LAW5230 Assignment Semester 3, 2017 Page | 1 LAW5230 Assignment Taxation Law Assignment Due date: 4 January 2018 Value: 40% Word Limit: 4,000 words (excluding calculations) 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. Pay careful attention to the marking criteria at the end of each Part. Part A Issue 1 Mrs Brown has been working in Australia in the child care sector as an early childhood educator from 2012. During the 2017 income year Mrs Brown worked as a casual employee with two different employers in the child care industry. She worked an average of between 25 and 30 hours per week and earned approximately $40,000 in wages during the 2017 income year. During 2015 and 2016 Mrs Brown became worried that as a casual worker she did not have job security, so she started looking at ways she might earn some more money and save for her retirement. Mrs Brown commenced buying shares in late 2015 utilising funds sourced from her savings of approximately $60,000 and a loan of initially $40,000. She used an online stockbroking service for all her share transactions. Mrs Brown purchased shares in banks and mining companies as well as some smaller listed companies. She held seven parcels of shares with a total value of approximately $50,000 as at 30 June 2016. During the 2017 income year Mrs Brown made: (a) 17 purchases to a value of $129,630.87 (b) 9 sales to a value of $75,019.76. The bulk of the transactions took place between July and December 2016. There were only six transactions in the second half of the financial year totalling a value of approximately $50,000. The gross dividends paid to Mrs Brown in the 2017 income year were $4,950.00. Mrs Brown made a small profit on her share transactions during the 2017 income year in the order of $12,000. Mrs Brown said that her investment strategy involved tracking the price of certain high quality shares and buying them whenever the price dipped down below a certain price range. She said that she would check the share price history and read the reports of analysts in financial newspapers and also watch “The Business” program on the ABC, before making purchases LAW5230 Assignment Semester 3, 2017 Page | 2 and sales. She would additionally discuss her strategy with her husband. She also said that the amount invested was based on her available funds. Mrs Brown usually spent 5 to 10 hours on research and share trading per week. She used a home office for researching and transacting shares. Mrs Brown stated that she had no written business plan but believed she was investing as an individual in a planned manner to earn some profit. Required: Discuss with reference to appropriate legislation, case law and/or rulings whether Mrs Brown is carrying on a business for taxation law purposes in either the 2016 or 2017 income years. Also discuss whether it makes any difference to the income tax treatment of the purchases and sales if Mrs Brown is carrying on a business. No calculations are required. Issue 2 Greg lives in Gladstone and carries on a workwear clothing business in the central business district. During the year ended 30 June 2017 he had the following transactions:  Greg received $24,000 on 28 September 2016 from the owner of a shopping centre in consideration for Greg opening a second store in the shopping centre in 2017 and signing a five-year lease. Another shopping centre had offered Greg $8,000 to lease a shop in an alternative shopping centre but Greg decided to accept the higher offer.  On 28 February 2017 the city council commenced roadworks outside Greg’s shop. As the roadworks took several weeks the city council compensated Greg $45,000 for the potential loss of profits caused by the temporary disruption to his business.  On 1 March 2017 Greg received $100,000 for signing a contract with a clothing company to only stock their brand of protective work clothing. From that date Greg cannot stock this style of clothing from any other suppliers.  On 30th June 2017 Greg received $5,000 in deposits for a new safety vest that was being released for sale on 5 July 2017. Greg had taken orders for the new vest but if it is not available as planned Greg will refund the money he has taken on deposit. Required: Based on this information what are the income tax consequences of the above transactions for Greg for the year ended 30 June 2017? Support your discussion with reference to legislation, case law and/or taxation rulings. LAW5230 Assignment Semester 3, 2017 Page | 3 LAW5230 – Taxation Law Semester 3, 2017 Assignment Marking Criteria Sheet PART A – Problem Solving Little attemp t F C B A HD Identification of legal issues, legislation and case law Overall the student has identified the relevant assessable income issues, legislation and where appropriate case law and rulings. 0 0.5 1 1.5 2 Application Demonstrated level of understanding of business income issues through the application of the identified law. 1 3 5 6.5 7.5 10 Demonstrated level of understanding of the ordinary income and trading stock issues through the application of the identified law. 1 3 5 6.5 7.5 10 Conclusions Overall, the student has drawn appropriate and valid conclusions after applying the law. 0 1 1.5 2 2.5 3 Total out of 25 Description of Performance Standards; HD – the student has shown a very high level of demonstrated ability in relation to the stated criteria by covering all valid points in a clear and succinct manner. The student may have also demonstrated an ability to think beyond the facts and recognise the broader implications of the facts, missing facts or alternate arguments. A – The student has show a high level of demonstrated ability in relation to the stated criteria by either covering all valid points or by covering the majority of valid points in a clear and succinct manner. The student may have very briefly or occasionally shown ability at the HD level. B – The student has show a good level of demonstrated ability in relation to the stated criteria by covering most of the valid points. The student may have made some minor incorrect statements or missed some minor points. C – The student has show a satisfactory level of demonstrated ability in relation to the stated criteria by covering the main valid points. The student may have made a number of minor incorrect statements but did make incorrect statements in relation to major points. F – The student has not shown a satisfactory level of demonstrated ability in relation to the stated criteria by missing some main points or by making incorrect statements in relation to major points. Little Attempt – The student has not addressed or attempted to address this criterion. LAW5230 Assignment Semester 3, 2017 Page | 4 Part B – 75 Marks (3,000 words) 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 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 selfassessment 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 and any alternative policies. Continued over page LAW5230 Assignment Semester 3, 2017 Page | 5 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. LAW5230 Assignment Semester 3, 2017 Page | 6 LAW5230 Part B – Research Assignment Criteria Little attempt F C B A HD Demonstrated technical understanding of the chosen tax law topic. No/little attempt made in relation to this criterion 1 Very little technical understanding of the legal topic demonstrate and/or many instances of incorrect understanding. 4 Sound technical understanding of the legal topic demonstrated with some instances of incorrect understanding. 7.5 Good technical understanding of the legal topic demonstrated, with few instances of incorrect understanding. 10 High level technical understanding of the legal topic demonstrated, with no/very few instances of incorrect understanding. 12 Very High level technical understanding of the legal topic demonstrated, no instances of incorrect understanding. 15 Ability to analyse and present practical applications of the law in the context of the overall paper, rather than simply describe the law. No attempt made in relation to this criterion. 0 Did not demonstrated an ability to explain tax law concepts in the context of how it is relevant to practical applications. 3 Demonstrated sound ability to explain tax law concepts in the context of how it is relevant to practical applications in some instances. Some insightful and relevant applications made. 6 Demonstrated a good ability to explain tax law concepts in the context of how it is relevant to practical applications in some instances. Practical applications were mostly insightful and relevant. 7.5 Demonstrated a very good ability to explain tax law concepts in the context of how it is relevant to practical applications in many instances. Practical applications were mostly insightful and relevant. 9 Demonstrated an excellent ability to explain tax law concepts in the context of how it is relevant to practical applications in all instances. Practical applications were insightful and relevant. 12 Ability to demonstrate critical reflection on the topic researched incorporating independent thought and ability to critically analyse research presented. No/little attempt made in relation to this criterion 1 Insufficient evidence of effective analysis, balanced evaluation, personal perspectives made. 4 Few instances of careful analysis of the research. Limited ability to balance and evaluate competing arguments in the literature and/or limited articulation of personal perspectives throughout paper. 7.5 Some evidence of careful analysis of the research. Some instances of an ability to balance and evaluate competing arguments in the literature as well as some personal perspectives throughout paper. 10 Evidence and multiple instances of careful analysis of the research. Evidence of an ability to balance and evaluate competing arguments in the literature as well as clearly articulated personal perspectives throughout paper. 12 Strong evidence and multiple instances of careful analysis of the research. Strong evidence of an ability to balance and evaluate competing arguments in the literature as well as clearly articulated personal perspectives throughout paper. 15 Ability to demonstrate independent, high quality research. No/little attempt made in relation to this criterion 1 Little evidence of quality and independent research. Many major sources overlooked. Very few sources from outside course materials. 4 Some evidence of careful, relevant, quality and independent research undertaken. Many major research sources/authors overlooked. A few sources from outside course materials. 7.5 Evidence of careful, relevant, quality and independent research undertaken. Few major research sources/authors overlooked. Some sources from outside course materials. 10 Evidence of careful, relevant, high quality and independent research undertaken. No major research sources/authors overlooked. Many sources from outside course materials. 12 Evidence of careful, relevant, high quality and independent research undertaken. No research sources/authors overlooked. Many sources from outside course materials and all high quality. 15 LAW5230 Assignment Semester 3, 2017 Page | 7 Overall clarity of expression, use of grammar and appropriateness of the language and terminology for an academic research paper. No/little attempt made in relation to this criterion 1 No instances of sophisticated and academic language used. Many instances of incoherent. Lacks readability. 2 Few instances of sophisticated and academic language used. Somewhat clear and readable expression used throughout. Many instances of unclear expression. 3 Mostly sophisticated, clear and readable expression used throughout. Moderately academic language used throughout. Few instances of unclear expression. 4 Some sophisticated language, but otherwise, very clear and highly readable expression used throughout. Appropriate academic language used throughout. 5 Sophisticated, clear and highly readable expression used throughout. Very appropriate academic language used throughout. 6 Clear and logical structure, development of clear arguments, supported conclusions reached. No/little attempt made in relation to this criterion 1 Very little persuasive argument used in paper. Little structure or flow. Many inconsistent / unsupported conclusions reached. 2 Somewhat persuasive argument built throughout paper. Some structure presented, though paper may have some flow problems, or inconsistent / not well supported conclusions presented. May have some inconsistencies. 3 Moderately persuasive argument built throughout paper. Clear structure resulting in some supported conclusions/ recommendations with few inconsistencies. 4 Persuasive argument built throughout paper. Clear and logical structure resulting in some well supported conclusions/ recommendations. 5 Highly persuasive argument built throughout paper. Very clear and logical structure resulting in well supported conclusions/ recommendations. 6 Ability to use chosen referencing method appropriately and correctly No/little attempt made in relation to this criterion 1 Inability to use chosen referencing method appropriately and correctly. Inconsistent and fundamental errors. 2 Acceptable standard of referencing, citations and bibliography. Some fundamental errors. 3 High standard of referencing, citations and bibliography. Some minor errors. 4 Very high standard of referencing, citations and bibliography. Very few errors. 5 Very high standard of referencing, citations and bibliography. Almost no errors. 6 Total out of 75 TOTAL (out of 75) General Comments END OF ASSIGNMENT