HA3042 – Taxation Law

HA3042 – Taxation Law – Tutorial Questions Assignment 2 – Marking Guide
Assessment Task – Tutorial Questions Assignment 2 MG
Student Feedback Document
Unit Code: HA3042
Unit Name: Taxation Law
Assignment: Tutorial Questions Assignment 2 MG
Due: 11:30pm, 26th June 2020
Weighting: 25%
Total Assignment Marks: 50 marks
Purpose: This assignment is designed to assess your level of knowledge of the key topics
covered in this unit
Dear Students,
This document is provided to you for the purpose of improving your knowledge and
understanding of the topics and the content covered in this unit. It is designed to assist you
to identify where you may have areas for improvement in this assessment. This is a
“learning tool” and an opportunity for “deep learning” through personal reflection. Please
note that quantitative units in the BPA program typically have marking rules in relation to
“consequential errors” and “partial marks.”
Consequential errors are defined as cases where the student’s answer in one part or stage of
the question affects other subsequent parts or stages of the student’s answer. For example,
when attempting a calculation question, a student may incorrectly use a “number” or “digit”
when applying a formula, which will then “carry forward” to the final answer provided. In
this case, students will only lose marks once and only once, provided that the subsequent
steps and calculations in the student’s answer are correct.
Partial marks are provided where the student’s final answer is incorrect, but the workings
and the information provided by the student deserves “partial” or “fractional” marks
because there is evidence of relevant knowledge of unit concepts, which directly relates to
the question.
For theoretical questions, where students have provided answers /responses which do not
exactly match the suggested answers, then professional judgement has been applied based
2
on “body of knowledge” principles i.e. provided that a student’s response is directly relevant
to the question requirements, partial (half) or fractional marks are awarded, depending on
relevance and appropriateness of the student’s answer/response to the question.
Unit Learning Outcomes Assessed:

Description: Each week students were provided with three tutorial questions of varying
degrees of difficulty. These tutorial questions are available in the Tutorial Folder for each
week on Blackboard. The Interactive Tutorials are designed to assist students with the
process, skills and knowledge to answer the provided tutorial questions. Your task is to
answer a selection of tutorial questions for weeks 1 to 5 inclusive and submit these answers
in a single document.
The questions to be answered are;
Week 6
John is a sole trader working in his small business as a carpenter. His brother Paul is mentally
disabled, who lives with John and is receiving disability support pension.
Required:
Work out John’s invalid tax offset for his brother Paul who is an invalid under the following three
scenarios:
Scenario 1- John has $120,000 taxable income in 2018-2019 financial year from his small business,
Paul has $4,000 adjusted taxable income.
Scenario 2- John has adjusted taxable income of $63,000, Paul has adjusted taxable income of $900.
Scenario 3- John has adjusted taxable income of $41,000, Paul was severely sick this year and had
zero adjusted taxable income. (10 marks, maximum 200 words).
Suggested Solutions:
Scenario 1- John and Paul’s combined adjusted taxable income in 2018–19 must be $100,000 or less
to be eligible for invalid tax offset. As John’s adjusted taxable income is above this threshold, John is
not entitled to invalid tax offset. (4 marks)
Scenario 2- John’s invalid tax offset in 2018-19 year = $2,717 – (($900 – $282) x 0.25) = $2,871.5
(3 marks)
3
Scenario 2- John’s invalid tax offset in 2018-19 year = $2,717 (3 marks)
Week 7
Oliver wanted to repay his loan of $12,000 he borrowed from NAB. He approached his employer on
4 October 2019 and received $12,000 from him at no interest. On 15 February 2019, Oliver had a
performance review with his employer when they told him that he was only required to repay half of
the loan as he is a good performing employee.
Required:
With reference to the relevant laws, advise Oliver and his employer of the tax consequences of this
transaction. (10 marks, Maximum 300 words)
Suggested Solutions:
Oliver has received a loan fringe benefit and a debt waiver fringe benefit at the end of the FBT year,
31 March 2020.
The loan fringe benefit and the debt waiver fringe benefit are both Type 2 fringe benefits as they do
not include GST. The taxable value of the loan fringe benefit is:
4 Oct to 15 Feb: $12,000 x 5.37% x (134/365) = $237: and (2 marks)
16 Feb to 31 Mar: $6,000 x 5.37% x (44/365) = $39 (2 marks)
The taxable value of the debt waiver fringe benefit is $6,000 that is the amount of the loan that is
waived. (1 mark)
Fringe benefits taxable amount = [($237 + $39) + $6,000] x 1.8868 = $11,842. (2 marks)
FBT payable = $11,842x 47% = $5,566. (2 marks)
For Oliver, the loan and the debt waiver fringe benefits are non-assessable non-exempt income.
Week 8
David and Emma are married and have some investment properties jointly in Sydney. To structurally
manage their investment properties, they signed a formal partnership agreement, and agreed that
net profits from their rental properties would be distributed 95% to Emma and 5% to David. They
also agreed that David bear the total losses from the investments.
Required:
With reference to the relevant laws, critically discuss whether David and Emma are in a partnership
as investors? Also, discuss whether they required to lodge a partnership tax return? (10 marks,
Maximum 200 words)

4
Suggested Solutions
David and Emma are joint owners in the investment properties and their agreement is a tax law
partnership. Student should refer to s995-1 ITAA97 and discuss a partnership at tax law. (3 marks)
Pursuant to the case of FCT v McDonald, it was held that there is no partnership at general law
because David And Emma are joint owners and their possible losses from the investment properties
should be distributed between both of them equally. (4 marks)
The agreement between David and Emma in regards to distribution of profits and losses will not be
taken into consideration for income tax purposes. Therefore, they do not need to lodge a
partnership tax return, however each of them is required to show their equal shares of profits and
losses in their individual tax return. (3 marks)
Week 9
Anna works for Eastern Medical Centre as admin officer, with a marginal tax rate of 47%. She has
just turned 48 in June 2020. Eastern Medical Centre contributed $13,000 under Superannuation
Guarantee Charge. Anna entered into a salary sacrifice agreement with Eastern Medical Centre to
sacrifice 10% her salary into her Super fund. This extra contribution has resulted in an additional
contribution of $17,000 for the current income year.
Required:
With reference to the relevant laws, discuss the effect of these arrangements for both Anna and her
Eastern Medical Centre. Determine the total tax levied on the contributions to Anna’s
superannuation fund and the tax effect on Anna’s employer. (10 marks, Maximum 200 words)
Suggested Solutions:
Pursuant to s 290-60 of ITAA97, Eastern Medical Centre will receive a tax deduction for $30,000 that
is the total payments of superannuation to Anna. (2 marks)
Anna total concessional contributions include both $13,000 and $17,000. The superannuation fund
will pay tax on them at the rate of 15%, calculated as follows: $30,000 x 15%= $4,500 in tax.
(4 marks)
According to s 291-20 of ITAA97, Anna’s concessional contributions cap is $25,000 per year (For
2019-2020 financial year). (2 marks)
Accordingly, Anna has exceeded her cap by $5,000. Therefore, the total tax paid in excess of $5,000
will be equivalent to her marginal tax rate of 47.
(2 marks)
5
Week 10
Darryl Kerrigan is the director of DK Pty Ltd, which is a property investment company in Sydney and
the company is registered for Goods and Services Tax. Due the COVID-19 impact, DK Pty Ltd has
decided to rent out their 20 existing office units that they have finished its building project in
February 2020.
To negotiate rental contracts, DK Pty Ltd employs a property lawyer, Mr Dennis Denuto. Dennis is a
busy lawyer and his practice income is $300,000 per year. DK Pty Ltd offered Dennis a rent-free
office in the city of Sydney in exchanged for his service to DK Pty Ltd. The market rental value of the
office provided to Dennis is $38,000 per year.
Required:
Advise GST obligations and input tax credit of this arrangements to DK Pty Ltd and Mr Dennis
Denuto. (10 marks, Maximum 400 words)
Suggested Solutions:
The rent-free office in the city of Sydney is considered to be the non-monetary consideration for the
legal services that Mr Dennis Denuto will provide to DK Pty Ltd. Considering that the commercial
office is not an input taxable supply, the free-rental office provided to Mr Dennis Denuto is a taxable
supply valued at $38,000 per year. (2 marks)
As the legal services provided by Mr Dennis Denuto is compensated by a non-monetary
compensation, it is considered to be a credible acquisition, because the office provided by DK Pty Ltd
is in order to make taxable supplies, being the sale of the new office units. (2 marks)
Also, the supply of the legal services provided by Mr Dennis Denuto is considered to be taxable
supply. DK Pty Ltd should be able to claim at least some of the $3,800 ($38,000 x 10%). As an input
tax credit provided that it holds a tax invoice from Mr Dennis Denuto. (2 marks)
Mr Dennis Denuto has provided legal services and acquired a rental office unit. His provision of legal
services would be a taxable supply because it meets all of the conditions, including the exchanged
consideration (the rental office unit). (2 marks)
Considering that legal services are not input taxed or GST-free and Mr Dennis Denuto’s turnover of
$300,000 per year is above the registration turnover threshold. As it is a taxable supply, and
assuming that the provided office price is equal to $38,000, Mr Dennis Denuto must pay $3,800 to
the ATO. (2 marks)
6
Submission Directions
The assignment has to be submitted via Blackboard. Each student will be permitted one
submission to Blackboard only. Each student needs to ensure that the document
submitted is the correct one.
Academic Integrity
Academic honesty is highly valued at Holmes Institute. Students must always submit work
that represents their original words or ideas. If any words or ideas used in a class posting or
assignment submission do not represent the student’s original words or ideas, the student
must cite all relevant sources and make clear the extent to which such sources were used.
Written assignments that include material similar to course reading materials or other
sources should include a citation including source, author, and page number.
In addition, written assignments that are similar or identical to those of another student in
the class is also a violation of the Holmes Institute’s Academic Conduct and Integrity Policy.
The consequence for a violation of this policy can incur a range of penalties varying from a
50% penalty through to suspension of enrolment. The penalty would be dependent on the
extent of academic misconduct and the student’s history of academic misconduct issues.
All assessments will be automatically submitted to Safe-Assign to assess their originality.
Further Information
For further information and additional learning resources, students should refer to their
Discussion Board for the unit.