LAW6001 Assessment 3: Group Case Study Page1of10
| ASSESSMENT 3 COVERSHEET | |
| Subject Code and Title | LAW 6001 Taxation Law |
| Assessment | Assessment 3: Case Study (Tax planning) |
| Individual/Group | Group |
| Length | 3,000 Words +/- 10% excluding References |
| Learning Outcomes | a) Identify and analyse the tax treatment of various types of income and deductions. b) Effectively apply taxation law in determining tax outcomes in various scenarios such as partnership, trust and company structures c) Small business entity (SBE) concessions d) Identify and calculation of capital gains tax (CGT), including CGT event A1 happening on disposal of an asset, the CGT discounts, the CGT consequences of death (estate planning) and the main residence exemption (and its application to investment properties), the availability of CGT concessions for small business, roll-overs, deemed disposals and gifts. |
| Submission | By 11:55pm AEST/AEDT Sunday of Week 10 |
| Weighting | 20% |
| Total Marks | 100 marks |
Context:
This assessment allows students to solve practical problems that arise from a fact scenario and to give
appropriate advice to clients.
Instructions:
• This case study must be presented as a group effort. The case study requires collaboration of
effective team work. It is expected students will take parts and survey the relevant literature,
including decided cases, and select appropriate additional resources.
• Your case study is not just a list of answers. Your reasons for your conclusions and
recommendations must be based on your research into the relevant cases and legislation.
• With respect to each case study:
• Advise the best investment option for clients from the facts of the case study
• Identify the appropriate legal principles that requires discussion in the case study
• Apply the law to the facts of the case study
LAW6001 Assessment 3: Group Case Study Page1of10
• After reaching a relevant conclusion, provide practical advice to your client(s).
• You will be assessed in accordance with the Assessment Rubric.
• The format of the report should be a business report and using APA referencing style
LAW6001 Assessment 3: Group Case Study Page1of10
PART A: CASE 1 – Married young couple
Matt and Miranda Murphy are an Australian married couple who live in Gold Coast, Queensland
with their 3 children and Matt’s father.
Matt and Miranda plan to purchase some assets and wonder which way is best to optimise their tax
obligations on various investments. They have visited your office to seek advice to optimise their tax
obligation in relation to the following investment situation.
1) Regarding Share Investment (17 marks)
Matt and Miranda jointly purchased shares in Citybank Ltd on the 20th of June 2017 at a cost of
$110,000. The shares have a market value on the 1st of June 2020 of $120,000. The shares have
returned fully franked dividends of $28,000 each year over the past 3 years.
When Matt and Miranda purchased the shares, they were both employed full-time. Miranda now
works part-time and is occupied with caring for the child and father in law.
Matt is an engineer who earns $150,000 per annum (net of all allowable deductions) from his sole
trading work and Miranda is a part time teacher, earning $10,000 per annum (net of all allowable
deductions) from her teaching job.
They are considering selling the shares and re-acquiring them in Miranda’s name only.
Required
Assuming the share price is stable in June at a market value of $120,000 and with an increase to
$121,000 in July, which of the following options would you recommend for them to minimise their
tax obligations? Justify your answers.
a) Not to sell shares at all
b) Sell the shares on the 30th of June 2020 and re-acquire them on the 30th of June 2020
c) Sell the shares on the 1st of July 2020 and re-acquire them on the 1st of July 2020.
Determine which one of the above options would minimise total net tax payable for both options
above for the tax year ended the 30th of June 2020 and 2021 (after medicare levy/surcharge and
eligible tax offsets)? Calculate how much tax would be saved. They are not covered by private health
insurance.
2) Regarding Rental property (15 marks)
Matt wishes to purchase an apartment from which he can collect rent before making profit on the
sale of the property in three years’ time. He intends to buy the property in July 2020 and sell it in
July 2023. He has determined that he can afford to purchase a three-bedroom apartment costing
$480,000 and has identified two suitable alternatives as follows;
| Address of property | 1 Single St, Brisbane | 32 Pam Ave, Brisbane |
| Purchase price (including stamp duty & legal costs) |
$480,000 | $480,000 |
| Construction date | built in 1971 | built in 2001 |
| Construction cost | $37,000 | $220,000 |
| Depreciable assets (fillings) | $8,000 | $30,000 |
| Remaining effective life (use Prime cost) | 4 years | 10 years |
| Annual maintenance fees | $3,500 | $3,500 |
| Annual council & water rates | $2,000 | $2,000 |
| Annual interest on $400,000 mortgage | $29,000 | $29,000 |
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| Annual rental income | $32,000 | $32,000 |
| Expected selling price in July 2023 | $700,000 | $700,000 |
In each case, the values of the fillings and construction costs have been verified by certified valuer.
Required
For each property advise Matt on following:
a) Provide an estimate of annual net rental income or loss
b) Provide an estimate of the net capital gain on sale in July 2023
c) Which property will minimise Matt’s total taxable income from the investment?
3) Regarding Business structure (18 marks)
Matt Murphy is considering a change of his business structure from the sole trader to another
structure commencing on the 1st of July 2020 (starting from a new financial year).
He has provided you with the following financial and other family details.
Matt is earning $150,000 (net of deductions) per annum from his engineering business.
Miranda earns $10,000 (net of deductions) from her teaching job.
They have the following family members living with them.
• Robert Murphy: Matt’s father who is 70 years old. He has retired from his job as chief
executive officer of Suncorp Ltd on the 15th of July 2020 (gross income was $2,000) and has
not been earning any income since retirement. Miranda takes care of him as his health has
deteriorated recently.
• Jean Murphy: 19-year-old son. He is a full time university student, currently no income.
• Xavier Murphy: 15-year-old son, full time high school student
• Megan Murphy: 2-year-old daughter.
Matt is considering the following options.
• Remaining Sole trader stucture
• Partnership with Miranda in equal profit sharing ratio
• Australian registered private company
• Discretionary Family Trust
Required
Please advise which business structure would you recommend in order to minimise tax on the
client’s income.
Comment on the tax implications of each business option considered.
4) Regarding Trust and Asset distribution (8 marks)
Matt seeks advice from you on the following matter.
Robert (Matt’s father) had provided significant financial support during their marriage. The support
was provided significantly through Trusts that had been set up by Robert himself for Matt, Linda and
their children. The Trusts were discretionary and were completely controlled by Robert.
Miranda made no financial contribution to the trust assets such as the house which had been
utilised by Matt and Miranda during their marriage. There were no significant assets other than the
house which had been provided by Robert, and the assets owned by the Trusts set up by Robert who
has complete control and discretion.
LAW6001 Assessment 3: Group Case Study Page1of10
Required
In case of a marriage breakdown in this scenario what would be the taxation of this estate?
Should the trust assets form part of the assets available for distribution between the parties? Explain
your reasoning.
PART B: CASE 2 – taxpayers at retirement age
Trex Muller, aged 58, recently retired from his employment as chief accountant of Moon Light Pty
Ltd, after 17 years and 4 months of service. Trex’s wife Belinda, aged 59, is currently running a small
newsagency. Trex and Belinda visited you to seek an advice on various retirement planning options
specified below. Trex and Belinda both are covered by private health insurance.
1) Regarding Trex’s Termination payment (8 marks)
Trex received the following payments from his employer
| Gross salary from employer from the 1st of July 2018 to 30th of May 2020 Employee Share scheme (taxable, taxed-upfront schemes not eligible for reduction) Genuine redundancy payment received on the 30th of May 2020 Unused annual leave Unused long service leave |
$47,000 $6,500 $53,000 $26,000 $2,800 |
Advise Trex how much tax is payable on the above termination payments. Assume no deductions to
claim. You must clearly identify any ETP tax offset.
2) Regarding Trex’s Termination payment & Superannuation (16 marks)
Trex currently has superannuation valued at $582,000 with the Suncorp (complying Super fund).
The total amount includes the following elements;
| Tax free component Element untaxed in the fund Element taxed in the fund |
$25,000 $207,000 $350,000 |
Required
Advise him what would be the tax consequences of withdrawing his super prior to his retirement
age, including all options available to him.
3) Regarding Belinda’s Business (18 marks): Please ignore COVID-19 Special Concessional amounts
for immediate written off
Belinda has started the newsagency business 3 months ago. She would like to get an advice on the
tax benefits available for her new business.
The expected business turnover for the financial year ending 30th of June 2020 is $500,000 including
GST.
She has purchased the following assets for the business.
Photocopy machine for $5,500 including GST on the 15th of Feb 2020 and was ready to use on the 1st
of March 2020.
Motor vehicle purchased on the 1st May 2020 for $68,800 including GST, to be used solely for
business purposes.
LAW6001 Assessment 3: Group Case Study Page1of10
She wishes to opt for the Small Business Entity (SBE) option but Trex is unsure whether this is the
good choice for them and what benefits will become available when choosing the SBE.
Advise Belinda and Trex the following.
• Eligibility for SBE;
• Concessions for trading stock;
• Asset pools; and
• Capital gains tax concession.
End of Assessment 3
LAW6001 Assessment 3 Case Study (Group) Page 7 of 9
Learning Rubric: Assessment 3 Case Study (Group Case Study)
| Assessment Criteria | Fail (Unacceptable) 0-49% |
Pass (Functional) 50-64% |
Credit (Proficient) 65-74% |
Distinction (Advanced) 75 -84% |
High Distinction (Exceptional) 85-100% |
| Knowledge and understanding (technical and theoretical knowledge) 30% |
Limited understanding of required concepts and knowledge Key components of the assignment are not addressed. |
Knowledge or understanding of the field or discipline. Resembles a recall or summary of key ideas. Often confuses assertion of personal opinion with information substantiated by evidence from the research/course materials. |
Thorough knowledge or understanding of the field or discipline/s. Supports personal opinion and information substantiated by evidence from the research/course materials. Demonstrates a capacity to explain and apply relevant concepts. |
Highly developed understanding of the field or discipline/s. Discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading. Well demonstrated capacity to explain and apply relevant concepts. |
A sophisticated understanding of the field or discipline/s. Systematically and critically discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading. Mastery of concepts and application to new situations/further learning. |
| Formation of recommendations based on the identification of the issues and the application of case law principles and relevant legislation identified in the research process. 30% |
Difficulty in formulating own opinion and a lack of recognition of the various issues. A lack of application of the relevant case law and/or relevant legislation No optimal investment advice has been provided to clients. |
Difficulty in justifying own opinion. Some recognition and discussion of the various issues. Some application of the relevant case law and/or relevant legislation |
Own opinion is partly justified with reference to case law and/or relevant legislation. Recognition and discussion of the various issues identified in the question Application of the relevant case law and/or relevant legislation to these issues |
Own opinion is justified with reference to case law and/or relevant legislation. Recognition and discussion of the various issues identified in the question plus others identified by the student Application of the relevant case law and/or relevant legislation to these issues |
Sophisticated arguments supporting own opinion is justified with reference to case law and/or relevant legislation. Recognition and discussion of the various issues identified in the question plus others identified by the student and problems identified Application of the relevant case law and/or relevant legislation to these issues |
LAW6001 Assessment 3 Case Study (Group) Page 8 of 9
| Evaluation of information selected to support the case study 30% |
Limited understanding of key concepts required to support the case study. Confuses logic and emotion. Information taken from reliable sources but without a coherent analysis or synthesis. Viewpoints of experts are taken as fact with little questioning. |
Resembles a recall or summary of key ideas. Often conflates/confuses assertion of personal opinion with information substantiated by evidence from the research/course materials. Analysis and evaluation do not reflect expert judgement, intellectual independence, rigor and adaptability. |
Supports personal opinion and information substantiated by evidence from the research/course materials. Demonstrates a capacity to explain and apply relevant concepts. Identify logical flaws. Questions viewpoints of experts. |
Discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading. Well demonstrated capacity to explain and apply relevant concepts. Viewpoint of experts are subject to questioning. Analysis and evaluation reflect growing judgement, intellectual independence, rigor and adaptability. |
Systematically and critically discriminates between assertion of personal opinion and information substantiated by robust evidence from the research/course materials and extended reading. Information is taken from sources with a high level of interpretation/evaluation to develop a comprehensive critical analysis or synthesis. Identifies gaps in knowledge. Exhibits intellectual independence, rigor, good judgement and adaptability. |
| Effective Communication 5% |
Difficult to understand for audience, no logical/clear structure, poor flow of ideas, argument lacks supporting evidence. Line of reasoning cannot be followed in regards to investment decisions for the clients. |
Information, arguments and evidence are presented in a way that is not always clear and logical. Line of reasoning is often difficult to follow in regards to investment decisions for clients. |
Information, arguments and evidence are well presented, mostly clear flow of ideas and arguments. Line of reasoning is easy to follow in regards to investment decisions for clients. |
Information, arguments and evidence are very well presented; the presentation is logical, clear and well supported by evidence. Great line of reasoning and analysis has been performed in regards to investment decisions for clients. |
Expertly presented; the presentation is logical, persuasive, and well supported by evidence, demonstrating a clear flow of ideas and arguments. Excellent line of reasoning and detailed analysis has been performed in regards to investment decisions for clients |
| Correct citation of key resources and evidence |
Demonstrates inconsistent use of good quality, credible and |
Demonstrates use of credible and relevant resources to support and |
Demonstrates use of high quality, credible and relevant resources to |
Demonstrates use of good quality, credible and relevant resources to support and |
Demonstrates use of high quality, credible and relevant resources to support and |
LAW6001 Assessment 3 Case Study (Group) Page 9 of 9
| 5% | relevant resources to support and develop ideas. Demonstrates no section numbers or incorrect section numbers per ITAA1936 and ITAA1997. |
develop ideas, but these are not always explicit or well developed. Demonstrates some section numbers per ITAA1936 and ITAA1997 with some errors. |
support and develop ideas. Demonstrates some section numbers per ITAA1936 and ITAA1997 with a couple of errors. |
develop arguments and statements. Shows evidence of wide scope within the organisation for sourcing evidence. Demonstrates more than enough correct section numbers per ITAA1936 and ITAA1997. |
develop arguments and position statements. Shows evidence of wide scope within and without the organisation for sourcing evidence. Demonstrates sufficient correct section numbers per ITAA1936 and ITAA1997. |