LAW301: Taxation Law - The Australian Taxation System - Peter’s Case Study - Law Assignment Help

Assignment Task:

Abstract 

This subject will explore the law relating to the Australian taxation system. It will investigate the concepts of taxation law such as assessable income including capital gains, allowable deductions and tax formulas. The Goods and Services tax regime and Fringe Benefits Tax will also be examined. Students will learn both how to apply relevant tax laws and how to compute tax assessments with a focus on individual rather than corporate taxation. 

Learning outcomes 

Upon successful completion of this subject, students should: 

• be able to locate and analyse the sources of taxation law in Australia; 

• be able to describe and access the Australian regulatory taxation system and compliance regime; 

• be able to interpret legislation to compute taxable income and allowable deductions to determine taxation liabilities and evaluate appropriate offsets; 

• be able to critically evaluate the law relating to the goods and services taxation regime and calculate the relevant tax liabilities; 

• be able to critically evaluate the law relating to capital gains taxation and trading stock and calculate the relevant tax liabilities; and 

• be able to critically evaluate the law relating to fringe benefits and calculate the relevant tax liabilities. 

TASK 

Question 1 

In October 2015, Peter’s father Henry passed away, leaving Peter his 400 acre dairy farm in his will. The market value of the farm at the time of Henry’s passing was $790,000. The farm had originally been purchased in two lots by Henry. The first lot of 300 acres was bought in June 1983 for $440,000 and the other 100 acres was purchased in May 1997 for $380,000. 

As Peter was a doctor living in Melbourne he employed a manager to run the farm. A downturn in the dairy industry over the next few years meant that Peter decided to sell the farm before he started incurring losses. A new market valuation obtained in January 2019 showed that the farm was now worth $910,000. 

A real estate friend of Peter’s suggested that he could achieve a better sale price if he were to sub-divide the dairy farm and sell it off in smaller blocks. This seemed like a good idea to Peter so he hired the real estate to complete the sub-division and sell the blocks on his behalf. 

The real estate obtained council approval and the farm was re-zoned to allow for a sub-division of 40 blocks of 5 acres each. The remaining block of 200 acres which included the homestead remained zoned as farmland. This block was part of the original parcel of 300 acres purchased in June 1983. 

The real estate organised for a surveyor as well as connections for electricity, water and telephone along with road access to each block. All up the cost of the sub-division including the agent’s fees was $1,400,000. 

In the year ended 30 June 2020, the real estate had managed to sell 15 of the small blocks for $80,000 each and the block with the homestead for $750,000. Agent’s commission and legal fees amounted to $70,000 for these sales. 

Required 

Advise Peter of the taxation consequences of the sales he made in the 2020 financial year. Note, you are not required to calculate any capital gain. (20 marks). 

Question 2 

Charles is an air traffic controller employed by the Department of Aviation and receives $105,000 a year in salary. Charles holds a pilot’s licence and during the current income year incurs $2,000 expenses in keeping up the flying hours necessary for the retention of that licence and $1,500 expenses in obtaining the higher grade of licence. There is no statutory or contractual requirement on controllers to obtain a flying licence and the holding of a pilot’s licence and ongoing flight training are not essential prerequisites for promotion. However, the Department of Aviation acknowledges that flying qualifications and experience help controllers to keep up to date with developments in their field and increase their knowledge and ability in their job. 

In July this year Charles was awarded a prize of $20,000, a leather briefcase worth $5,000 embossed with his name from his local community club and notification he will receive $100 per month for the next year of study for the higher grade of pilot's licence ($1,200 in total) from the club as well. He also receives an award for outstanding services to aviation and $10,000 Plasma screen TV from the Department of Aviation. 

In January this year Charles purchased a townhouse near the airport with the intention of moving into it in one year’s time, after he had paid off some of the mortgage. The townhouse needs repairs which would cost $40,000 but Charles rents it out immediately. In May this year the tenants move out and Charles decides to do the repairs and move in. When he has been in the flat for a month he spends $2,000 painting the flat as the existing pain has started to crack. 

Advise Charles of the taxation consequences of these transactions for the year. Answer this question with reference to the legislation, rulings and case law where relevant.

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