LAW 6001: Taxation Law - Dan and Judith Murphy Case Study - Married Young Couple - Law Assignment Help

Assignment Task:

Learning Outcomes:

 b) Recognise and effectively apply ethical and professional responsibilities placed on tax agents and financial advisers providing taxation advice under the Tax Agent Services Act (TASA) and associated regulations. 

d) Critically assess differences between the tax treatment of individuals, partnerships, companies and trusts and evaluate the effectiveness of each structure in meeting various client needs. 

e) Analyse, evaluate and recommend taxation strategies to develop comprehensive solutions in order to maximise client financial outcomes. 

f) Research, interpret and effectively communicate complex taxation concepts and recommended taxation strategies to clients in an industry compliant format.

PART A: CASE 1 – Married young couple 

Dan and Judith Murphy are an Australian married couple who live in Gold Coast, Queensland with their 3 children and Dan’s father. Dan and Judith 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 

Dan and Judith jointly purchased shares in BHP Ltd on the 20th of June 2016 at a cost of $110,000. The shares have a market value on the 1st of June 2019 of $120,000. The shares have returned fully franked dividends of $28,000 each year over the past 3 years. When Dan and Judith purchased the shares, they were both employed full-time. Judith now works part-time and is occupied with caring for the child and father in law. Dan is an engineer who earns $150,000 per annum (net of all allowable deductions) from his sole trading work and Judith 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 Judith’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 2019 and re-acquire them on the 30th of June 2019

c) Sell the shares on the 1st of July 2019 and re-acquire them on the 1st of July 2019. 

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 2019 and 2020 (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) 

Dan 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 2019 and sell it in July 2022. 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) 

$580,000 $580,000 

Construction date built in 1971 built in 2001 Construction cost $47,000 $230,000 Depreciable assets (fillings) $7,000 $29,000 Remaining effective life (use Prime cost) 4 years 10 years Annual maintenance fees $4,500 $4,500 Annual council & water rates $3,000 $3,000 Annual interest on $400,000 mortgage $24,000 $24,000 Annual rental income $31,000 $31,000 Expected selling price in July 2021 $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 Dan on the 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 2022 c) Which property will minimise Dan’s total taxable income from the investment? 

3) Regarding Business structure (18 Marks) 

Dan Murphy is considering a change of his business structure from the sole trader to another structure commencing on the 1st of July 2019 (starting from a new financial year). He has provided you with the following financial and other family details. 

Dan is earning $150,000 (net of deductions) per annum from his engineering business. Judith earns $10,000 (net of deductions) from her teaching job. They have the following family members living with them. 

• Robert Murphy: Dan’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 2019 (gross income was $2,000) and has not been earning any income since retirement. Judith 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.

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