LAW6001 - Analyse The Tax Treatment & Calculation of Capital Gains Tax - Case Study - Law Assignment Help

Assignment Task - ;

 

Learning Outcomes

a) Identify and analyse the tax treatment of various types of incomeand 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.

 

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

 

 

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 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 Rent

 

3) Regarding Business structure 

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

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.

 

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

Trex received the following payments from his employer;

Gross salary from employer from the 1st of July 2018 to 30th of May 2020 $47,000 Employee Share scheme (taxable, taxed-upfront schemes not eligible for reduction) $6,500 Genuine redundancy payment received on the 30th of May 2020 $53,000  Unused annual leave $26,000 Unused long service leave $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 

Trex currently has superannuation valued at $582,000 with the Suncorp (complying Super fund). The total amount includes the following elements

Tax free component $25,000 

Element untaxed in the fund $207,000

Element taxed in the fund $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.

 

 

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