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; H
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