UNSW THE UNIVERSITY OF NEW SOUTH WALES UNSW BUSINESS SCHOOL SCHOOL OF TAXATION & BUSINESS LAW TABL 5551 TAXATION LAW SEMESTER TWO, 2018 LONG ASSIGNMENT DUE DATE AND TIME Monday, 8 October 2018 by 12.00 pm. This is in Week 11 of Semester Two, 2018 (Note, this is later than first stated) LATE LODGMENT OF ASSIGNMENT Not Accepted (Zero marks awarded, along with unavoidable fail grade in course) PLACE OF LODGMENT On the Moodle site under the Long Assignment submission link VALUE OF ASSIGNMENT 25% INSTRUCTIONS AND CONDITIONS APPLYING TO ASSIGNMENT PLEASE READ THE FOLLOWING INSTRUCTIONS AND CONDITIONS CAREFULLY AND IMPLEMENT THE INSTRUCTIONS You are required to submit an answer to the attached assignment question by the due date and time for lodgment. Your answer must not exceed 1,800 words. The word limit will be strictly enforced. Words above the word limit will not be marked (i.e. wasted words). Words, case names/case citations and legislative references in footnotes are not counted in the word count. However, you must not place substantive parts or central parts of your answer or argument in footnotes to get around the word limit. (Note, you should use footnotes, and not endnotes, because footnotes appear on the same page as the related text, which is easier for the reader). If your answer requires you to show substantial calculations (e.g. more than half a page), you must place these in an appendix or appendices to your answer and refer to these in the text of your answer. Appendices are not counted in the word count, but again, do not use an appendix to get around the word limit. Small calculations (e.g. three or four lines) should be incorporated into the text of your answer (or in footnotes at the relevant part of your answer). Your answer must be typed. You must use one and a half (1.5) spacing and a font size of 12. You must leave a three-centimetre (3 cm) margin from both sides of the A4 page. Your pages must be numbered sequentially. You must pay careful attention to the presentation of your answer (e.g. use headings and sub-headings to break up your answer, use appropriate gaps between paragraphs, use case citations correctly, use references to legislation correctly). Sub-standard presentation of your answer will be reflected in the grade for your answer. Indeed, I will be sending you a separate email in respect to this matter, and it will be mentioned in the lecture. The presentation of answers in the Short Assignment was poor to very poor. You must not include a bibliography or reference list at the back of your assignment; this is a waste of words and time to do this. The legislation and cases cited in support of your answer is all that is required. You must carefully proof-read your answer (two to four times) before submission. Things like incorrect spelling, incomplete sentences and incorrect use of grammar will be reflected in the grade for your answer. Also, use plain English in writing your answer. You must keep a copy (or two) of the answer that you have submitted. The following items (Items 10-12) is subject to lodgment requirements. You must complete and attach a copy of the Official Assignment Cover Sheet at the front of your answer. The Official Assignment Cover Sheet will be posted on Moodle under the Long Assignment link. Provided you agree with the terms of the declaration, you must sign the declaration regarding plagiarism on the Official Assignment Cover Sheet. An assignment is not validly lodged if the plagiarism declaration is unsigned, which will mean the assignment is lodged late. You can sign your declaration by simply typing your name in capitals (e.g. TRAN SONG) in the designated signature box. You must not place your name or student number on pages that contain your answer. Such information must only appear on the Official Assignment Cover Sheet. This is to ensure anonymity in marking. Again, ensure that the Official Assignment Cover Sheet is attached to the front of your answer. In preparing an answer, you will inevitably discuss issues raised by the assignment with other students. There is nothing in the UNSW rules prohibiting such discussions. Indeed, you are encouraged to discuss issues arising from the assignment with other students. However, in the end, you must be able to state that the work that you have submitted is your work. Importantly, you should ensure that you have not committed (either deliberately, or without intent) an act of plagiarism (e.g. presenting anothers work or ideas as your own, failing to acknowledge the source of a quotation, submitting the same or similar version of work to that of another student). Due to the potential for damage to reputation, plagiarism is taken very seriously by the university, and therefore, the lecturer-in-charge of this course. In this regard, you should re-read the notes on plagiarism in the Course Outline. If you still do not know what plagiarism is, you must see the lecturer-in-charge. This assignment is a research assignment. You are expected to undertake independent research into tax materials that may be relevant to the issues raised by the assignment. This means that you will have to go beyond the prescribed materials for the course in respect to some issues (i.e. you cannot, and should not, just rely on your textbook, casebook and core tax legislation). This is also likely to mean that the assignment will deal with issues in topic areas that have not yet been lectured on. Indeed, topics involved in the assignment are very unlikely to be lectured on in any detail, as this would tend to undermine the research-based nature of the assignment. Given that this assignment is a problem type question requiring you to undertake research, no staff member working on this course (e.g. lecturer, tutor(s)), or any staff member in the School of Taxation & Business Law, will assist you in writing and researching your answer. Accordingly, please do not ask a staff member questions related to the assignment. The lecturers suggested answer or approach (and feedback) to the assignment question will be posted on Moodle under the Long Assignment link as soon as possible (after due date). The lecturers suggested answer will largely serve as the marking guide for the assignment. Importantly, the lecturers suggested answer will allow you to compare your answer with the suggested approach taken by the lecturer. (It should be noted that the lecturers suggested answer is not necessarily the only approach, or the best approach to issues in the assignment). Reading the lecturers suggested answer and feedback document is an important part of the feedback provided to you in this course. It is expected that marked assignments/marked answers will be returned to you as soon as possible. Your mark for the assignment will not be posted on Moodle. You are strongly advised to read the relevant parts of the document, Approach to Solving Problems in Taxation Law and Student Companion, well in advance of commencing your research for the assignment. It would also be a very good idea to re-read the relevant parts around 10-days before submitting your assignment. Before submitting your answer, ask yourself this question and answer it honestly: If you were a client of a reputable accounting firm (e.g. Ron), would you be pleased to pay (a substantial amount of money) for your assignment answer and the advice contained in your assignment answer? If the answer is no, you need to do more work on the assignment before submitting it. Read you assignment out loud to yourself. This is an excellent way, another way, of checking that what you have written is logical, coherent, addresses relevant issues and overall, makes sense. It is also one of the best ways of picking up poor sentence structure, poor use of words, etc. If you are dissatisfied with your grade, the first thing you must do is to check your analysis and answer against the lecturers suggested answer and feedback. Experience indicates that this process will generally resolve most concerns regarding allocated grades. However, if you are still dissatisfied with your grade, you are welcome to discuss the issue with the lecturer-in-charge. Dale Boccabella Lecturer-In-Charge 21 August 2018 LONG ASSIGNMENT QUESTION Part A (15 Marks) Ron, aged 42 and a qualified lawyer, is in the process of completing his income tax return for the income year ending 30 June 2018. He seeks your assistance/advice on how to deal with the following transactions in his tax return: On 30 September 2017, Ron sold all his shares in Zinc Mines Ltd, a company listed on the Australian Stock Exchange. He bought the shares on 5 July 2008 for $50,000 and sold them for $160,000. Ron purchased the shares with the purpose of making a profit from their sale. (Ron did receive dividends during the time he owned the shares). Ron advised his stockbroker to place the sale proceeds in a cash management trust that had its headquarters in Singapore. This trust was paying 12% interest per annum on short-term deposits and many Australian investors were using the trust. Rons thinking was to hold the money temporarily in the cash management trust while he decides what to do with the funds in the long-term. Unfortunately, on 12 December 2017, Rons stockbroker (Calvin) advises Ron that the proprietors of the cash management trust were professional fraudsters and that they had defrauded numerous investors of millions of dollars. In short, Rons $160,000 has also been stolen and there is no chance of getting any of the money back even though the regulatory authorities and several police agencies (from Singapore and Australia) are investigating the fraud. Between 2008 and 2018, Ron only bought and sold other shares around eight times. As at 12 December 2017, Ron was still thinking about the long-term use of the $160,000. Ron received an interest payment from the fund of $3,400 on 14 November 2017. Ron is a beneficiary in a family discretionary trust (Medak Family Trust (MFT)) that Rons parents established 25-years ago. The MFT owns five investment properties and two small businesses. Like many discretionary trusts, the trustee of the MFT has an absolute discretion to pay profits to any beneficiary listed in the schedule to the trust deed. Ron is listed as one of the beneficiaries in the schedule. The MFT had an accounting profit of $240,000 for the financial year ending 30 June 2018. The net income (taxable income) under s 95(1) of the ITAA 1936 for the income year ending 30 June 2018 was $280,000. The difference was mainly attributable to lower tax depreciation (compared to accounting) on depreciating assets. The difference was not due to any capital gains/capital profits. The trustee exercised his discretion on 29 June 2018 in favour of Ron (and other beneficiaries). Ron was allocated $45,000 out of the profits for the year. This amount was paid into Rons bank account on 29 August 2018. Ron has always worked during his adult years. For the last 12-years, he has worked in trade practices law and consumer protection law for a major law firm (Integrity Lawyers Pty Ltd (Integrity Lawyers)). Ron decides to change his career path and now wants to work in banking and finance law. His employer (Integrity Lawyers) agrees to transfer him to the Banking and Finance division but only on strict conditions. The company does not normally allow an established employee lawyer with considerable expertise in an area to change their area of specialty, and effectively start from scratch. One of the conditions is that Ron must immediately enrol in the Master of Laws (LLM) degree at the University of Sydney and that he undertakes two banking and finance courses per semester over the next two years. Ron agrees. Unfortunately for Ron, the firm insists that Ron meets all his own costs of the degree, aside from textbooks. For the income year ending 30 June 2018, the course fees (both courses were undertaken in Semester One, 2018) came to $8,000 and the textbooks came to $770. Another condition imposed by the firm is that Rons salary will decrease by 15% when he starts in the Banking and Finance division (i.e. Rons salary will drop from $160,000 to $136,000). Ron started in the Banking and Finance division in February 2018. If Ron should fail any course in his LLM, he will take a further salary drop of 10%. After two years in the Banking and Finance division, Rons salary will return to its normal level (i.e. $160,000). On 23 March 2018, Ron presents his receipts for the textbooks he purchased ($770) to the accounts department of Integrity Lawyers, and that department paid the amount ($770) on the receipts into Rons normal bank account (where his salary is deposited). Ron also advises that he had $45,000 in net capital losses for the 2014-15 income year (from a sale of shares). These are the only losses available to Ron. Advise Ron on the income tax consequences of the above transactions, events, etc. Your advice must be supported by relevant tax legislation, tax cases and/or tax principles. (Note, there is no need to calculate Rons liability to the Australian Taxation Office for the income year because we do not have all relevant facts). Part B (10 Marks) Incorporating and building on the relevant facts from Part A above, like other major and second-tier law firms, Integrity Lawyers hires around 15-20 graduate lawyers every year from Australian universities. Given the competition for high quality law graduates from Australian universities, prospective employers like Integrity Lawyers are now having to pay incentive payments (sign-on payments) to attract quality graduates. In August 2017, Integrity Lawyers made 17 payments of $15,000 (total: $255,000) to new recruits. All the new recruits are scheduled to start in February 2018. The main contractual arrangement with the new recruits is that the payment is for agreeing to enter into an employment contract with Integrity Lawyers. If the graduate did not end up working for Integrity Lawyers (e.g. got a job elsewhere), he or she was entitled to retain the money (no need for repayment). All 17 recruits who received sign-on payments from Integrity Lawyers did in fact commence employment with the firm at the agreed time. Indeed, all 17 of them were still working for Integrity Lawyers 12-months after they commenced employment with the company. Integrity Lawyers expects nearly all these staff to remain with the company for some time given the excellent conditions of employment offered by the company (e.g. staff training, flexi-time). The management committee of Integrity Lawyers decided, after lengthy discussions, to commission a cost-benefit analysis into the viability of having more of its tax division staff out at client locations for longer periods of time while doing client work. This would cut down on the space requirements (and lease payments) at Integrity Lawyers office premises, and it would allow for a closer working relationship between the staff member and the client. The management committee noted that this approach is already used extensively in the audit division and the management consulting division of the company. Accordingly, Integrity Lawyers commissions a space usage consultant to carry out the study and produce a report for the management committee to consider. The report is completed and delivered on 24 November 2017. The consultant that produced the report charged Integrity Lawyers $50,000 for the report. After lengthy deliberations up to March 2018, the management committee decided not to go ahead with any change mainly because tax work is different to audit work (e.g. there is less of a requirement for access to staff of the client). Further, many staff in the corporate tax division quite often work from home in any event, and thereby the objective of reducing the space requirements at Integrity Lawyers leased premises is already being achieved. Fully advise Integrity Lawyers on the deductibility, etc, of the above expenses. (Ignore the GST consequences of transactions unless relevant to income tax or FBT: see below). Show calculations where appropriate. Support your advice by reference to relevant tax legislation, tax cases and tax principles. (Note, there is no need to calculate Integrity Lawyers taxable income, etc, because the facts do not reveal the total of the companys assessable income and deductions, or for that matter, tax offsets, for any income year). Also, advise Integrity Lawyers on the fringe benefits tax issues associated with the $770 payment made to Ron in Part A. Show calculations where appropriate. Support your advice by reference to tax legislation, tax cases and/or tax principles. End of Document
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