively communicate complex taxation concepts and recommended taxation strategies to clients in an industry compliant format.
Submission By 11:55pm AEST/AEDT Sunday of Week 7 (Module 4.1)
Total Marks 100 Marks
This assessment assesses your research skills, your ability to synthesise an original piece of work to specific content requirements and your ability to produce a comprehensible piece of advice while addressing the client’s needs.
It also assesses your written communication skills. The ability to deliver to a brief is an essential skill in the workplace. Clients often approach advisors seeking solution to a combination of scenarios, including advice on the tax implications of a particular arrangement within the Australian tax jurisdiction. It is therefore important to be able to identify all the issues presented by an arrangement and to think about the potential consequences of different approaches to addressing the client’s needs.
• You will be expected to identify and discuss tax implications of the various issues raised.
• In the case study, the taxpayer’s assessable income, allowable deductions must be identified and recorded in the Excel Workbook (2019 Individual Tax Return) where applicable (only blue coloured cells are required to be filled) as per the information provided in the case study.
• In addition, a report (Word document, approx. 2,000 words) must be submitted, summarizing all the calculations of the assessable income; allowable deductions and taxable income of the
taxpayer including identifying and discussing them. E.g., how the amounts of income & deductions have been derived. If any receipts and payments are not assessable or deductible, the reasoning for non-inclusion of these in assessable income or deductions as per relevant legislation or cases should be provided.
• Critically analyse the following case study.
With respect to each task:
• Review relevant case law and legislation (ITAA1936, ITAA1997)
• Apply the law to the facts of the case study
• Reach a conclusion/ give practical advice to your client.
• You will be assessed in accordance with the Assessment Rubric.
• This case study must be presented as an individual effort. The case study requires individual research. It is expected the student will research relevant literature, including decided cases, and select appropriate additional resources.
• Your case study is not just a list of answers. The reasons for your conclusions and recommendations must be based on your research into the relevant cases and legislation.
• The format of the report should be a business report, using APA referencing style.
• You are expected to submit both files: Individual Tax Return Excel file, Business report in the Word format
Case Study: Comprehensive Individual Tax Return
Eric Zhang, a resident taxpayer aged 59, runs a sole trading business selling imported food items. His business is registered for GST. He also works on a casual basis as an import/export agent for Blue Marlin Pty Ltd (ABN: 89 125 678 968). He has a rental property in Lakemba, Sydney. Eric is taking care of his wife Linda Wang, who has lost the eye sight in her left eye 9 months ago, on the 1st of October 2018 as a result of a car accident. Eric is solely taking care of Linda.
Name: Eric Zhang
TFN: 300 001 000
Date of Birth: 15 July 1974
Address: 23 Market Street, Newtown NSW 2200
Contact: 0456 587 987 (Work: 02 9578 3648)
Bank account: BSB 225887 Account 378458
Eric is not covered by a private hospital cover.
Spouse: Linda Wang
Date of Birth: 30 July 1989
Currently receives disability pension from Centrelink $9,200 for the 2019 tax year. She has no deductions to claim for the 2019 tax year.
Eric and Linda have a joint term deposit account at ANZ. Total interest received from the joint account was $500 for the 2019 financial year.
Eric has paid $400 to a registered tax agent for preparing his tax return for 2018 tax year.
In addition to the above, the following information relates to his employment (Part A), business income/expenses (Part B) and rental receipts/payments (Part C). All expenses have been substantiated unless it states otherwise.
Part A: Regarding his employment
Employer: Blue Marlin Pty Ltd (ABN: 11 235 365 874)
Gross wages for the 1st of July 2018 to the 30th of June 2019: $7,800 (PAYG withheld: $200)
He also received $2,000 shift allowance and $800 reimbursement for work related software fees from his employer.
Eric received a car from employer as a fringe benefit (showing as reportable in his PAYG summary, valued $60,000 not exempt from FBT)
Work related allowable deductions to claim (telephone & stationery) $300
Part B: Regarding his Business
During the year, Eric has had the following transactions in relation to sales, purchases, and inventory (trading stock. Eric did not choose the Small Business Entity option.
Cash received from accounts receivable for credit sales $85,000
Cash paid to accounts payable for purchases of trading stock $43,000
Inventory (trading stock) on 1 July 2018 $7,100
Inventory (trading stock) on 30 June 2019
- at cost $8,400
- at market selling $8,600
- at replacement $8,500
The closing stock values include $5,000 worth stock in transit from overseas paid for and owned but not received until the 15th of July 2019.
Eric has taken home some food items from the stock purchased for consumption by his family at total value of $2,500.
Ledger balances were as follows (GST inclusive)
1 July 2018 30 June 2019
Accounts receivable $17,600 $19,800
Accounts payable $5,280 $5,830
Additional cash receipts included:
• Volume rebates from overseas suppliers $3,500
• Insurance recovery from the insurance company due to extensive damage caused by a hailstorm and included
- Compensation for loss of income $7,900
- Repairs carried out on shop caused by storm damage $2,700
- Medical costs incurred by Eric form injuries $900
• Capital contributed by Eric to expand the business $10,000
Cash payments included:
• Cash Drawings by Eric $3,000
• Fines for breach of Australian Customers regulations $900
• Net wages to employees $12,000
• PAYG withheld from employees and paid to the ATO $2,900
• Superannuation for employees $1,230
• Superannuation guarantee charge $190
• Fringe benefit tax $850
• Lease payments on shop fittings and plant equipment $940
• PAYG instalments for Eric's personal tax commitments $2,500
• Fee for maintenance of computer systems -
Covering the period 1/4/2019 to 30/9/2019 $1,680
• Other tax deductible operating expenses $9,200
• Decline in value (see note 1) $ ?
Other information regarding Eric’s Business
Note 1) Eric uses plant and equipment in his business as follows.
Eric wishes a maximum deduction for 2018/19 tax year. Ignore SBE concession. You must show
clearly decline value to claim this year and closing adjustable value balance of the each asset in the word report.
Assets Cost ($) Purchase date Effective life Adjustable vale (30/6/2018) Business usage DIV method
Mobile phone 3,000 1/6/2017 4 years 2,188 60% Diminishing Value
Furniture 15,000 1/6/2017 10 years 13,375 100% Prime Cost
Laptop Computer 4,000 1/8/2018 3 years 100%
Printer 150 1/3/2019 2 years 100%
Part C: Regarding his Rental property
Eric purchased a house as a residential investment property on the 1st of July 2018. Purchase price of the property was $300,000 comprised of the following payments. All amounts include GST where applicable.
• Land and buildings $276,800
• Depreciable assets adjustable value on the 1st of July 2018 (See Note 1)
- Carpets $5,000
- Hot water system electric $1,200
- Ceiling fans $1,600
- Barbecue (fixed) $1,400
- Window blinds internal $8,000
- Window curtains $6,000
The previous owner provided a statement to Eric certifying that the property was constructed and completed on the 1st of January 1990 at a construction cost of $100,000. The house was in good condition except that the outside walls required complete repair.
Eric recorded the following receipts and payments for the 2018/19 tax year in respect of the rental property:
Rent received (net of agent commission withheld $1,250) by 28 June 2019 $23,750
Compensation from Rental bond board for tenants who left and
did not pay the rent they owed (see note 2) $1,300
Rent in advance from new tenants on 29 June for the period 1 July to 30 July 2019 $3,000
Insurance recovery for storm damage to roof $2,100
Mortgage repayments to Westpac Bank - principal $4,500
- interest $23,800
Loan application fees to Westpac Bank for a 10-year mortgage loan
to buy the house - paid on approval of the loan 1 July 2018 $825
Council & Water rates $3,400
Building Insurance premium $850
Payment to solicitors - for lease preparation fees $150
- to eject tenants for non-payment of rent $375
Repairs - to paint the outside walls of the house, carried out on 10 July 2018 $1,100
Construction costs of brick room to store garbage bins
and gardening equipment, carried out on 1 May 2019 $6,000
Garden hose and attachments $165
Travel costs to the rental property for inspections (see Note 3) $830
Pest control costs to eliminate cockroach infestation $280
Payment to a registered tax agent - preparing 2017/18 tax return $170
Payments to the Australian Taxation Office
- Additional tax on an amended assessment $400
- Fine for the late lodgement of 2017/18 tax return $760
Note 1) Eric will use the Commissioners estimate of effective life for calculation decline in value which can be found under “Residential Property Operators”.
Note 2) The rental bond board were only able to pay part of the money owed by the tenants. A further amount of $650 is outstanding. Eric is attempting to recover this amount by legal means.
Note 3) Eric lives in Sydney, he took a flight to Brisbane to inspect the property and meet with the real estate agents and tenants.
Eric wishes to minimise his income tax for 2018/19. Calculate Eric's taxable income for 2018/19. You are required to enter income and deduction details where applicable in the tax return form provided in the excel sheet.
Submit all workings of EACH income & deductions of calculations and any tax offsets available for Eric in a word format (written report) including relevant section numbers as per ITAA36/ITAA97.
In your report, clearly advise whether Eric is eligible to claim a dependant tax offset (invalid and invalid carer tax offset).
End of Assessment 2
Learning Rubric: Assessment 2 Case Study (Individual)
Assessment Criteria Fail (Unacceptable) 0-49% Pass (Functional) 50-64% Credit (Proficient) 65-74% Distinction (Advanced) 75 -84% High Distinction (Exceptional) 85-100%
Knowledge and understanding (technical and theoretical knowledge)
40% Limited understanding of required concepts and knowledge
Key components of the assignment are not addressed. Knowledge or understanding of the field or discipline.
Resembles a recall or summary of key ideas.
Often confuses assertion of personal opinion with information substantiated by evidence from the research/course materials. Thorough knowledge or understanding of the field or discipline/s. Supports personal opinion and information substantiated by evidence from the research/course materials.
Demonstrates a capacity to explain and apply relevant concepts. Highly developed understanding of the field or discipline/s.
Discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading.
Well demonstrated capacity to explain and apply relevant concepts. A sophisticated understanding of the field or discipline/s.
Systematically and critically discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading.
Mastery of concepts and application to new situations/further learning.
Evaluation of information selected to support the case study
45% Limited understanding of key concepts required to support the case study.
Confuses logic and emotion. Information taken from reliable sources but without a coherent analysis or synthesis.
Viewpoints of experts are taken as fact with little questioning. Resembles a recall or summary of key ideas.
Often conflates/confuses assertion of personal opinion with information substantiated by evidence from the research/course materials.
Analysis and evaluation do not reflect expert judgement, intellectual Supports personal opinion and information substantiated by evidence from the research/course materials.
Demonstrates a capacity to explain and apply relevant concepts.
Identify logical flaws. Discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading.
Well demonstrated capacity to explain and apply relevant concepts.
Viewpoint of experts are subject to questioning. Systematically and critically discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading.
Information is taken from sources with a high level of interpretation/evaluation to
The response shows a complete lack of understanding of the case, its context and application of tax law in regards to decline in value, trading stock, GST, accrual basis in taxation in an business environment; and other investment related income & deductions. independence, rigor and adaptability.
The response shows some understanding of the case, its context and application of tax law in regards to decline in value, trading stock, GST, accrual basis in taxation in an business environment; and other investment related income & deductions. Questions viewpoints of experts.
Shows a good understanding of the case, its context and application of tax law in regards to decline in value, trading stock, GST, accrual basis in taxation in an business environment; and other investment related income & deductions. Analysis and evaluation reflect growing judgement, intellectual independence, rigor and adaptability.
Shows a great understanding of the case, its context and application of tax law in regards to decline in value, trading stock, GST, accrual basis in taxation in an business environment; and other investment related income & deductions. develop a comprehensive critical analysis or synthesis.
Identifies gaps in knowledge.
Exhibits intellectual independence, rigor, good judgement and adaptability.
Shows excellent understanding of the case, its context and application of tax law in regards to decline in value, trading stock, GST, accrual basis in taxation in an business environment; and other investment related income & deductions.
Effective communication while giving advices to client
5% Difficult to understand for audience, no logical/clear structure, poor flow of ideas, argument lacks supporting evidence.
Line of reasoning cannot be followed in regards to deductions claimed for the client. Information, arguments and evidence are presented in a way that is not always clear and logical.
Line of reasoning is often difficult to follow in regards to deductions claimed for the client. Information, arguments and evidence are well presented, mostly clear flow of ideas and arguments.
Line of reasoning is easy to follow in regards to deductions claimed for the client. Information, arguments and evidence are very well presented; the presentation is logical, clear and well supported by evidence.
Great line of reasoning and analysis has been performed in regards to deductions claimed for the client. Expertly presented; the presentation is logical, persuasive, and well supported by evidence, demonstrating a clear flow of ideas and arguments.
Excellent line of reasoning and detailed analysis has been performed in regards to deductions claimed for the client.
Correct citation of key resources and evidence
10% Demonstrates inconsistent use of good quality, credible and relevant resources to support and develop ideas. Demonstrates use of credible and relevant resources to support and develop ideas, but these are not always explicit or well developed. Demonstrates use of high quality, credible and relevant resources to support and develop ideas. Demonstrates use of good quality, credible and relevant resources to support and develop arguments and statements. Shows evidence of wide scope within the Demonstrates use of high- quality, credible and relevant resources to support and develop arguments and position statements. Shows evidence of wide scope within
Demonstrates no section numbers or incorrect section numbers per ITAA1936 and ITAA1997. Demonstrates some section numbers per ITAA1936 and ITAA1997 with some errors.
organisation for sourcing evidence.
Demonstrates more than enough correct section numbers per ITAA1936 and ITAA1997. and without the organisation for sourcing evidence.
Demonstrates sufficient correct section numbers per ITAA1936 and ITAA1997.