This assignment consists of two (2) parts. Part A consists of a problem solving scenario (1,000 words) and Part B is a research assignment (3,000 words). You must complete both Part A and Part B.
Part A
The following separate transactions require your advice as indicated:
Kate is a teacher who was born in Australia and up to 12 August 2017 she worked in Toowoomba. Having resigned from her job in Toowoomba, Kate travelled to Fiji on 13 August 2017 to join her husband Jack who has been working at a university in Fiji. Jack and Kate have three children and from 13 August 2017 the family has been living in a rented house provided by Jack's university employer. Jack has a 3 year contract with the university in Fiji which expires in June 2020 at which time they intend to return home. During the year ended 30 June 2017 Kate earned $14,000 in rent from renting out their home in Toowoomba (her share) and interest income of $500 from an investment in an Australian bank. She works part-time as a teacher in Fiji and earned $19,000 AUD during the year ended 30 June 2018. Provide advice to Kate as to whether she is a resident of Australia for the year ended 30 June 2018 and based on your conclusion advise Kate of the amount that she should include in her assessable income in Australia for the year ended 30 June 2018.
Bernie carries on a delivery business where he employs 4 staff. Bernie provided $5,000 worth of delivery services to Paul (one of his customers) but Paul indicated that he did not have any money to pay Bernie. Instead of paying Bernie cash Paul allowed Bernie to use one of his residential rental properties to live in with his family for 6 months during the year ended 30 June 2018. The market value of the rental property was $6,000 for the 6 month period. Provide advice to Bernie as to whether he needs to include any amount in his assessable income as a result of being provided with free accommodation.
Melanie carries on a cleaning business and earned $500,000 in income during the year ended 30 June 2018. Her biggest customer Brown Pty Ltd (Brown) accounts for 95% of her work and paid her $475,000 in fees for the year ended 30 June 2018. Brown has just indicated to Melanie that it will be cancelling their cleaning contract and will pay her compensation of $200,000 for cancelling the contract. Melanie considers that due to the fact that Brown is paying her this amount she will have to close her business because she will have insufficient work to keep her business in operation. Provide advice to Melanie as to whether the $200,000 would be ordinary income.
NOTE: For all scenarios above, provide advice as requested, indicating any amount that would be included as assessable income for the year ended 30 June 2018. You must support your discussion with reference to any relevant authorities. Please refer to the marking criteria for further details on requirements.
Part B
You are required to prepare a written research assignment that addresses one of the provided topics below. The purpose of the task is for you to demonstrate high level critical reflection and analytical reasoning skills in the context of the application of Australian taxation law and taxation law policy. You must undertake academic research which demonstrates the following:
- An in-depth your understanding of how the specific tax law applies,
- The policy context of the law and if relevant how other jurisdictions deal with similar issues,
- Critical reflection as to whether the law achieves its stated purpose, aligns with principles of good tax policy or could be improved/amended. These critical reflections should be supported by the research you have undertaken as well as your own independent thought.
Topic Choices
1. Deductions - discuss and critically evaluate the extent to which Australia's deduction regime satisfies the principles of a good tax system (specifically simplicity and fairness). Provide an international comparative analysis (choosing 1 other jurisdiction) of our deduction regime (New Zealand might be a good choice).
2. CGT Small Business Concessions - discuss and critically evaluate the Small Business CGT Concession regime in Australia. You should include a discussion of the overall policy objectives and your evaluation of whether regime currently meets these objectives or whether further amendments are necessary.
3. Division 7A (treatment of private company loans) - discuss and critically evaluate Division 7A as a specific anti-avoidance provision. You should include a discussion of the overall policy objectives and your evaluation of whether the Division currently meets these objectives or whether further amendments are necessary.
4. International Tax Avoidance - The avoidance and/or minimisation of tax by large multi-national corporations is of great concern to Governments and tax administrators. Identify and discuss at least one common method multi-national corporations might use to avoid tax in Australia. Then identify and critically evaluate at least one current strategy implemented by the Government and/or the ATO that is used to prevent this.
5. The current Liberal Government has a policy of reducing small business taxation through the reduction in corporate tax rates for those with turnovers under a certain threshold. Provide an international comparative analysis (choosing 1 other jurisdiction) of whether the taxation rate for small businesses should be reduced and why.
6. Another tax technical or tax policy topic of your choice. Must be approved by course examiner.