Newcastle Business School
ACFI3004 TAXATION
INDIVIDUAL WRITTEN ASSIGNMENT
Semester 1, 2021
Due: 5.59 pm (AEDT), Sunday 9 May 2021
Submit via Turnitin in Blackboard
Format: Single-spaced, word-processed document with font size of 11
Total Marks: 25 (Task 1 = 18 marks & Task 2 = 7 marks)
Weighting: 25% of overall course grade
Required: Complete both Task 1 and Task 2.
Task 1: Limit your written response to 1,000 words. In grading task one, examiners will expect you to show appropriate referencing to case law, sections of the ITAA 1936 and ITAA 1997 and income tax rulings issued by the Australian Taxation Office.
Task 2: Section referencing of the ITAA 1936 and ITAA 1997 is not required, however a list of other references used to answer the question should be included.
Late submission: The mark for an assessment item submitted after the designated time on the due date, without an approved extension of time, will be reduced by 10% of the possible maximum mark for that assessment item for each day, or part day, that the assessment item is late. Note: this applies equally to week and weekend days.
Assignment Task One - (1,000 words - 15 Marks)
Alice Bates is a 28-year-old Australian citizen and an accomplished classically trained musician. Alice is single, born in Australia and has always lived with her parents at Newcastle, Australia.
Alice’s ambition is to pursue a career as a musician however she has found her opportunities in Australia limited and, as she has always wanted to see more of the world, she decides to look for work abroad. After researching potential opportunities and leveraging her network, Alice was successful in securing a six-month contract with the Hungarian National Philharmonic Orchestra based in Budapest, Hungary. The Orchestra has advised they may consider a further six-month extension to the contract provided they are satisfied with her performance. Alice has been granted a 12-month Hungarian working visa and will apply for an extension to the visa if offered further work with the orchestra.
She left Australia on 1 March 2021 to commence her contract on 1 April 2021. Alice travelled to Hungary on a one-way ticket and has left sufficient funds with her mother to pay for a return flight if she decides to return home. Alice is unsure of her actions if the contract is not extended. At that time, she will make a decision to either apply for another position in Hungary or return to Australia to further her studies.
Although Alice has few contacts in Hungary she has kept in touch with Elena, a Hungarian resident she met when Elena was travelling Australia. Elena lives in Budapest and has assisted Alice in securing a six-month lease on a one-bedroom apartment close to where the Orchestra plays. She has also arranged for Alice to open an account with a Hungarian bank to receive her salary.
Alice has few assets in Australia other than a $10,000 term deposit with the CBC Bank and a motor vehicle valued at $10,000 (which will be garaged at her parent’s house until she decides her future). Alice intends to purchase a cheap car in Hungary so that she can explore the country when she is not working.
Required
In a professional letter (not exceeding 1,000 words) to advise Alice whether at 30 June 2021 she will be assessed as a resident of Australia for income tax purposes. Also advise Alice how her income will be assessed given both scenarios of her being deemed a resident or a non-resident of Australia for taxation purposes. Show appropriate referencing to case law, sections of the ITAA 1936 and ITAA 1997 and income tax rulings issued by the Australian Taxation Office. Ignore any consequences of the Double Tax Agreement between Australia and Hungary.
Assignment Task Two (10 marks)
Dexter Mason is a 48-year-old resident of Australia for income tax purposes. Dexter is married to Rita (44-years-old) and they have two dependent children together Cody (19 years old) and Harrison (4 years old). Rita’s Adjusted Taxable Income for the 2021 financial year was $19,900. Cody is in receipt of a government Disability Support Pension and has Adjusted Taxable Income of $14,800. Harrison earned no income during the year.
Dexter has been employed by a private company that provides engineering services to the Australian Defence Force. He and his family had been based in Newcastle until his transfer to the company’s operations in Darwin, Australia on 1 December 2020 where they remain.
Details relating to Dexter’s income and expenses for the year ended 30 June 2021 are as follows:
Receipts
Gross Salary as per payment summary (note 1) 105,524
Franked dividends received from an ASX listed company 5,800
Unfranked dividends received from an ASX listed company 350
Gross rental income received 22,500
Net Interest received from a New Zealand bank (note 2) 800
Payments
Deductible expenses and interest on the rental property (note 3) 26,500
05/01/21 - Purchase of a laptop computer used 60% for
employment purposes which has an effective life of 2 years 2,850
05/01/21 - Purchase of a calculator used 100% for employment
purposes which has an effective life of 4 years 95
03/07/20 – Purchase of a new oven for the rental property
which has an effective life of 12 years 1,225
Removal and relocation costs to Darwin 2,800
Other deductible expenditure relating to Australian income 1,000
Other information:
At 30 June 2021 Dexter had an accumulated HELP (HECS) debt of $7,500.
Dexter did not have any private hospital cover for himself or his family.
Dexter contributed $5,000 to a complying superannuation fund on Rita’s behalf (as a spouse contribution) on 25 June 2021.
Notes:
The payment summary also showed $26,000 PAYG deducted, a Reportable Fringe Benefit amount of $5,500 and a Reportable Employer Superannuation Contribution amount of $5,200.
Amount shown in Australian dollar equivalent (AUD). $200 AUD withholding tax was deducted by the NZ institution from the gross $1,000 AUD interest earned.
Assume all amounts shown are deductible. Dexter acquired the rental property on 15 May 2020 for $450,000. The building was brand new and $285,000 directly related to the building cost. On that day he also paid a total of $1,500 borrowing costs in relation to a 25-year mortgage used solely to purchase the property. The property was first rented on 1 July 2020 and was tenanted for the full 2021 tax year. Apart from the new oven there are no other depreciable assets related to the rental property.
Dexter also used his privately owned 2,000cc BMW motor vehicle for business purposes. Dexter purchased the vehicle in May 2020 at a cost of $25,000. Assume Dexter can meet all substantiation requirements. Dexter estimates he travelled 8,000 km for business purposes during the 2021 year.
Required
Calculate Dexter’s taxable income and net tax payable/refundable for the year ended 30 June 2021. Adopt any elections that will minimize his tax payable. Show all workings. Section referencing of the ITAA 1936 and ITAA 1997 is not required, however a list of other references used to answer the question should be included.
Task 1 - Indicative Marking Matrix (Maximum Score of 15 marks)
|
Level of attribute exhibited
and interim score s to be weighted
|
Attribute (and marks m)
|
Lowest
|
Lower
|
Moderate
|
Higher
|
Highest
|
0 -
|
20 -
|
40 -
|
60 -
|
80 – 100%
|
a. Understanding of theory
(4.5 marks)
e.g.
Strong understanding of key concepts and theory
Awareness of key issues
Breadth/depth of literature review, etc.
|
|
|
|
|
|
b. Relevance of discussion
(4.5 marks)
e.g.
Key issues addressed;
Discussions are balanced/logical;
Discussions are complete;
Peripheral issues do not dominate, etc.
|
|
|
|
|
|
c. Accuracy of information
(3.75 marks)
e.g.
Correct restatement of facts;
Correct/reasonable assertions or interpretations, etc.
|
|
|
|
|
|
d. Structure/Presentation
(1.5 marks)
e.g.
Readability & Clarity via:
General layout;
Writing style & spelling;
Appropriate use of any tables, references, appendices, etc.
|
|
|
|
|
|
e. Assessment Task Compliance
(0.75 marks)
e.g.
Follow instructions:
Comply with word count;
Comply with font size, etc.
|
|
|
|
|
|
WEIGHTED SCORE out of 15 = [sum (m x s) from attribute a to e] =
(before any alteration due to peer assessment, late submission or other penalty).
|
Task 2 - Indicative Marking Matrix (Maximum Score of 10 marks)
|
Level of attribute exhibited
and interim score s to be weighted
|
Attribute (and marks m)
|
Lowest
|
Lower
|
Moderate
|
Higher
|
Highest
|
0 -
|
20 -
|
40 -
|
60 -
|
80 – 100%
|
a. Understanding of theory
(3.5 marks)
e.g.
Strong understanding of key concepts and theory;
Awareness of key issues;
Breadth/depth of literature review;
Key issues addressed, etc
|
|
|
|
|
|
b. Accuracy of information
(5.0 marks)
e.g.
Correct restatement of facts;
Correct/reasonable assertions or interpretations;
Correct use of rates & thresholds;
Correct calculations, etc
|
|
|
|
|
|
c. Structure/Presentation
(1.0 marks)
e.g.
Readability and clarity;
General layout;
Appropriate use of any tables, references, appendices, etc.
|
|
|
|
|
|
d. Assessment Task Compliance
(0.5 marks)
e.g.
Follow instructions;
Comply with font size, etc
|
|
|
|
|
|
WEIGHTED SCORE out of 10 = [sum (m x s) from attribute a to d] =
(before any alteration due to peer assessment, late submission or other penalty).
|