LAWS20060 Taxation Law Of Australia Individual Assignment Answer

pages Pages: 4word Words: 890

Question :


TERM 1 2019

40% - 40 marks in total available
2500 – 3000 words
Online via Moodle
One file in .doc or .docx (MS Word) format


This assessment item relates to learning outcomes 1, 2 and 3 as stated in the course profile.


This assignment is to be submitted in one (1) Word document only. This assignment is to be submitted online via Moodle by the due date stated. It is suggested that where necessary you put your calculations into columns or tables to improve readability in the assignment document

The method of referencing to be used in this assignment is the Australian Guide to Legal Citation (AGLC) 3rd Edition referencing method. Additional information regarding this method is available through the library and the Academic Learning Centre. When making a reference, cite the original source or authority in preference to a secondary source such as the textbook, especially when you are discussing various sections of legislation. This means you should make reference to legislation, cases and Tax Rulings as a priority to back up any arguments that you make in your assignment.

Extensions policy

The university policy on extensions of time will be strictly enforced. Extensions will only be considered if made via the online system and based on medical or compassionate grounds. Any extension application should be made before the due date for submission. Medical conditions should be supported by a medical certificate, and, since students are expected to start the assignment early, temporary or last-minute conditions are usually not grounds for an extension.

Professionals are expected to manage their time to meet their obligations, so work or personal commitments are insufficient grounds for an extension.


The university’s plagiarism policy will also be strictly enforced. If plagiarism is found, a minimum penalty is likely to be zero marks for the assignment. This assignment is the only assignment for this course, and it carries a weighting of 40% of the total assessment for the course.

While the assignment is largely based on material covered, you are free to research and seek advice as widely as you find necessary – there are no limitations as to sources. However, you must make sure that sources are appropriately referenced.

Students must complete all questions in the assignment.

With reference to all questions - support the analysis in your answers where appropriate to the ITAA97, ITAA36, Tax Rulings and/or case law.


  1. What topic does Taxation Ruling TR 2018/4 cover?1 mark
  2. Which Division of the Income Tax Assessment Act 1997 details available tax offsets?1 mark
  3. What is the top tax rate applicable to a resident taxpayer in the 2018/19 tax year?1 mark
  4. Give one example of an asset that is exempt from capital gains tax, including its legislative reference?1 mark
  5. What does the CGT event B1 s104-15 tax?1 mark
  6. Explain the formula contained in s4-10(3) ITAA 1997?1 mark
  7. Explain the significance of the High Court case, FC of T v Day 2008 ATC 20-064 in the topic of deductions?4 marks
  8. Explain in your own words the difference between marginal rate of tax and average rate of tax?5 marks
  9. Explain what a consumption tax is?5 marks


Briefly explain the extent, if any, to which each of the following payments made by an Australian resident taxpayer during the current tax year would be an allowable deduction:

  1. Brett incurred interest expense on a loan he took out to pay employee wages. The loan was secured against his personal home.2 marks
  2. Julie incurred $500 in mobile phone charges for the year. She determined that her work related calls represented 60% of her total calls.2 marks
  3. Sally paid $1,200 during the tax year to a babysitter to look after her children that she required in order to go work.2 marks
  4. One of Jerry’s long term employees stole $20,000 worth of goods from the business during the tax year.2 marks
  5. Expenditure incurred in contesting a local government election of $5,000 with $2,000 of that, spent on a big election party.2 marks


  1. Andy owns some land and grants a lease to Brian for five years, at a premium of $5,000.3 marks
  2. On the 11th January 2018, in exchange for the sum of $40,000 John granted to Farm Ltd, an option to purchase his 100-acre farm just outside Adelaide for the sum of $800,000. John had purchased the farm 10 years ago.4 marks
  3. Jamie and Olivia purchase a house in January 2006. Immediately they rent it out for 2 years while they travel overseas. In January 2008 they occupy the house and make it their main residence until they sell it in January 2018. They make a capital gain of $300,000. What are the CGT implications for Jamie and Olivia? 5 marks
  4. Chris bought 12,000 shares in BHP for 45 cents on the 1 August 2018 and they are now trading at $1.56. The same day he also purchased 5,000 shares in Westfarmers for $5.20 and they are now trading at only $2.10. Chris sells both his BHP and Westfarmers shares on the 30 June 2018. Calculate the net capital gain that Chris would record in his 2018/19 tax return.8 marks

Outline the CGT consequences for the 2018/19 tax year and state if the 50% discount is applicable to the above transactions?


Various taxpayers receive the following during the 2018/19 income tax year:

  1. A prize of $2,000 for the best TV advertisement of the year.3 marks
  2. $500 received by an employee from an employer for costs incurred to travel to Sydney for work. The employee bought a return ticket on sale for only $120 and stayed with a friend while in Sydney. One of the conditions of the work related trip was that the employee could keep whatever remained of the $500 as long as the work required to be performed in Sydney was completed. 3 marks
  3. An iphone worth $1,000 from a client.3 marks
  4. $10,000 awarded as damages for personal injuries incurred by an individual in a car accident.3 marks
  5. A taxpayer buys a share during the year for $5. On the 30 June, the taxpayer still owns the share but it is now trading at $7.503 marks


Discuss the assessability or not of the above amounts.Total 15 marks 


Nisu arrives in Australia on 30th December 2018 from Nepal. He is enrolled in the Masters of Accounting Program at CQU Sydney campus. He comes to Australia from

Nepal with the intention of studying for three years in Australia. Nisu manages to get a part-time job working in a bookshop with one of his roommates. There are four students that share the rental of a house not far from the university. Nisu makes lots of friends, joins the local soccer team and is doing well with his studies and job.

However, on the 30 June 2019 he has to return to Nepal due to a family commitment. He unfortunately has to withdraw from university with no prospect of returning.


Discuss the factors that will be taken into account in determining if Nisu would be considered a resident of Australia for income tax purposes for the 2018/19 income year.Total 15 marks

MARK - 65-74%

CRITERION Demonstrates ability to use and apply fundamental concepts and skills of the unit, going beyond mere replication of content knowledge or skill to show understanding of key ideas, awareness of their relevance and some use of analytical skills.

COMMENT: Learning involves not only knowing principles or concepts but also the ability to apply them to a real-life situation.


MARK - 50-64%

CRITERION Demonstrates the learning outcomes of the unit, such as knowledge of fundamental concepts and performance of basic skills; demonstrates sufficient quality ofperformance to be considered satisfactory or adequate or competent or capable in relation to the learning outcomes of the unit.

COMMENT: Students who get a mark in this range usually demonstrate some knowledge of principles and concepts, but do not explain or apply them accurately. Answers often look like little more than a summary of what someone else has written.


MARK - 40-49%

CRITERION Fails to demonstrate the learning outcomes of the unit.

COMMENT: Students in this range usually make some effort to perform the assignment task but fail to achieve what is prescribed for a Pass.


MARK - <40%

CRITERION COMMENT: Students in this range usually fail to properly carry out the instructions or fully perform the tasks specified in the assessment.

Assessment criteria Evaluation Criteria

These criteria are a general guide as to the standard expected at the various levels. Characteristics indicative of the respective levels of achievement in the assignment are as follows. It is not necessarily the case that all these criteria will be met at a particular standard as there may be a superior performance on one of the criteria and not so satisfactory performance on another.

High distinction standard

• The answer is very well written and clearly expressed

• There is a demonstrated appreciation and understanding of the issues involved

• The answer is well structured and logically organised

• Demonstrated mastery of referencing system

• There is evidence of a comprehensive analysis of the issues

• Conclusions are backed by well-reasoned arguments demonstrating a detailed insight and analysis of issues

• Comprehensive coverage of all relevant issues

• References are made to the appropriated legislation for particular issues

• Statutory provisions are analysed and interpreted correctly

• The legislation is applied to the particular fact situation in a competent manner

• Consideration is given to the operation of the common law

• There may be consideration of issues not raised in the tutorials and answer guides

Distinction standard

• The answer is well written and expressed

• The answer is structured and logical

• The issues have been reasonably well identified and appreciated

• There is correct use of referencing

• Issues have been analysed

• Reference is made to all appropriate legislation, although the analysis and interpretation is not as detailed and reasoned as for the high distinction standard

• The effect of the common law is considered

• There is a comprehensive coverage of the issues

• Occasional errors of law and legal reasoning may still be present

Credit standard

• The answer is generally well written and expressed

• The answer is structured and sequential

• Referencing is satisfactory

• Issues are identified and addressed

• There has been an attempt to analyse some of the issues

• The coverage of issues is reasonably comprehensive often with a good treatment and analysis of particular points

• Errors of law and incorrect reasoning may sometimes be present

• Statutory interpretation may require improvement

• Depth of treatment is often lacking in some of the issues

Pass standard

• The answer is able to be followed and understood

• The answer could perhaps be better organised and structured

• The referencing may need improvement

• Issues may need to be identified and addressed in more depth

• Analysis when present may be incorrect

• Some familiarity with the legislation and its application is demonstrated

• Sometimes the conclusions reached are simple

• There may be several errors of law

• There may be quantities of material of marginal relevance included in the answer

Fail standard

• The answer may be significantly short of the required length

• The written expression is poor and difficult to understand

• The answer is poorly organised

• There has been a failure to identify and address the issues in the question

• Referencing is generally inadequate

• There is a lack of familiarity with the legislation and its appropriate application

• The reasoning and application demonstrated is poor

• Frequently there is much irrelevant material


All parts of the assignment will be marked in accordance with the university’s Gradesprocedure (which can be accessed via the Course Profile). The following marking rubricincorporates that procedure.



MARK - 85%+

CRITERION Demonstrates proficiency in all the learning outcomes of the unit; work is well read or scholarly. 

COMMENT: Here, the student will have done everything well and formulated their answer in a tight, efficient, thoroughly professional manner. Their explanations and arguments will have a strong logical flow and be convincing. Their research will be thorough.


MARK - 75-84%

CRITERION Demonstrates awareness and understanding of deeper and less obvious aspects of the unit, such as ability to identify and debate critical issues or problems, ability to solve nonā€routine problems, ability to adapt and apply ideas to new situations. COMMENT: The student will demonstrate this by achieving all the outcomes for a Credit, but also some of the higher level standards for a High Distinction

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Answer :


Answer to question no- 1

  1. Taxation Ruling TR 2018/4 contains the list of effective lives of depreciating assets under section 40-100 of the Income Tax Assessment Act 1997 (ITAA 1997). The list contains official new effective live which has been determined and is applicable from 1 July, 2018 onwards. 
  2. Division 13 of the Income Tax Assessment Act 1997 states the details about the available tax offsets. 
  3. For residents, if the income is $180,001 and over, a tax of $54,097 plus 45% of amounts over $180,000 is applicable for the year 2018-19. 
  4. A car, motorcycle or any similar vehicle, which can’t carry a load of more than 1 tonne or 9 passengers is exempted from the Capital gains tax .
  5. Section 104-15 of CGT event B1 under Income Tax Assessment Act, 1997 states the treatment of capital gains when the right of Use and Enjoyment of CGT asset passes to another entity and the title of the asset might or might not pass before the termination of the agreement until the final installment is paid. The agreement is also called a hire purchase agreement.
  6. The taxable income in a financial year can be calculated as- 

Income tax = (Taxable income x Rate) – Tax offset

The formula explains the computation of the tax liability of the taxpayer due in a financial year. The taxable income is to be multiplied with the applicable tax rate as per the tax payer’s income slab to get the Gross Income tax liability. This will then be adjusted by reducing the tax offsets from the Gross Income Tax Liability to arrive at the Tax liability for the period.

  1. The High Court case, FC of T v Day 2008 ATC 20-064, deals about deductibility of legal expenses incurred by an individual while assessing his taxable income. In the given case, the taxpayer was charged with 3 disciplinary charges by his employer on the grounds of -

     I. Wrong usage of ID card at non- work related places

           II. Failure to fulfil his duty to accurately record attendance at work.

          III. Wrong usage of work vehicle and diesel claim for non- work related things.

As per the judgment, the judge held that only the second charge can be deducted from his taxable income while the rest two charges were held non-deductible. Later, on re appeal by the taxpayer, the panel of judges agreed that all 3 expenses can be deductible on different grounds.

This case sets the following grounds in respect to deduction of expenses-

  1. The expenses incurred in the course of earning a person’s taxable income are deductible
  2. The expenses which are not for private usage, i.e. related to work of the taxpayer, are deductible

H) Marginal rate of tax is incremental tax which is paid on the incremental income of the taxpayer. In other words, marginal tax means extra tax that you pay for extra dollar of your income. 

e.g. If a person is earning $3500 per year and the tax rates are-

$ 1000 and below– 10%

$ 2000 and below – 20%

$ 3500 and below – 35%

Then, till $ 1000 he has to pay 10% tax, for next $ 1000 20% and last $ 1500 35%.

Hence, each part of the income is taxable as per the tax bracket they fall in. This is a progressive tax system that ATO has set up for the taxpayers. 

Whereas, average tax is the total taxes paid by the taxpayer divided by your total income. 

Therefore, the average rate of tax will always be less than the marginal rate of tax.

I) Consumption tax is the tax levied on the consumers for the goods and services consumed by him. Consumption tax is different for different types of goods, e.g. GST for goods and services, Excise tax for specific types of goods like alcohol, tobacco and tourism, Import duties for import of goods in the country, retail sales tax, etc .

As opposed to income tax, consumption tax is attributable to how much a person is consuming in an economy.

Answer to question no-2

  1. 100% deductible from the assessable income as the expense is incurred in the process of earning his taxable income.
  2. $ 300 is tax deductible (60% of $ 500)
  3. Not deductible as it is incurred for personal purposes
  4. Deductible as an expense before charging tax
  5. Entire $ 5000 is tax deductible as it is incurred for election campaign, hence work related 

Answer to question no-3

It is analyzed that capital gain tax operates by the net capital gain as taxable income in the tax year in which the assets undertaken is being sold or disposed of. However, any gain is first discounted 50% for individual taxpayer or by 33.33 superannuation funds. 


Any amount received by Andy as premium on the least capital reduced by the expenses will be considered as capital gain

Capital gain- $ 5000

The capital gain tax will be 5,000*10%= 500 MGT.


0% tax bracket
$0 - $38,600
$0 - $77,200
15% tax bracket
$38,601 - $425,800
$77,201 - $479,000
20% tax bracket
$425,801 and above
$479,001 and above

Capital gain tax on property for individual would be – 18% on the gain 

Property value- $ 80,000

Consideration received= $ 40000

Actual value of the farm house= 800000- 40%*800000

=$ 480000

Loss on capital= $ 80000

Tax on the capital loss will be zero and could be used by individual for the taxation credit. 

Answer to question no-4


 The prize of $2000 will be assessable income as the person has rendered his/her services and then won the prize for it. As advertising is a business like-activity, so the taxpayer will have to show this prize income in his/her books and will be liable to pay tax to the government for the same amount. This income will be included in the 'Other Income' head in the Income Tax return of the Tax payer. Further, the tax for this income will be charged according to the slab of the tax payer. 


The employee received a sum of $500 for the cost incurred to travel Sydney for work. The employee booked the return ticket at a discounted cost of $120. The balance amount of $380 will not be an assessable income for the employee. For the employer, it is a cost part for the books of the company. The employer also has the policy to let keep the remaining amount with the employee if the work has been successfully done by the employee. For the employee the remaining amount of $380 is a remuneration for the expenses the employee has to occur for his/her trip to Sydney, and according to the income tax rules the remuneration received for tour expenses are not a part of assessable income. 


An I-Phone worth $1000 from a client will be assessable income for the receiver. The iPhone has been gifted by the client and also it is worth $1000. The gifts received by an individual from any person related to his/her business will always be a assessable income. If the person would have received this gift from a family member or a friend then it would not be considered as assessable income, but this gift has been received by a client so this will be an assessable income. The whole amount $100 will be the assessable income for the person .        


The $10,000 awarded as damage for personal injuries incurred by an individual in a car accident will not be an assessable income. The awards which are received against injuries in any kind of road accidents are not considered as assessable income. This award is exempted from Income Tax. The Tax payer will not have to pay any taxes on this income which is received by him/her for road accident. This income is always exempted from taxes . 


The Taxpayer bought a share of $5 worth during the financial year. On 30th of June the share was trading at $7.50. In this case, the assessable amount for income tax would only be $2.5. As the taxpayer bought the share for $5 and at the end of the financial year the share was trading at $7.50, so the difference of the cost of purchase and the current trading price will be the profit booked by the taxpayer. So the assessable income will only be $2.50 for the Tax payer.  

Answer to the question no-5

In the given case, it is found that Nisu arrives in Australia on 30th December 2018 from Nepal and enrolled himself in the accounting course in Australia.  However, due to the personal reason, she had to leave the Australia on 30 June 2019.  It is analyzed that in order to become the resident of the Australia, a person needs to fulfill following conditions which are given as below . 

Tax residency test in Australia:

For the taxation purpose, the resident of the Australia is the person who resides in the country and meets with the certain terms and conditions. 

The domicile test is the test which reveals the person who is by origin or through choice resides in the place of country. This is used to identify the residency of the individual based on his origin. 

183 day test: This is the residency test in which a person or individual would be considered to the resident of the country if he lives in Australia more than 183 days. This period could be either continuous or separate period. 

Another test is called commonwealth superannuation test which is used to assess the residency test o the government employees. Therefore, in this case, this test would not be used.

As per the rules and regulation of Taxation Ruling TR 98/17 Income tax, an individual who comes in Australia for the academic purpose, tourist purpose and business purpose for more than 183 days will be considered resident for the tax purpose (Apps, & Rees, 2013). 

Analysis and recommendation of case

After assessing the case of Nisu, it is found that he has stayed in Australia for 180 days for his educational purpose which is less time which was given in 183 day test. Therefore, after assessing the details of Nisu, it could be inferred that he is not resident of Australia for the tax purpose as his stays fall low by 3 days.