Taxation Law Assignment -
This assignment consists of two (2) parts.
Part A -
Anna is a jeweller and operates her own business selling jewellery on the Gold Coast. She opened her shop to customers on 1 July 2017. Anna employs two shop assistants. The following information relates to the period from 1 July 2017 to 30 June 2018:
- Anna borrowed $200,000 from her bank on 1 July 2017 to purchase equipment and stock. The bank charged interest totalling $6,000 during the income year. Anna on-lent $20,000 of the loan to her daughter at 0% interest.
- Anna leased a small shop from 1 July 2017 and pays $2,000 per month in rent.
- Legal fees of $4,400 paid on 20 July 2017 for advice relating to establishing the business.
- Lockable glass display cabinets were purchased for $28,000 and installed on 1 July 2017.
- A laptop costing $2,200 was purchased on 15 July 2017 to keep accounting and tax records for the business. Anna took this laptop home regularly and estimated 10% of the time it was used for checking her personal social media and email accounts.
- An opening party was held in the shop for a few local celebrities, where Anna provided champagne and canapes to her guests. This cost $2,500 on 10 July 2017.
- Jewellery was purchased from various suppliers throughout the year at a cost of $480,000.
- A security firm was paid $24,000 on 20 July 2017 to provide overnight surveillance of the shop. The contract was paid for the period 20 July 2017 to 19 July 2019.
- To keep up to date with trends in designer jewellery, Anna attended New York fashion week. She flew business class at a cost of $5,600, if she had flown economy the cost would have been only $1,800. She also paid $2,000 for accommodation and food. She stayed in New York an extra 2 days to catch up with friends costing $600.
- Salary and wages paid to the two employees totalled $65,000. Anna paid herself $80,000 from the business bank account.
- Anna accrued $6,000 in her accounts for unused annual leave for her employees at 30 June 2018.
Required: Provide advice to Anna on the income tax consequences of the above transactions for the year ended 30 June 2018. Include calculations where required. Assume that Anna qualifies as a small business entity. Support your discussion with reference to legislation, case law and taxation rulings.
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. Australia's Self-Assessment System
- Briefly outline the self-assessment tax system used in Australia;
- Discuss and critically evaluate the extent to which Australia's self assessment encourages individuals to comply with the taxation legislation;
- Critique whether you think it is effective in obtaining taxpayer compliance or whether other techniques should be adopted.
2. Work-related allowable deductions
- Briefly outline the Australian tax law for work-related deductions;
- Discuss and critically evaluate the extent to which Australia's deduction regime for individual taxpayers satisfies the principles of a good tax system;
- Compare and contrast this with the deduction system in another jurisdiction, for example, New Zealand.
3. Negative Gearing
- Briefly outline what is meant by negative gearing and how the Australian tax system treats negatively geared investments;
- Discuss and critically evaluate the extent to which tax deductible negative gearing impacts upon savings and investment decisions;
- Evaluate whether negative gearing from a tax perspective should be removed.
4. Company tax rate
- Briefly outline the company tax base and rate in Australia;
- Discuss and critically evaluate the Federal Government's policy of lowering the company tax rate to 25%;
- Discuss potential advantages and disadvantages;
- Compare to one (1) other country or an alternative policy.
5. Small Business Concessions
- Briefly outline the Small Business CGT Concessions in Australia;
- Discuss and critically evaluate the Small Business CGT Concessions in Australia, including the overall policy objectives and your evaluation of whether regime currently meets these objectives;
- Make conclusions as to whether further amendments are necessary.
Note - 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.