Please answer as per the format provided.
LAWS7012 Business Taxation Semester 1, 2020 Page 1 of 6 LAWS7012 Business Taxation Semester 1, 2020 ASSIGNMENT WEIGHTING: 50% DUE DATE: Monday, 15 June 2020 by 2pm SUBMISSION: Online via the Turnitin link provided on the Learn.UQ website for this course. PURPOSE: The purpose of this assignment is to assess each student’s ability to conduct research into relevant tax issues and to provide advice to a client that clearly demonstrates an appropriate understanding of the relevant taxation issues and the applicable law. These issues predominantly involve capital gains tax and some aspects of assessable income and deductions. INSTRUCTIONS: In relation to the provided facts and using the provided Word document Assignment Answer template, students are required to work through the 3-step CGT process covered in Seminars 8 and 9 to calculate the taxpayer’s net capital gain for the 2019/20 income year. This will entail working through Steps 1 and 2 for each of the taxpayer’s CGT events, before using the resulting capital gain and/or capital losses to calculate the taxpayer’s net capital gain (Step 3). To clarify, the steps referred to are as follows: Students are also required to use the provided Assignment Answer template to calculate the taxpayer’s taxable income for the 2019/20 income year. Note that students must not use the ILAC format for their answers. Rather the format should follow that used in the Suggested Solutions to the Revision Questions and the Seminar 9 slides whereby clear formatting and appropriate headings are used, full calculations are shown, and all application is backed up by reference to the specific law applied and/or tax rulings relied upon. As the assignment is a of a legal hypothetical style, rather than a report or an essay, it should not contain a coversheet, table of contents, footnotes, a reference list or similar. LAWS7012 Business Taxation Semester 1, 2020 Page 2 of 6 Note that submitted assignments must be of a professional standard. A professional presentation is word-processed and contains no spelling, grammatical or formatting errors. MARKING GUIDE: The Course Profile provides that assignment will be graded according to the following criteria: 1. Correct identification of the relevant taxation issue(s). 2. Correct application of the relevant taxation laws. 3. Correct referencing of relevant legislation, case law and tax rulings. 4. Correct calculations of any required amounts. The table below can be used as a guide as to what will be expected: 0-10 marks Answer demonstrates a fundamental misunderstanding of the taxation issues contained in this assignment and/or does not relate to the issues raised. 11-24 marks Answer is partially incomplete; it includes a partially correct approach to the taxation issues and could have been acceptable if the answer was completed. The answer also contains insufficient referencing to the relevant law and/or tax rulings. Where applicable, it contains substantial calculation errors. 25-39 marks Answer includes a correct interpretation of some of the relevant taxation issues. The answer mainly contains sufficient referencing to the relevant law and/or tax rulings. It contains some calculation errors. 40-49 marks Answer includes a correct interpretation of most of the relevant taxation issues. The answer contains sufficient referencing to the law and/or tax rulings. It contains minor calculation errors. 50 marks Answer includes a correct interpretation of all relevant taxation issues. The answer contains all pertinent referencing to the law and/or tax rulings. It contains no calculation errors. NOTE: This is an INDIVIDUAL ASSESSMENT ITEM. This means that students must work alone on all aspects of their assignment submissions, including but not limited to analysing the facts, conducting research, applying the law, and writing up their application. Collusion, being working with others, is a serious breach of the Academic Integrity standards and constitutes Academic Misconduct. LAWS7012 Business Taxation Semester 1, 2020 Page 3 of 6 ASSIGNMENT FACTS Alex Zhang is 35 years old (he was born on 1 August 1984) and is an Australian resident for tax purposes. He is employed as an information technology (IT) professional by a large law firm and is based at the firm’s city office in Brisbane. He is currently single, has no dependants and resides in his own home in the Brisbane suburb of Taringa. In relation to his employment income, Alex’s income statement for the 2019/20 income year showed the following details: Gross salary payments $120,000 Total tax withheld (PAYG credits) $34,320 Work-related expenses • On 30 December 2019 Alex paid $165 (including GST) for his annual Information Technology Professional Association (ITPA) membership fee. The fee covers Alex’s membership for the 2020 calendar year (1 January 2020 to 31 December 2020). • On 1 February 2020 Alex paid $720 (including GST) to join the Australian Computer Society (ACS) as a certified member as it is the largest professional body in Australia representing the ICT sector. The fee covered his annual membership for the 2020 calendar year ($374) plus the one-off cost of joining the ACS as a certified member ($346). • Due to COVID-19, Alex worked from home from early April 2020 for one day per week for 9 weeks using the laptop computer from his workplace. He does not have a home office area set up in his Taringa home for this purpose but rather worked from the kitchen table. He did not keep a diary recording the hours worked from home, but his payslips show that he gets paid for an 8-hour working day. He would like to claim a deduction for his internet usage and phone calls during this period and has heard that the ATO has introduced a new shortcut method for workers in his situation. Note that Alex pays $50/month for his mobile phone plan and $60/month for his home internet use, but he has not kept a record of either his work calls or internet usage. Other outgoings • Alex made the following donations during the 2019/20 income year: - He donated $200 to the Surf Life Saving Foundation (SLSF). Note that the SLSF is a deductible gift recipient. - He further supported the SLSF by purchasing $100 of tickets in one of their Surf Life Saving Lotteries draws where the first prize was a luxury house on the Gold Coast. - He donated $2,500 to a registered Australian political party. Other income • During the 2019/20 income year, Alex received a fully franked dividend of $6,300 (company tax rate was 30%). LAWS7012 Business Taxation Semester 1, 2020 Page 4 of 6 During the 2019/20 income year Alex disposed of some property as outlined below. TRANSACTION 1: RESUMPTION OF LAND AT COOLUM BEACH Alex loves the ocean and has always dreamt of retiring near a good surf beach. On his 21st birthday he received numerous gifts from family and friends including a lotto ticket. Alex ended up winning 1st division in the lotto draw, which amounted to a cash prize of $872,000. Despite his youth he decided to invest most of his winnings in real estate rather than squandering it all on travel, fast cars, and nights out. To that end he bought a house near his parents’ home in the Brisbane suburb of Kenmore, and a block of vacant land at Coolum Beach on which he intended to build his dream house to retire in by the time he turned 50 years old. In relation to the block of land at Coolum Beach, Alex signed the contract to purchase the 750m2 property for $320,000 on 2 November 2005 with the settlement date occurring on 4 December 2005. Alex paid $9,650 in transfer duty and $1,320 (including GST) in legal fees at the time of purchase. In April 2019 Alex received a Notice of Intention to Resume from the Queensland Department of Transport and Main Roads stating that they intended to compulsorily acquire his block of land at Coolum Beach for transport infrastructure purposes. Alex was devastated by this news as he had his heart set on building his dream house there one day, so he consulted a planning and environment lawyer for advice. The lawyer lodged an objection to the proposed acquisition and appeared at the ensuing objection hearing on Alex’s behalf at a cost of $4,400 (including GST). This objection was considered by the Minister for Transport and Main Roads; however, the minister was satisfied that the proposed resumption should proceed so the minister applied to the Executive Council to have a Taking of Land Notice published in the Queensland Government Gazette. The notice was published on 4 September 2019. As the land was effectively resumed at this point, Alex obtained the services of a professional valuer at a cost of $450 (including GST) to have the land valued. The valuer determined that the market value of the land was $560,000 at the time of the resumption. Alex then applied to the department for compensation for the land based on its market value plus the legal and valuation costs he had incurred in relation to the resumption. The department responded by making Alex an offer of compensation of $560,450, which included a reimbursement for the valuation costs only. Alex accepted this offer on 12 November 2019 and received the compensation payment on 4 December 2019. Alex decided against trying to purchase a replacement block of land and instead invested most of the proceeds in the share market. Note that Alex left the block of land vacant throughout his ownership period and did not use it for an income-producing use. He incurred a total of $16,800 in council rates over his ownership period and $7,830 (including GST) in maintenance costs to have the land cleared from weeds at regular intervals (as required by the local council). Hint: You may wish to refer to the Australian CGT Handbook for assistance in dealing with this compulsory acquisition of land. Note that this book is available online in the Thomson Reuters ‘Checkpoint’ database. You can find a direct link to this database on the course Learn.UQ website. LAWS7012 Business Taxation Semester 1, 2020 Page 5 of 6 TRANSACTION 2: SALE OF A RESIDENTIAL