The following transaction are relevant to Michael Kelvin. Advise Michael as to his potential net taxable capital gain that may arise for him for the year ended 30 June 2015 as a result of these transactions.
Please make full reference to income tax legislation and specifying your specific reasons for each component of your answer.
1. On 1st August 2014, Michael sold his flat at St Kilda for $380,000. He had purchased the flat in November 2007 for $200,000 and lived there at all times until 1 January 2012 when he and his family moved to Sydney. While he lived in Sydney, the flat at St Kilda was rented out. Michael did not acquire a new residence before he sold the flat.
2. On 20th September 2014, Michael sold a painting for $4,000. The painting was acquired in March 2011 for $5,000.
3. Michael also bought a coin collection in 2010 for $400 and sold it to the same buyer that bought the painting for $2000 on 20 September 2014.
4. On 15th March 2005, Michael sold a ring for $2,000. He had bought the ring in 1990 for $800 as a present for his former wife who left it to him after their divorce.
5. Michael is only 35 years old but he had been carrying on a small goods business for as a sole trader for 15 years. The business has had an annual turnover of $5,000,000 in 2014 year. Michael wishes to travel extensively over the next 18 months and sold his business on 8 January 2015 to a former business partner. The only CGT asset in the business was goodwill which had been generated in the business since inception. He sold the business for $500,000. When Michael returns after his travels he intends to purchase
another business again.
6. In order to have some cash for his travels Michael also sold his luxury boat for $100,000 on 12 January 2015. He original bought it for $120,000 in 2010.
7. Michael also owned a warehouse which he acquired in 2008 for $120,000. Unfortunately just before he left on his travels the warehouse had burnt down due to an electrical fault. Michael expects that the insurance company will pay him compensation in the amount of $100,000 as the insured value.
Criteria and marking guide
Criteria that will determine the mark given will be:
- identification of all issues that arise in the question
- discussion of theory that underlies those issues
- identification of relevant sections of legislation
- identification of relevant case authorities
- application of the law to the facts that arise in the question
- mastery of referencing.
Characteristics indicative of the respective levels of achievement in the assignment are as follows. Sometimes not all features will necessarily be present in any one assignment for that particular grade.
Evaluation criteria
These criteria are a general guide as to the standard expected at the various levels. It is not necessarily the case that all these criteria will be met at a particular standard as there may be a superior performance on one of the criteria and not so satisfactory
performance on another.
High distinction standard
- The answer is very well written and clearly expressed.
- There is a demonstrated appreciation and understanding of the issues involved.
- The answer is well structured and logically organised.
- Demonstrated mastery of referencing system.
- There is evidence of a comprehensive analysis of the issues.
- Conclusions are backed by well-reasoned arguments demonstrating a detailed insight and analysis of issues.
- Comprehensive coverage of all relevant issues.
- References are made to the appropriate legislation for particular issues.
- Statutory provisions are analysed and interpreted correctly.
- The legislation is applied to the particular fact situation in a competent manner.
- Consideration is given to the operation of the common law.
- There may be consideration of issues not raised in the tutorials and answer guides.
Distinction standard
- The answer is well written and expressed.
- The answer is structured and logical.
- The issues have been reasonably well identified and appreciated.
- There is correct use of referencing.
- Issues have been analysed.
- Reference is made to all appropriate legislation, although the analysis and interpretation is not as detailed and reasoned as for the high distinction standard.
- The effect of the common law is considered.
- There is a comprehensive coverage of the issues.
- Occasional errors of law and legal reasoning may still be present.
Credit standard
- The answer is generally well written and expressed.
- The answer is structured and sequential.
- Referencing is satisfactory.
- Issues are identified and addressed.
- There has been an attempt to analyse some of the issues.
- The coverage of issues is reasonably comprehensive often with a good treatment and analysis of particular points.
- Errors of law and incorrect reasoning may sometimes be present.
- Statutory interpretation may require improvement.
- Depth of treatment is often lacking in some of the issues.
Pass standard
- The answer is able to be followed and understood.
- The answer could perhaps be better organised and structured.
- The referencing may need improvement.
- Issues may need to be identified and addressed in more depth.
- Analysis when present may be incorrect.
- Some familiarity with the legislation and its application is demonstrated.
- Sometimes the conclusions reached are simple.
- There may be several errors of law.
- There may be quantities of material of marginal relevance included in the answer.
Fail standard
- The answer may be significantly short of the required length.
- The written expression is poor and difficult to understand.
- The answer is poorly organised.
- There has been a failure to identify and address the issues in the question.
- Referencing is generally inadequate.
- There is a lack of familiarity with the legislation and its appropriate application.
- The reasoning and application demonstrated is poor.
- Frequently there is much irrelevant material.