Australian taxation

Taxation Law Improvement Project (TLIP)

The objective of the Taxation Law Improvement Project was meant to simplify income tax legislation and make it more user-friendly.  Discuss whether you consider that this objective has been achieved based on the material in the Income Tax Assessment Act 1997 and give reasons for your position.  Select a couple of provisions and compare the structure and language in both the 1936 and 1997 Act and form your opinion

Maximum word limit:  750 words

Deductions

Scenario

David Reese purchased a factory in Broadmeadows , Victoria on the 1st September 2019 for $800,000 . He also incurred an additional expense to the value of $150,000. This included machinery , valued at $80,000, with an effective life of 10 years and minor internal capital improvements to the factory building so as to get it ready for production.

David borrowed  $900,000 on 1st September 2019 for 25 years to purchase the factory. Interest paid on the loan for the tax year ended 30 June 2020 was $48,000. The legal fees , loan charges and stamp duty paid in relation to the loan were $10,000.

On the 12th September 2019 David had moved into the factory , had hired labour, and commenced manufacturing Jet Skis. The factory was set up such that 90% of the building was used for  production and 10% was taken up by an office area.

A month into production , he realised the factory building needed some major repairs made to it. He then decided to repair part of  the roof as it was leaking. He replaced the roof tiles and plaster and  reinforced the timber frame on the 15th October 2019. As the building was more than 20 years old the materials he could find to repair the roof were modern and more durable, than the previous ones. The total cost of the repairs including materials was  $125,000.

The timber floor in the main entrance / office area was replaced due to water damage caused by the leaking roof. It was replaced with a concrete floor on 1st November  2019 at a cost of $16,000.

In order to comply with health and safety requirements he installed a refrigerated cooling system for the well being of his employees. The total cost of the unit and installation on the 1st February 2020 was $50,000, with an effective life of 15 years.

Required:

David  seeks your professional tax advice as to what deductions ( if any) he might be able to claim in respect of the above expenditure for the 2019/20 tax year. In your answer make reference to case law and relevant sections of the tax act, including worked calculations where applicable.

(Maximum word limit:  1000 words.)

Assessable Income

    Scenario

Peter Miles owned rural property for 20 years. On 1st July 2017 he sold the rural properties and vacant lands and retired on the Sunshine Coast , Queensland. On the 1st September that year he purchased half an acre of land near the beach for $800,000. In order to increase his retirement funds Peter appointed a builder to build six townhouses at a cost of $300,000 each. At the same time he asked his accountant for advice on expected rental return from each of the townhouses. The townhouses were completed on 12th June 2018.

Peter decided to live in one of the townhouses and he rented the others on a yearly basis. All the townhouses had a separate strata title. In December 2019 Peter sold three of the townhouses for $550,000 each.

He decided to then purchase another block of land in Queensland for $1.5million and intended to build and develop a combination of units and townhouses for resale.

  Required :

State your views and draw conclusions making reference to relevant case law and relevant sections of the tax act as to the tax implications of the above scenario. When referring to cases explain them clearly and in detail explaining how they apply to the given situation.

(Maximum word limit:  500 words.)

GUIDELINES TO ESSAY WRITING

  1. Identify the question being asked. Keep the question in focus in answering the question.  Dissect the question in order to determine all of its elements.  Brainstorm the question.  Draw flow diagrams in order to canvass all possible views of the issues.
  2. Research and read materials on the subject area.
  3. Argue for or against the statement or proposition. Once you have decided on the position you will take, the task is to develop the essay to support that position.  Do not write on everything.  Select your points carefully to see to see if and how they are relevant to the position you have selected.
  4. Develop a well organised system of keeping your research notes. As you research each resource, it is best to keep an accurate record of the notes you make on each resource.  Also, it is a good idea to record the resources accurately in the bibliography as you read each document
  5. Prepare an outline of your essay. Have headings for each main section.
  6. Start with an introduction. Introduce the reader to the position you will take and the issues that will be analysed.  For example, the introduction may start with ‘…this paper explores the issues in current employment laws in Australia….Secondly, the paper documents ……  The third part of the answer provides that …………………..
  7. Body of essay. This provides guideposts throughout the answer.  This approach assists in guiding and persuading the reader towards the writer’s point of view.  Reinforce your position at the end of each major section of the essay.
  8. Complete the essay with a conclusion. It brings together the arguments that have been put forward in the essay.  The paper should conclude on a strong note of affirming the writer’s position on the topic.  Do not introduce new material in the conclusion.