Assignment format and referencing: Assignment must be answered in an essay format, using academic formal language. Avoid colloquial language and spelling, grammatical and typographical errors.
Repeated errors of this kind will be penalised. All consulted/cited materials must be referenced.
You may choose either Harvard or Australian Guide to Legal Citation (AGLC) styles. For tips regarding referencing please refer to:
https://www.latrobe.edu.au/learning/referencing.html. For tips on acknowledgement, referencing and plagiarism please refer to:
https://www.latrobe.edu.au/learning/referencing.html.
Assessment criteria: Assignments will be assessed against the SILOs for the assessment. In particular, assignments will be assessed based on objective demonstration of the following:
- Engagement of critical thinking and interpretation skills to correctly identify the issues to be analysed in the case study.
- Application of critical thinking, interpretation and analytical skills to develop a meaningful analysis of the issue(s) previously identified on each question, with detailed and analytical application of tax concepts, tax principles, legislation and case law. Mere repetition of question facts, citation or transcription of theory, concepts, legislation and case law without proper application will not attract any marks.
- Elaboration of a meaningful solution to each question; the solution must be logically derived from the factors analysed in the body of the essay.
Please refer to Grades Table available at the SLG for details of the expected elements/achievement level of each grade band.
Graduate capabilities assessed in this assignment:
- Writing - Writing skills are assessed based on the quality of the arguments presented, marks are attributed where student presents a well organised essay written in academic English, with logically sequenced and coherent paragraphs and proper application of legislation and case law. A good essay must be clear, objective, and easily understandable, and must provide a conclusion that is logically derived from the arguments presented. Essays whose paragraphs are not logically organised, with tautological arguments and poor syntax will receive less marks depending on the quality of the work presented.
- Cultural Literacy - Cultural literacy is assessed based on the demonstrated capacity to correctly interpret question facts with reference to Business/Accounting concepts and general knowledge expected from final year master students.
- Critical Thinking / Creative Problem-Solving / Inquiry / Research - Critical thinking/Creative Problem Solving skills are assessed based on the student's demonstrated capacity to make reasonable, justifiable and original assumptions leading to a correct and coherent conclusion grounded on legal provisions and case law precedents. Inquiry / Research skills are assessed by correct identification and application legislation, rulings and case precedents in order to provide legal grounds for their solution.
Assignment Case
Part A
AUSGeo vs U-Trains
AUSGeo Engineering Ltd (AUSGeo) is an Australian geological engineering company which provides consultancy and infrastructure services to several companies in the mining, transport and infrastructure sectors.
In July 2014 AUSGeo was engaged by Underground Trains Melbourne (U-Trains) to perform infrastructure assessments and coordinate the excavation works for the construction of part of the tunnel that would link Melbourne to Sydney. The contract between AUSGeo and U-Trains had an initial term of 8 years and an agreed value of $18,000,000 for the infrastructure assessment and $86,000,000 for the excavation and construction services. The infrastructure assessment was completed by January 2015, and in that same month AUSGeo invested $16,000,000 in a tunnel boring machine (TBM) which was 100% dedicated to the project.
In September 2016, an auditing procedure evidenced that U-Trains was under severe financial difficulties and as a consequence U-Trains' Board of Directors decided to restructure the business. As part of the restructuring process, in October 2016 U-Trains temporarily suspended all existing contracts until further notice, which caused the immediate interruption of the payments to AUSGeo.
As AUSGeo's TBM had already been underground, AUSGeo incurred $8,000,000 in order to resurface it so it could be used in other projects. Unfortunately, during the resurfacing operation part of the tunnel collapsed and damaged the TBM, causing AUSGeo to spend a further $5,000,000 having it repaired.
In March 2017 U-Trains decided to quit the construction of the Melbourne-Sydney tunnel and negotiated the cancellation of the contract with AUSGeo. While the contract was in force, AUSGeo had received from U-Trains a total amount of $30,000,000, being $18,000,000 for the infrastructure assessment services (which were already completed) and $12,000,000 as an initial payment for the construction of the tunnel.
According to the contract's termination clause, U-Trains had to pay AUSGeo an upfront cancellation fee of 10% of the contract's original value (i.e. $10,400,000) plus 10% of the residual value over a period of 5 years. U-Trains honoured the upfront termination payment and agreed to pay the future instalments accordingly, so the contract was terminated on 30 March 2017.
In May 2017 AUSGeo took U-Trains to Court seeking compensation for the damages caused to the TBM. On 20 August 2017 the Court ordered U-Trains to pay $25,000,000 in damages to AUSGeo.
Part A - Required:
For the year ending 30 June 2017, advise AUSGeo on the assessability of the payments received from U-Trains, supporting your arguments with legislative references and application of case law.
(calculations not required)
Part B
Black Gold Resort
In 1984 AUSGeo purchased a 20-hectare block of land in northern Queensland for $100,000. The land included a deactivated gold mine which had been used by AUSGeo for geoscience research projects during approximately 10 years. The land was also located in a heritage protected site with good potential for tourism.
As AUSGeo had not conducted any research projects on the land since 1995, its Board of Directors made a decision to sell it. However, instead of selling the vacant mine which would require extensive environmental remediation, AUSGeo decided to take advantage of its expertise in geoscience to create a theme resort where visitors could enjoy exciting experiences involving geological experiments, mine-site tours and field trips. In order to fund this enterprise, AUSGeo obtained a $30 million loan from the Bank of Queensland, which was to be repaid in 5 years at commercial interest rates.
The development, which was named "Black Gold Resort", was constructed between 2014 and 2015 at a total cost of $32 million, and on 10 April 2017 it was sold to Parklands Leisure Group (which owns and runs a number of entertainment facilities in QLD, including theme parks and resorts) for a total of $45 million. At the time of sale, the land was valued at $800,000 and the improvements (being the resort hotel and related infrastructure such as access roads, geothermal pools, solar energy plant and water reservoir) were valued at $44,200,000 (building only, excluding depreciating assets).
Part B - Required:
For the year ending 30 June 2017, advise AUSGeo on the tax consequences of the above transactions, supporting your arguments with legislative references and applying relevant case law.
(calculations not required)
Total word limit: 2,000 words (overall), with 10% tolerance, you may distribute the total of 2,000 words as necessary in answering the two questions. Word limit excludes the assignment questions, footnotes and reference lists.