Assignment: Taxation Law
WRITTEN COMPONENT PART A
Instructions to Candidates: STUDENTS ARE REQUIRED TO USE AND REFERENCE CASE LAW AND LEGISLATION WHEN ANSWERING THE QUESTIONS
Question 1 - Capital Allowances
Galway Industries Pty Ltd manufactures musical instruments. Due to a need to expand its business operations the company decided to build a bigger factory. You have been provided with the following information:
• Construction commenced on 4 July 2017
• The cost to build the factory was $4,000,000
• The Occupational Health and Safety inspector examined the building on 15 December 2017 and approval to commence manufacturing was given.
• The company installed all the equipment necessary for manufacturing on 16 December 2017 and the manufacturing operations commenced on 31 December 2017.
(a) Is the building depreciable. Give reasons for your answer
(b) What type of expenditure is the $4,000,000 to build the new factory. Give reasons for your answer
(c) Advise the company what deductions (if any) the company can claim in respect to building this factory. In answering this question determine what type of deductions the taxpayer may qualify for and calculate the amount the taxpayer might be able to claim in 2017/2018 financial year.
Question 2- Capital Gains
Tanishka purchased a main residence in March 2012 consisting of 16 equal rooms at a cost of $400,000. Four rooms had been exclusively used to run hermedical practise. Tanishka sold the property to another medical practitioner inJanuary 2018. The sale price was $1,000,000. She also received an additional $50,000 from the purchaser for agreeing not to operate another medical practice within 5 kilometres of the property.
During the year ended 30 June 2018Tanishka also sold the following CGT assets
She sold the following shares. The details were as follow:
1000 Bamboozle Ltd shares
Date acquired: 1 July 2017 $20,000
Date sold: 23 May 2018 $37,000
1000 SkulduggeryLtd shares
Date acquired 17 May 2003 $141,000
Date sold 1 April 2018 $ 74,000
Date acquired 1 May 2002 $19,000
Date sold 12 September 2017 $11,000
Medical Trolleys which was a depreciable asset
Date acquired 13 September 2012 $6,000
Date sold 12 September 2017 $1,000
(a) Identify the CGT assets and advise Tanishka of the capital gains tax consequence in respect of the above CGT-assets (include calculations of gains or losses if any). Give reasons for your answers
(b) Calculate the net capital gain / capital loss Tanishka made on disposal of the above CGT-assets
Question 3 - Deductions
Discuss whether the following expenditure is revenue in nature, capital in nature or private and domestic in nature. Give reasons and cite relevant legal authority for each item
(a) $10,000 study fees incurred by a motor mechanic studying for an law degree in order to improve his chances of earning more income in the future.
(b) A $10,000 payment under the HECS or HELP program.
(c) $5,000 study fees incurred by a tax consultant studying for a master of tax degree at Sydney University in order to earn more money in the future.
(d) $1250 train fares incurred by an employee in respect to travelling from home to work.
(e) $2,500 car expenses travelling from home to work where taxpayer has to transport by car bulky equipment necessary for employment.
(f) $1,000 expenditure incurred on sunhat, sunglasses and sunscreen by a bricklayer who works outdoors.
(g) $2,000 grooming expenses incurred by a television presenter who is expected to be well groomed. Would your answer be different if the television presenter travelled extensively by aeroplane and other situations where the presenter was subject to harsh conditions?
(h) $10,000 in Armani suits incurred by a Stockbroker. Would your answer be different if the Stockbroker's firm name was embroidered on the pocket of the suit jacket?
(i) $15,000 child minding expenses incurred by a parent for looking after their children while at work.
(j) A Taxpayer was robbed $5,000 while taking the previous day's business takings to bank. The money was not recovered and the taxpayer incurred a loss. The taxpayer uses the accruals or earning basis
(k) Company made a $50,000 provision for long service leave
(l) In order to expand its business a company that carries on business as an internet service provider paid a lump sum payment to acquire a competitor's subscriber base. Is the expenditure deductible or capital in nature? Identify the key precedent relevant here and apply the benchmark indicators from that case in answering this question
PRESENTATION COMPONENT PART B
Give a presentation on the issue on deductions. You can discuss in detail any of the questions below
(a) Explain the rationale behind deductions and discuss why nexus to earning income is central to claiming general deductions. How do specific deductions differ in this regard? Give examples. Should deductions be capped to what are reasonable expenses rather than actual expenses? Can you think of an example of such a restriction under the ITAA97
(b) Discuss what would happen if Australia did not have a deduction provision. You might consider the practical results where no deductions are allowable and we are taxed on net profits or where all losses and outgoings are deductible.
(c) What would be the net result of an income tax regime that allowed a deduction for all education expenses, child minding for a working parent or travel to work (as well as other worthy items you might care to add?
Here you might discuss whether they should they be deductible in the course of determining a correct assessment of a taxpayer's true income or deductible on some concessional basis or whether a cash subsidy is a preferred option?
Does the tax-free threshold partly address these issues?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.