taxation law
Assignment length: 2,500 – 3,000 words
Groups: The assignment is to be prepared in groups of two or three students.
Your answer:
Your analysis of each problem should include:
An introduction
Identify the issues (usually only one or two) that you have to consider
Discuss the relevant legislation and cases
Evaluate the facts and the law from both the ATO’s and the taxpayers position
Form a conclusion based on your discussion of the issues, the law and the facts
Marks are allocated for your overall presentation.
General information regarding the assignment:
Assignments should be typed, one and half spaced and on one side of the paper only.
Please do not submit assignments in folders, simply staple in the top left hand corner.
It is your responsibility to submit your assignment on the due date. It is
recommended that you retain a copy of your assignment.
Your presentation should be formatted using the Harvard Style Manual which is available
on line through the library
Question one (20 marks)
Lin is an auditor who works for the Australian subsidiary of a global shipping company. Lin
moved from Malaysia to Australia with his spouse and children several years ago and
purchased a home in Melbourne for the family to live. His job occasionally requires an
extended overseas assignment, but ultimately he intends to settle in Australia.
In July 2015 he was posted to the Singapore subsidiary of his company for a definite period
of two years with a possibility it might extend a further two years. Lin was keen to take this
option if it arose because the pay and working conditions were good. Lin took a two year
lease on an apartment in Singapore for himself to live in, while his family remained in
Melbourne where his children go to school.
During his short holiday breaks his family would travel to stay with him in Singapore. Lin did
not return to Australia during the income year.
The Singapore subsidiary paid Lin an annual salary in Singapore dollars equivalent to
AU$200,000. Most of his savings were sent home to support his family and to make
accelerated payments on the family home loan. During the year he purchased some
Commonwealth Bank shares for AU$50,000 and sold them for AU$100,000.
Required:
Lin has asked for your advice on whether:
(i) he is a resident of Australia for income tax purposes in the period during the
income year to 30 June 2017; and
(ii) the effect this decision might have on his income tax liabilities in Australia
Explain the alternative residency arguments using quality legal references, and form an
opinion as to which is the better view from the facts.
Explain how he would be assessed on his salary and capital gains if he was a resident and
alternatively if he was a non-resident.
Question two (20 marks)
In 2015 Winnie, an Australian resident individual, sold her horse breeding business based in
the south eastern suburbs of Melbourne.
The purchaser of the business did not want to buy the land. The real estate comprises 10
hectares which cost her $1m in 2005.
Winnie put the entire real estate up for auction but it failed to reach her reserve price of
$10m and was passed in. Her real estate agent had suggested the reserve was a fair market
value but at the moment no buyers were interested in such a large parcel of land.
She sought advice from agents and accountants who suggested that smaller blocks of land
would be more affordable for home buyers. Potentially, 10 vacant one hectare blocks would
sell for $2m each and would require minimal costs to subdivide.
However, Winnie was also advised that 50 townhouses could be built at a cost of $100,000
each and they could sell for $1m each.
In July 2016, Winnie installed office cabins on the site and personally managed the entire
construction, sales and marketing activities. 50 townhouses on equal size and value blocks
were constructed and by 30 June 2017 half of these had been sold for a total of $25m.
Required:
Advise Winnie of the possible income tax consequences of the $25m real estate sales this
year.
You should discuss any alternative views based on the facts, using quality legal references.
Determine the assessable income resulting from each alternative view.
Finally, provide your opinion on which you think is the better or correct outcome.
