LAWS7012 Business Taxation Assignment – Semester 1 2014

LAWS7012 | Business TaxationAssignment – Semester 1 | 2014Important Facts to Note1. The assignment is worth 40% of the assessment in this
course.2. The assignment has 2 questions.3. You must submit your assignment before 4.00pm on
Thursday, 17 April 2014.4. Students must submit their assignment electronically via
the Turnitin link [LAWS7012 |2014 – Semester 1] in the Assignment Submission folder in
the Assessment area of thecourse website in Blackboard. Online assignments do not
require a separate coversheet. Refer to documentation in the Assignment Submission
folder on the namingrequirements of the assignment file.5. There is no prescribed word limit for this assignment and
no penalties will be applied forstudents who exceed the suggested word limit. As a guide,
your assignment could becompleted in approximately 3,500 words.6. Students must retain a hard copy of their submitted work.7. Students need to be aware of and abide by the
university’s policy on plagiarism. Moredetailed information on this issue can be found in:a. UQ Student Integrity and Misconduct Policy?
http://ppl.app.uq.edu.au/content/3.60.04-student-integrity-and-misconductb. On-line Academic Integrity Tutorial?
https://www.uq.edu.au/integrity/Login.aspx?ReturnUrl=%25252fintegrityc. Law School Resource | Avoiding plagiarism
http://www.law.uq.edu.au/?page=1039278. Also, review Sections 5.3, 5.5 & 6.1 of the Course
Profile for information on assessmentprocedures. In particular, note:LAWS7012 Business Taxation |
Assignment | Semester 1 – 20142 | P a g eWhere a non-examination item of assessment (including
essays, assignments, take-home tests, etc.) isnot submitted by the due date and time, a penalty will be
levied at the rate of 10% of the marksavailable for the assessment item per day that the
assessment is overdue.Example: Where a piece of assessment is due at 4pm on
Monday, assessment submitted after 4pmMonday but before 4pm on Tuesday will receive a 10% penalty.Assessment submitted more than 5 days after the due date and
time will receive zero marks.Example: Where a piece of assessment is due at 4pm on the
10th, any work submitted after 4pm onthe 15th will receive zero marks.If the 5th day following the due date is a Saturday or a
Sunday, assessment will be accepted until 9amon the following Monday.Example: A piece of assessment is due at 4pm on Monday the
9th. In the normal course of events, toreceive any marks, a student must submit their assessment by
4pm on Saturday the 14th (the 5th dayfollowing the due date) at the latest. As the 5th day is a
Saturday, the student may submit anytime upto 9am on Monday the 16th.No extension granted may exceed 14 days.The Business Taxation Assignment examines a student’s
ability to conduct research intotaxation issues and to provide advice to a client. The
assignment will also examine anunderstanding of statutory income, in particular the capital
gains tax provisions of theIncome Tax Assessment Act 1997.Question 1 requires students to clearly identify the
relevant tax issues, reference allapplicable sections of the Income Tax Assessment Act 1936
and/or the Income TaxAssessment Act 1997, related tax cases and/or rulings of the
Australian Taxation Office. Asuggested format to answer Question 1 is the traditional
ILAC approach:-1. Identify the relevant issue(s)2. State the relevant law3. Apply the relevant law to the facts provided4. Reach a conclusion based on the application of the law to
the factsStudents can review past year examples of Business Taxation
assignments in the Assessmentfolder of the course website. These examples demonstrate
some of the better formats usedto present answers, however they do not necessarily contain
the correct answer.LAWS7012 Business Taxation | Assignment | Semester 1 – 20143 | P a g eQuestion 1 | 20 MarksYour client was born in Sydney on 23 June 1949 but completed
all his schooling anduniversity studies in Brisbane. Your client graduated from
the University of Queensland witha Bachelor of Commerce in 1970 and then worked as an
accountant for several majoraccounting firms, until he commenced employment as a
lecturer in accounting on 1 January1992 with the Queensland Institute of Technology, now the
Queensland University ofTechnology (QUT). After nearly 22 years employment with the
university your client isconsidering a change of career as QUT is currently offering
a generous early retirementpackage to academic staff at the university. Your client
would be eligible for a maximum 40weeks’ pay under QUT’s early retirement scheme and based on
your client’s current salary,their gross payment under this scheme is approximately
$140,000.QUT’s Human Resources area has advised your client of the
following information:1. Year to date gross salary paid as at 1 April 2014 =
$140,0002. Projected full year gross salary as at 30 June 2014 =
$160,0003. Unused Annual Leave = $5,0004. Unused Long Service Leave = $8,0005. If your client was to resign rather than accept early
retirement, they will only beentitled to payments relating to any unused annual leave and
long service leave.6. To be eligible to participate in the early retirement
scheme all relevant staff mustterminate their employment with the university on or before
4 July 2014.In addition to the above information you have ascertained
your client has been onuniversity approved study leave and long service leave since
early 2013, travelling aroundEurope and the Americas on a working holiday researching
material for a new Accountingand Finance textbook he is writing. He is currently in
Seville, Spain but will return toBrisbane if he decides to accept the early retirement offer
from the university.As part of your client’s research into their new textbook
they have participated in severalfinancial spread betting activities offered by a company
operating in Australia. This company LAWS7012 Business Taxation | Assignment |
Semester 1 – 20144 | P a g eholds an Australian Financial Service Licence. Since 1 July
2013, as a result of these bettingactivities, your client has managed to make a small profit
of $3,000.You have also ascertained your client received $2,000 in
royalties from Thomson Reuters,publishers of his current textbook on accounting and $1,000
in interest on a Term Depositwith the Commonwealth Bank. You do not anticipate your
client receiving any additionalincome other than that detailed above, between now and 30
June 2014.Based on all of the information provided determine which
receipts, if any, are assessableincome for your client. In particular, your client is
seeking your advice as to the taxationconsequences of participating in QUT’s Early Retirement
Scheme. Your answer shouldinclude exact dollar amounts and where applicable any
relevant rates of taxation that willbe applied to this income. Calculations of tax payable are
not required. Your answer shouldreference all applicable sections of the Income Tax
Assessment Act 1936 and/or the IncomeTax Assessment Act 1997, related cases and or rulings of the
Australian Taxation Office.LAWS7012 Business Taxation | Assignment | Semester 1
– 20145 | P a g eQuestion 2 | 20 MarksYour client is a wealthy investor and property owner. Your
client provides you withinformation (as detailed below) on various transactions
between 1 July 2013 and 30 June2014. Many of these transactions were undertaken to raise
funds for the purchase of a largeindustrial complex, which is to be finalised in October
2014.Your client seeks advice as to what amount(s), if any, must
be returned as assessableincome for the year ended 30 June 2014. In particular, you
are required to discuss thecapital gains tax consequences of these transactions and
determine your client’s net capitalgain or net capital loss, if any, for the year ended 30 June
2014.Your advice should include all calculations and references
to applicable sections of theIncome Tax Assessment Act 1997 and if applicable related
cases and or rulings of theAustralian Taxation Office.1 | Holiday House in Blue Mountains. On 3 June 2014 your
client signs a contract to selltheir holiday house in the Blue Mountains of New South Wales
for $400,000. Your clientacquired this property on 8 January 1991 for $100,000. The
property is used solely byyour client for holidays and family gatherings. They incur
$120,000 in local council ratesand land taxes during the period of ownership. The contract
of sale stipulates that adeposit of $40,000 is payable to your client when the
contract of sale is signed and thebalance is payable in three equal instalments on 3 September
2014, 3 December 2014and 3 March 2015. On 4 June 2014 your client incurs $3,400
in real estate agent fees inrespect of the sale of the house.2 | Rental Property | Your client purchased an investment
property for $520,000 inApril 2007. The property was rented during the entire period
of ownership through alocal real estate agency. Your client incurs the following
costs since purchasing theproperty:-a) $10,000 in stamp duty when acquiring the property.b) $3,000 in legal costs and search fees when acquiring the
property.c) $750 in repairs to lighting and plumbing.LAWS7012
Business Taxation | Assignment | Semester 1 – 20146 | P a g ed) $10,000 to the real estate agency to collect rent and
organise regularmaintenance of the property.e) $3,000 to the local council as a levy to have overhead
mains power convertedto underground power. This was the result of a joint state
government andlocal council project to remove power poles and power lines
from certainsuburbs in the local council area.f) $7,000 to construct a new concrete retaining wall on the
property to preventerosion.g) $1,500 to the local council for a fine for failing to
obtain the required councilapproval for construction of the retaining wall on the
property.In October 2012 your client was advised by the State
Government they intended toresume his investment property to make way for a new
transport corridor for buses.Your client incurs $7,000 in legal fees seeking advice about
his legal options to resistthe property resumption. In November 2013, after significant
negotiations betweenyour client, his legal representatives and the government,
it was agreed the propertywould be resumed for a price of $750,000. It was also agreed
that the governmentwould pay interest at a prescribed rate between the original
notified date of theresumption in 2012 until the date compensation is finally
paid. On April 2014 yourclient receives the $750,000 compensation payment and an
additional $20,000representing the agreed interest payment.3 | Land (#1) – Gold Coast Hinterland. In September 1984
your client purchased a 2hectare block of land in the Gold Coast hinterland at a cost
of $50,000. In July 2013 yourclient received approval from the Gold Cost City Council to
subdivide this land into two 1hectare blocks. The costs associated with obtaining this
approval and subsequent worksto subdivide the land amounted to $50,000. The titles to the
new subdivided blockswere registered on 15 April 2014. During your client’s
period of ownership of the landthey incurred $30,000 in council rates. Both blocks of land
went to auction in May 2014with one block selling for $300,000 and the other block for
$400,000. The auction coststotalled $7,000.LAWS7012 Business Taxation | Assignment |
Semester 1 – 20147 | P a g e3 | Land (#2) – Gold Coast Hinterland. Your client also
acquired an adjoining 5 hectareblock of land in November 2001 for $150,000. Your client
constructed a house on thisland during 2002 at a cost of $250,000 and used the house as
his main residence fromJanuary 2003. In July 2013 your client received approval
from the Gold Cost City Councilto subdivide the 5 hectares of land into four separate
blocks, a two hectare block onwhich his house and surrounding land were situated and three
1 hectare blocks. Thecosts associated with obtaining this approval and subsequent
works to subdivide theland amounted to $200,000. The titles to the new subdivided
blocks were registered on15 April 2014. During your client’s period of ownership of
the land they incurred $50,000in council rates. The three one hectare blocks of land went
to auction in May 2014 witheach block selling for $300,000. The auction costs totalled
$9,000.4 | Shares ABN Ltd. In June 2007 your client acquired 5,000
shares in ABN Ltd at a costof $15.00 each. On 31 May 2014 these shares were sold for
$16.00 each. Your clientincurred $1,500 in stamp duty on the purchase and $500 in
stockbroker’s fees on thesale. The company has paid no dividend since the shares were
purchased which was themajor reason for selling the shares. Your client borrowed
$50,000 to help fund thepurchase of these shares, incurring $6,000 in interest
between 2007 and 2014. The ATOhas advised that this interest cannot be claimed as a tax
deduction.5 | Inheritance. In June 2001 your client’s mother passed
away and her will bequeatheda family heirloom to your client. The item was a painting by
Australia’s prominentlandscape painter Arthur Boyd. Your client’s mother was a
close friend of Boyd and shetold her family Boyd gave her the painting in 1951. Your
client had the painting valuedby a local art gallery for insurance purposes when their
mother died. The valuationindicated the painting was worth $700,000. In December 2013
your client decided to giftthe painting to the Queensland Art Gallery under the
Cultural Gifts Program. Your clienthad the painting expertly examined for valuation purposes by
two approved valuersrecommended by the Gallery and the agreed average value of
the painting was$1,200,000. During your client’s period of ownership, they
paid $30,000 in insurance onthe painting and $1,000 to have the painting valued in 2001
and $9,000 to have it valuedin 2013.LAWS7012 Business Taxation | Assignment | Semester 1
– 20148 | P a g eAdditional information relevant to your client:? Your client also has a significant capital loss carried
forward from the 2011-2012 taxyear. These losses total $180,000 and relate to losses from
the sale of shares duringthe 2008 Global Financial Crisis.? You can assume your client is not an eligible Small
Business Entity. Therefore theSmall Business CGT concessions do not apply to any capital
gains made in the year ofincome.? You can also assume your client is not carrying on a
business in respect of any ofthese assets.LAWS7012 Business Taxation | Assignment |
Semester 1 – 20149 | P a g eMarking Guide for the AssignmentIn marking the assignment answers will be graded on the
criteria listed below.Submitted assignments must be of a professional standard.
When awarding a mark for eachquestion, consideration will be given to the standard of
presentation. A professionalpresentation contains no spelling, grammatical or formatting
errors.Assignments will be marked online and made available to
students before the end of thesemester.Question 1 | The general criteria for Question 1 are as
follows:0-1 Answer demonstrates a fundamental misunderstanding of
the taxation issuescontained in this assignment and does not answer the
questions asked.2-8 Answer is partially incomplete; it includes a correct
approach to the taxationissues and would be acceptable if the answer was completed.9-15 Answer includes a correct interpretation of some the relevant
taxation issues.The answer contains insufficient referencing to the relevant
provisions of theIncome Tax Assessment Acts, or the answer contains
insufficient identification ofany relevant cases and/or Australian Taxation Office
rulings.16-19 Answer includes a correct interpretation of most of
the taxation issues. Theanswer contains sufficient referencing to the relevant
provisions of the IncomeTax Assessment Acts and the answer contains some
identification of relevanttaxation cases and/or Australian Taxation Office rulings.20 Answer includes a correct interpretation of all of the
taxation issues. The answercontains all pertinent referencing to the relevant
provisions of the Income TaxAssessment Acts, relevant taxation cases and/or Australian
Taxation Officerulings.LAWS7012 Business Taxation | Assignment | Semester 1
– 201410 | P a g eQuestion 2 | The general criteria for each part Question 2
are as follows:0-1 Answer demonstrates a fundamental misunderstanding of
the taxation issuescontained in this assignment and does not answer the
questions asked.2-8 Answer is partially incomplete or it includes a
partially correct interpretation of thetaxation issues. Issues associated with capital gains tax
contain calculation errors.For example:? It fails to correctly calculate most of the relevant
capital gains and orcapital losses.? It fails to correctly calculate some of the relevant
capital gains and fails todetermine the correct overall net capital gain or capital
loss for the currenttax year.The answer only references some of the relevant sections of
the Income TaxAssessment Act. The answer contains insufficient
identification of any relevantcases and/or Australian Taxation Office rulings9-15 Answer includes a correct interpretation of some the
taxation issues. Issuesassociated with capital gains tax contain calculation
errors. For example:? It fails to correctly calculate some of the relevant
capital gains and orcapital losses but uses the correct approach to calculate an
overall netcapital gain or capital loss for the current tax year.The answer also references most of the relevant sections of
the Income TaxAssessment Act. The answer contains identification of some
relevant cases and/orAustralian Taxation Office rulings16-19 Answer includes a correct interpretation of most of
the taxation issues. Issuesassociated with capital gains tax contain minor calculation
errors. For example:? It correctly calculates all of the relevant capital gains
and or capital lossesbut fails to correctly calculate the overall net capital
gain or capital loss forthe current tax year.? It fails to correctly calculate one of the relevant
capital gains and or capitallosses, however it uses the correct approach to calculate an
overall netcapital gain or capital loss for the current tax year.The answer also references all or most of the relevant
sections of the Income TaxAssessment Act. The answer contains identification of most
of the relevant casesand/or Australian Taxation Office rulings.20 Answer includes a correct interpretation of all of the
taxation issues. Issuesassociated with capital gains tax correctly calculate all of
the relevant capital gainsand or capital losses. It determines the correct overall net
capital gain or capitalloss for the current tax year.The answer also references all the relevant sections of the
Income Tax AssessmentAct. The answer contains identification of all of the
relevant cases and/or
Australian Taxation Office rulings.
Important Facts to Note
1. The assignment is worth 40% of the assessment in this
course.
2. The assignment has 2 questions.
3. You must submit your assignment before 4.00pm on
Thursday, 17 April 2014.
4. Students must submit their assignment electronically via
the Turnitin link [LAWS7012 |
2014 – Semester 1] in the Assignment Submission folder in
the Assessment area of the
course website in Blackboard. Online assignments do not
require a separate cover
sheet. Refer to documentation in the Assignment Submission
folder on the naming
requirements of the assignment file.
5. There is no prescribed word limit for this assignment and
no penalties will be applied for
students who exceed the suggested word limit. As a guide,
your assignment could be
completed in approximately 3,500 words.
6. Students must retain a hard copy of their submitted work.
7. Students need to be aware of and abide by the
university’s policy on plagiarism. More
detailed information on this issue can be found in:
a. UQ Student Integrity and Misconduct Policy
?
http://ppl.app.uq.edu.au/content/3.60.04-student-integrity-and-misconduct
b. On-line Academic Integrity Tutorial
?
https://www.uq.edu.au/integrity/Login.aspx?ReturnUrl=%25252fintegrity
c. Law School Resource | Avoiding plagiarism
http://www.law.uq.edu.au/?page=103927
8. Also, review Sections 5.3, 5.5 & 6.1 of the Course
Profile for information on assessment
procedures. In particular, note:LAWS7012 Business Taxation |
Assignment | Semester 1 – 2014
2 | P a g e
Where a non-examination item of assessment (including
essays, assignments, take-home tests, etc.) is
not submitted by the due date and time, a penalty will be
levied at the rate of 10% of the marks
available for the assessment item per day that the
assessment is overdue.
Example: Where a piece of assessment is due at 4pm on
Monday, assessment submitted after 4pm
Monday but before 4pm on Tuesday will receive a 10% penalty.
Assessment submitted more than 5 days after the due date and
time will receive zero marks.
Example: Where a piece of assessment is due at 4pm on the
10th, any work submitted after 4pm on
the 15th will receive zero marks.
If the 5th day following the due date is a Saturday or a
Sunday, assessment will be accepted until 9am
on the following Monday.
Example: A piece of assessment is due at 4pm on Monday the
9th
. In the normal course of events, to
receive any marks, a student must submit their assessment by
4pm on Saturday the 14th (the 5th day
following the due date) at the latest. As the 5th day is a
Saturday, the student may submit anytime up
to 9am on Monday the 16th
.
No extension granted may exceed 14 days.
The Business Taxation Assignment examines a student’s
ability to conduct research into
taxation issues and to provide advice to a client. The
assignment will also examine an
understanding of statutory income, in particular the capital
gains tax provisions of the
Income Tax Assessment Act 1997.
Question 1 requires students to clearly identify the
relevant tax issues, reference all
applicable sections of the Income Tax Assessment Act 1936
and/or the Income Tax
Assessment Act 1997, related tax cases and/or rulings of the
Australian Taxation Office. A
suggested format to answer Question 1 is the traditional
ILAC approach:-
1. Identify the relevant issue(s)
2. State the relevant law
3. Apply the relevant law to the facts provided
4. Reach a conclusion based on the application of the law to
the facts
Students can review past year examples of Business Taxation
assignments in the Assessment
folder of the course website. These examples demonstrate
some of the better formats used
to present answers, however they do not necessarily contain
the correct answer.LAWS7012 Business Taxation | Assignment | Semester 1 – 2014
3 | P a g e
Question 1 | 20 Marks
Your client was born in Sydney on 23 June 1949 but completed
all his schooling and
university studies in Brisbane. Your client graduated from
the University of Queensland with
a Bachelor of Commerce in 1970 and then worked as an
accountant for several major
accounting firms, until he commenced employment as a
lecturer in accounting on 1 January
1992 with the Queensland Institute of Technology, now the
Queensland University of
Technology (QUT). After nearly 22 years employment with the
university your client is
considering a change of career as QUT is currently offering
a generous early retirement
package to academic staff at the university. Your client
would be eligible for a maximum 40
weeks’ pay under QUT’s early retirement scheme and based on
your client’s current salary,
their gross payment under this scheme is approximately
$140,000.
QUT’s Human Resources area has advised your client of the
following information:
1. Year to date gross salary paid as at 1 April 2014 =
$140,000
2. Projected full year gross salary as at 30 June 2014 =
$160,000
3. Unused Annual Leave = $5,000
4. Unused Long Service Leave = $8,000
5. If your client was to resign rather than accept early
retirement, they will only be
entitled to payments relating to any unused annual leave and
long service leave.
6. To be eligible to participate in the early retirement
scheme all relevant staff must
terminate their employment with the university on or before
4 July 2014.
In addition to the above information you have ascertained
your client has been on
university approved study leave and long service leave since
early 2013, travelling around
Europe and the Americas on a working holiday researching
material for a new Accounting
and Finance textbook he is writing. He is currently in
Seville, Spain but will return to
Brisbane if he decides to accept the early retirement offer
from the university.
As part of your client’s research into their new textbook
they have participated in several
financial spread betting activities offered by a company
operating in Australia. This company LAWS7012 Business Taxation | Assignment |
Semester 1 – 2014
4 | P a g e
holds an Australian Financial Service Licence. Since 1 July
2013, as a result of these betting
activities, your client has managed to make a small profit
of $3,000.
You have also ascertained your client received $2,000 in
royalties from Thomson Reuters,
publishers of his current textbook on accounting and $1,000
in interest on a Term Deposit
with the Commonwealth Bank. You do not anticipate your
client receiving any additional
income other than that detailed above, between now and 30
June 2014.
Based on all of the information provided determine which
receipts, if any, are assessable
income for your client. In particular, your client is
seeking your advice as to the taxation
consequences of participating in QUT’s Early Retirement
Scheme. Your answer should
include exact dollar amounts and where applicable any
relevant rates of taxation that will
be applied to this income. Calculations of tax payable are
not required. Your answer should
reference all applicable sections of the Income Tax
Assessment Act 1936 and/or the Income
Tax Assessment Act 1997, related cases and or rulings of the
Australian Taxation Office.LAWS7012 Business Taxation | Assignment | Semester 1
– 2014
5 | P a g e
Question 2 | 20 Marks
Your client is a wealthy investor and property owner. Your
client provides you with
information (as detailed below) on various transactions
between 1 July 2013 and 30 June
2014. Many of these transactions were undertaken to raise
funds for the purchase of a large
industrial complex, which is to be finalised in October
2014.
Your client seeks advice as to what amount(s), if any, must
be returned as assessable
income for the year ended 30 June 2014. In particular, you
are required to discuss the
capital gains tax consequences of these transactions and
determine your client’s net capital
gain or net capital loss, if any, for the year ended 30 June
2014.
Your advice should include all calculations and references
to applicable sections of the
Income Tax Assessment Act 1997 and if applicable related
cases and or rulings of the
Australian Taxation Office.
1 | Holiday House in Blue Mountains. On 3 June 2014 your
client signs a contract to sell
their holiday house in the Blue Mountains of New South Wales
for $400,000. Your client
acquired this property on 8 January 1991 for $100,000. The
property is used solely by
your client for holidays and family gatherings. They incur
$120,000 in local council rates
and land taxes during the period of ownership. The contract
of sale stipulates that a
deposit of $40,000 is payable to your client when the
contract of sale is signed and the
balance is payable in three equal instalments on 3 September
2014, 3 December 2014
and 3 March 2015. On 4 June 2014 your client incurs $3,400
in real estate agent fees in
respect of the sale of the house.
2 | Rental Property | Your client purchased an investment
property for $520,000 in
April 2007. The property was rented during the entire period
of ownership through a
local real estate agency. Your client incurs the following
costs since purchasing the
property:-
a) $10,000 in stamp duty when acquiring the property.
b) $3,000 in legal costs and search fees when acquiring the
property.
c) $750 in repairs to lighting and plumbing.LAWS7012
Business Taxation | Assignment | Semester 1 – 2014
6 | P a g e
d) $10,000 to the real estate agency to collect rent and
organise regular
maintenance of the property.
e) $3,000 to the local council as a levy to have overhead
mains power converted
to underground power. This was the result of a joint state
government and
local council project to remove power poles and power lines
from certain
suburbs in the local council area.
f) $7,000 to construct a new concrete retaining wall on the
property to prevent
erosion.
g) $1,500 to the local council for a fine for failing to
obtain the required council
approval for construction of the retaining wall on the
property.
In October 2012 your client was advised by the State
Government they intended to
resume his investment property to make way for a new
transport corridor for buses.
Your client incurs $7,000 in legal fees seeking advice about
his legal options to resist
the property resumption. In November 2013, after significant
negotiations between
your client, his legal representatives and the government,
it was agreed the property
would be resumed for a price of $750,000. It was also agreed
that the government
would pay interest at a prescribed rate between the original
notified date of the
resumption in 2012 until the date compensation is finally
paid. On April 2014 your
client receives the $750,000 compensation payment and an
additional $20,000
representing the agreed interest payment.
3 | Land (#1) – Gold Coast Hinterland. In September 1984
your client purchased a 2
hectare block of land in the Gold Coast hinterland at a cost
of $50,000. In July 2013 your
client received approval from the Gold Cost City Council to
subdivide this land into two 1
hectare blocks. The costs associated with obtaining this
approval and subsequent works
to subdivide the land amounted to $50,000. The titles to the
new subdivided blocks
were registered on 15 April 2014. During your client’s
period of ownership of the land
they incurred $30,000 in council rates. Both blocks of land
went to auction in May 2014
with one block selling for $300,000 and the other block for
$400,000. The auction costs
totalled $7,000.LAWS7012 Business Taxation | Assignment |
Semester 1 – 2014
7 | P a g e
3 | Land (#2) – Gold Coast Hinterland. Your client also
acquired an adjoining 5 hectare
block of land in November 2001 for $150,000. Your client
constructed a house on this
land during 2002 at a cost of $250,000 and used the house as
his main residence from
January 2003. In July 2013 your client received approval
from the Gold Cost City Council
to subdivide the 5 hectares of land into four separate
blocks, a two hectare block on
which his house and surrounding land were situated and three
1 hectare blocks. The
costs associated with obtaining this approval and subsequent
works to subdivide the
land amounted to $200,000. The titles to the new subdivided
blocks were registered on
15 April 2014. During your client’s period of ownership of
the land they incurred $50,000
in council rates. The three one hectare blocks of land went
to auction in May 2014 with
each block selling for $300,000. The auction costs totalled
$9,000.
4 | Shares ABN Ltd. In June 2007 your client acquired 5,000
shares in ABN Ltd at a cost
of $15.00 each. On 31 May 2014 these shares were sold for
$16.00 each. Your client
incurred $1,500 in stamp duty on the purchase and $500 in
stockbroker’s fees on the
sale. The company has paid no dividend since the shares were
purchased which was the
major reason for selling the shares. Your client borrowed
$50,000 to help fund the
purchase of these shares, incurring $6,000 in interest
between 2007 and 2014. The ATO
has advised that this interest cannot be claimed as a tax
deduction.
5 | Inheritance. In June 2001 your client’s mother passed
away and her will bequeathed
a family heirloom to your client. The item was a painting by
Australia’s prominent
landscape painter Arthur Boyd. Your client’s mother was a
close friend of Boyd and she
told her family Boyd gave her the painting in 1951. Your
client had the painting valued
by a local art gallery for insurance purposes when their
mother died. The valuation
indicated the painting was worth $700,000. In December 2013
your client decided to gift
the painting to the Queensland Art Gallery under the
Cultural Gifts Program. Your client
had the painting expertly examined for valuation purposes by
two approved valuers
recommended by the Gallery and the agreed average value of
the painting was
$1,200,000. During your client’s peri