MLC 703 - Principles of Income Tax Law Assignment

Trimester 2, 201
INSTRUCTIONS
Please note t!at t!e following will not form part of t!e wor" co#nt$
%eferences, incl#"ing stat#te an" cases&
'iagrams&
Ta(les&
Calc#lations)
*o# m#st complete all parts of t!e assignment - t!ree +3, -#estions) Please complete t!e
.ario#s parts of t!e assignment separately ie start eac! new -#estion a new page) *o#
s!o#l" allocate t!e appropriate amo#nt of wor"s to t!e .ario#s -#estions in accor"ance
wit! t!e recommen"ations in t!e (ox pro.i"e" at t!e commencement of eac! new
-#estion) T!ere is a strict wor" limit of 3,000 wor"s for t!is assignment)
/or t!e t!ree +3, -#estions in t!e assignment 0o# will (e re-#ire" to go (e0on" t!e st#"0
materials for t!is #nit an" 0o# will (e expecte" to con"#ct 0o#r own researc! of cases
an" ot!er aca"emic material #pon w!ic! 0o# s!o#l" (ase 0o#r answer)
*o# are enco#rage" to #se !ea"ings for p#rposes of clarit0 an" presentation of 0o#r
assignment) It is !owe.er, essential t!at 0o#r assignment is written in f#ll sentences an"
not 1"ot2(#llet point3 format) If 0o# #se an0 e-#ations in sol.ing t!e pro(lem -#estion
please ma4e s#re t!at 0o# cite t!e correct sections of t!e rele.ant legislation an" t!at
0o# o#tline 0o#r entire wor4ing)
*o# m#st (egin eac! -#estion separatel0) It is !owe.er essential t!at 0o# place 0o#r
name an" st#"ent n#m(er an" t!e -#estion n#m(er on eac! -#estion w!ic! 0o#
complete)
%egar"ing referencing, 0o# will fin" t!e A#stralian 5#i"e to Legal Citation +A5LC, st0le
of referencing in t!e following we( site$
!ttp$22www)law)#nimel()e"#)a#2files2"mfile2/inal6nlineP'/-2012%eprint)p"f
Please note t!at t!is A5LC st0le is inten"e" for Law st#"ents an" alt!o#g! it is preferre"
t!at 0o# follow it, mar4s will not (e "e"#cte" for not citing cases etc exactl0 as
"escri(e") In ot!er wor"s, w!ilst 0o# m#st reference, 0o# can c!oose to #se ot!er
referencing st0les +ie not necessaril0 t!e A5LC st0le, if 0o# wis!)
1
MLC 703 - Principles of Income Tax Law Assignment
Trimester 2, 201
SUBMISSION: *o# m#st s#(mit (ot! an electronic .ersion of 0o#r assignment in
a""ition to s#(mitting a !ar" cop0 of 0o#r assignment) T!e electronic cop0 of 0o#r
assignment an" t!e !ar" cop0 of 0o#r assignment m#st (e i"entical) If t!ere are an0
"ifferences (etween 0o#r electronic assignment an" 0o#r !ar" cop0 assignment 0o#r
electronic assignment will (e mar4e")
7xtensions to t!e "#e "ate are not grante" lig!tl0, as t!is will "isr#pt t!e mar4ing
process, an" is #nfair to most st#"ents w!o !a.e complie" wit! t!e s#(mission
"ea"line) In ot!er wor"s, extensions are seldom gi.en 8 t!e0 are onl0 grante" in t!e
most exceptional #nforeseea(le circ#mstances) If 0o# are experiencing serio#s an"
exceptional circ#mstances t!at are (e0on" 0o#r control at least t!ree wor4ing "a0s prior
to t!e "#e "ate to negotiate an extension) 9!en consi"ering t!e granting of extensions
t!e fact t!at st#"ents !a.e !a" se.eral wee4s to complete t!e assignments prior to t!e
"#e "ate will (e ta4en into acco#nt)
Late Submissions: If 0o# s#(mit an assignment late +wit! no extension grante"2none
applie" for,, 10: of 0o#r mar4 will (e "e"#cte" per calen"ar "a0 from t!e "#e "ate +eg
for a 0 mar4 assignment, eac! "a0 an assignment is late will res#lt in a penalt0 of
mar4s (eing "e"#cte",)

6nce assignments !a.e (een mar4e" an" fee"(ac4 pro.i"e", no f#rt!er assignment
can (e accepte")
T!e assignments m#st (e complete" individually an" in t!e following st0le an" format$
Assignment Style:
/ont$ Times New Roman or Arial&
/ont si;e$ or ! "oint&
Line spacing$ #$ line s"a%ing or &ouble s"a%ing&
/ormat: Assignments are to be "resented'submitted in MS (ord )ormat only)
Please note in the interests of equity to all students, academic staff will not be
able to provide any assistance with the questions in this case study.
&U* &AT*:
2
MLC 703 - Principles of Income Tax Law Assignment
Trimester 2, 201
T+IS ,U*STION IS (ORT+ $- O. /OUR O0*RALL MAR1
.OR T+IS UNIT# ALLOCAT* A22RO3IMAT*L/ $44 (OR&S
5MA3IMUM6 IN ANS(*RIN7 IT
6n 1 <#l0 2010, =#;ette sol" t!e farm s!e !a" p#rc!ase" 2> 0ears earlier an" mo.e"
to t!e nort! coast of ?ew =o#t! 9ales w!ere s!e rente" a !o#se, inten"ing to retire)
=!e also p#rc!ase" a !ectare of lan" on t!e waterfront) =!e soon (ecame (ore" wit!
not!ing m#c! to "o in retirement) In or"er to more f#ll0 pro.i"e f#n"s for !er retirement
an" (0 wa0 of in.estment, =#;ette !a" m#c! cons#ltation wit!, an" s#(se-#entl0
commissione" a (#il"er in 6cto(er 2012 to "esign an" (#il" eig!t town!o#ses on t!e
lan" s!e owne" on t!e waterfront) =#;ette also cons#lte" !er acco#ntant at t!is time
an" as4e" !im to pro.i"e "etails of t!e expecte" rental ret#rn from t!e lease of se.en
of t!e #nits, as s!e inten"e" to li.e in one of t!em)
T!e #nits were complete" in Ma0 2013) =#;ette was s#ccessf#l in leasing fi.e of
t!e #nits on a s!ort-term (asis) In 6cto(er 2013 s!e s#ccessf#ll0 applie" to !a.e eac!
of t!e #nits c!ange" to 1strata titles3 an" (0 t!e en" of 'ecem(er 2013, fo#r of t!e #nits
!a" (een sol") 9it! t!e procee"s =#;ette p#rc!ase" an a"@oining (loc4 of lan", wit!
t!e intention of (#il"ing more #nits)
Required:
A".ise =#;ette of t!e income tax implications of t!e a(o.e transactions 5ignore any
Ca"ital 7ains Ta8 im"li%ations6)
3
MLC 703 - Principles of Income Tax Law Assignment
Trimester 2, 201
T+IS ,U*STION IS (ORT+ $- O. /OUR O0*RALL MAR1
.OR T+IS UNIT SO /OU S+OUL& ALLOCAT*
A22RO3IMAT*L/ 9444 (OR&S 5MA3IMUM6 IN
ANS(*RIN7 IT

MLC 703 - Principles of Income Tax Law Assignment

Trimester 2, 201
T!ang p#rc!ase" an in.estment propert0 in Pert! "#ring /e(r#ar0 200A for B200,000)
Ce pai" stamp "#t0 of B10,000 at t!at time) Ce !a" no tro#(le fin"ing tenants for t!e
propert0) In A#g#st 2013 T!ang re-#ire" a new tenant for t!e propert0) Deca#se of
strong "eman" for rental !o#sing, T!ang was a(le to get a new tenant to pa0 !im a
l#mp s#m 1#p front3 amo#nt of B2,000 +in a""ition to t!e ann#al rental, for entering into a
12 mont! lease) Cowe.er, in <an#ar0 201 t!e tenant wante" to (e release" earl0 from
t!is lease) T!e tenant an" T!ang agree" t!at t!e lease wo#l" (e terminate" earl0 in
exc!ange for t!e tenant gi.ing T!ang B3,000) 6n Ma0 3, 201 T!ang entere" into a
contract to sell t!is propert0 for B700,000& t!is sale was settle" in <#ne 201)
T!ang also en@o0e" (eing a (#sinessman) As a res#lt, "#ring =eptem(er 200A, T!ang
p#rc!ase" 100: of t!e s!ares in a compan0 calle" Cong Pt0 Lt" for B2 million) Cong
Pt0 Lt" owne" an" operates a pillow-man#fact#ring factor0)
In /e(r#ar0 201 T!ang sol" !is s!ares in Cong Pt0 Lt" for B million) At t!is time Cong
Pt0 Lt"3s assets were as follows$
Pillow man#fact#ring plant an" factor0 B2,>00,000
5oo"will B1,>00,000
Ann#al t#rno.er for t!e compan0 !as (een consistentl0 aro#n" B2)>m per 0ear for a
n#m(er of 0ears)
In <#ne 201, T!ang +w!o was age" >3 at t!e time, p#rc!ase" <#lian Pt0 Lt", for
B3>0,000) T!e assets of <#lian Pt0 Lt" were as follows$
a De" an" Drea4fast accommo"ation B2E0,000
a 10 : s!are in In.estment propert0 BA0,000
At t!e time of t!e sale of Cong Pt0 Lt", T!ang an" !is spo#se !el" t!e following assets
+ot!er t!an t!e s!ares in Cong Pt0 Lt",$
T:ang
Car +#se" >0: for !is (#siness, B>0,000
Propert0 in Mel(o#rne +T!ang li.es in t!is propert0, BF>0,000
In.estment Propert0 in Pert! B700,000
=#perann#ation B1,>0,000
T:ang;s s"ouse
In.estment Propert0 in =0"ne0 BA00,000
Required:
.or all transa%tions in t:is <uestion dis%uss only t:e Ca"ital 7ains Ta8
im"li%ations#
Re)er to all o) t:e relevant se%tions o) legislation9 %ases and any ot:er s%:olarly
material w:en "roviding advi%e to T:ang# Advise T:ang on:
Any Ca"ital 7ains Ta8 liabilities )or :im in relation to :is a%tivities=
S"e%i)i%ally9 ma>e sure t:at your dis%ussion in%ludes advi%e on w:et:er
T:ang %an ta>e advantage o) t:e small business %on%essions to redu%e t:e
amount o) ta8 "ayable on t:e sale o) +ong 2ty Ltd#
>
MLC 703 - Principles of Income Tax Law Assignment
Trimester 2, 201
2OLIC/ BAS*& *SSA/ ,U*STION: T+IS IS (ORT+ !4- O.
/OUR O0*RALL MAR1 .OR T+* UNIT SO /OU S+OUL&
ALLOCAT* A22RO3IMAT*L/ 9$44 (OR&S 5MA3IMUM6 IN
ANS(*RIN7 IT
T!e A#stralian go.ernment recentl0 enacte" laws in its 201 D#"get to reform t!e
/amil0 Pa0ment s0stem t!at is c#rrentl0 in place) %eforms !a.e also (een applie" to
eligi(le income s#pport recipients in relation to t!e 7"#cation 7ntr0 Pa0ment)
Required:
'isc#ss both of t!e following$
i6 *8"lain w:at t:e law was regarding t:e .amily 2ayment system and *du%ation
*ntry 2ayment prior to t:e %:anges "ut )orward9 and t:e nature o) t:e
abovementioned %:anges# /our e8"lanation s:ould indi%ate when t:ese new
measures will begin and %ease 5i) a""li%able6#
ii6 .rom a "oli%y "ers"e%tive9 %onsider w:et:er it is desirable to im"lement t:ese
%:anges# 2lease %onsider t:is in t:e %onte8t o) )airness9 e))i%ien%y9 e<uality9
"rote%tion o) government revenue and any ot:er relevant %onsiderations#
A