LAW3130 Major Assignment - Semester 2, 2021 Due date: 13 September 2021 Value: 40% Length: 2000 words (excluding any calculations) This assignment consists of two (2) case studies. The assignment assesses course Learning Objectives 1,2,3 & 4. These objectives are reflected in the marking criteria at the end of these assignment questions. Students should review the marking criteria sheet carefully. You must complete all the case studies and all parts of each case study.

Case Study One The following separate transactions require your advice as indicated: Kate is a senior executive with an Australian producer and exporter of beef. The company is expanding into the Asian market so has asked Kate to travel to Singapore and establish the office in that country. There is no fixed date of return at this stage, though initial negotiations suggest her period of time in Singapore will be between one and three years. Kate plans to leave for Singapore on 1 January 2022. Kate's property connected with Australia includes her private residence located in Brisbane and an investment unit at the Gold Coast. Usually this unit is untenanted and available for holiday use by the family. Kate also has several parcels of Australian shares as well as bank accounts. She plans to keep all of this property whilst she is overseas working. Kate's husband and son (12 years) will join her in Singapore, whereas her daughter (18 years) will stay at the family home rent-free. Kate understands she will be required to return to Australia several times each year for meetings and will stay for up to a week at each time (either at her home in Brisbane or the Gold Coast unit). Kate's income for the 2022 income year is likely to include salary from her employer (approx $200,000 AUD), dividends from Australian shares and interest on Australian bank accounts. Kate seeks your advice as to whether she will be a resident for Australian tax purposes for the 2022 income tax year and based on this conclusion which amounts of income received are likely to be assessable.

2 John has been operating a retail business in Toowoomba for the past 10 years. He sells mobile phone and other device accessories as well as undertakes repairs to such items within the store. Further, John utilises this legitimate business to launder proceeds from his illegal drug operation. He purchases illegal drugs and on-sells them through a network of drug dealers. On 1 July 2020 John had illegal drugs on hand with a market value of $80,000 (cost price $40,000). As at 30 June 2021, he had illegal drugs on hand with a market value of $110,000 (cost price $55,000). Sales of illegal drugs during the year ended 30 June 2021 were $300,000 and other drug purchases were $150,000. John plans on including 20% of his gross profit from his drug enterprise in his taxable income for the mobile phone business. He believes this will avoid any unwanted ATO attention to his lifestyle and other assets in the event of an audit. Provide advice to John as to what amount(s) if any he should include in his assessable income for the year ended 30 June 2021. Melanie carries on a cleaning business and earned $500,000 in taxable income during the year ended 30 June 2020. Her largest contract is with Brisbane International Airport where she undertakes commercial cleaning. This contract accounted for 60% of her total cleaning service income received in the 2020 income year. On 1 October 2020, Brisbane International Airport cancelled their contract for cleaning services due to the decline in international visitor arrivals. They intend to utilize existing employees to undertake cleaning until normal travel conditions apply again. Since there was still 18 months of her contract remaining, they paid her compensation of $150,000 on 1 October 2020 for cancelling the contract. Melanie is uncertain as to whether she can continue to operate her business without this contract. Further, during the year ended 30 June 2021, Melanie received $40,000 in Job Keeper payments from the Australian Government to compensate her for loss of cleaning income during the pandemic. Provide advice to Melanie as to whether either amount would be ordinary income.

REQUIRED: For all scenarios above, provide advice as requested. You must support your discussion with reference to any relevant authorities (including legislation and relevant case law). Please refer to the marking criteria for further details on requirements.

3 Case Study Two Jacquie is a qualified beauty therapist who operates her own business in a shopping centre in Toowoomba. She employs 3 staff and has been in business for 6 years. Jacquie and her staff provide a range of beauty services using a range of equipment and also sell beauty and skin care products both in-store and online. Jacquie provides you with the following information in relation to her business expenses which are relevant to calculating her taxable income for the year ended 30 June 2021: Purchases of trading stock $457,000. Purchases of beauty products used to provide services $230,000. Salaries and Wages paid to staff $180,000. Drawings by Jacquie from the business for her own living expenses $65,000. Leasing costs of shop premises (to 30 June 2021) $25,000. Additional information not included in the above figures: Jacquie pre-paid one year's lease payments on 29 June 2021 of $27,000. The prepayment relates to the period 1 July 2021 to 30 June 2022. This amount is in addition to the amount shown in the table above Jacquie purchased a car to do deliveries for the business and to use for private purposes. The log book indicates that 70% of the use is for a taxable purpose. The car was purchased on 1 September 2020 for $85,000 (excluding GST) and the running costs in the current year were $5,600. During the Covid-19 lockdown period, Jacquie was unable to operate her business. She therefore took the opportunity to undertake repairs and upgrades to her beauty therapy rooms. She spend $4,000 to have all rooms repainted with a new colour scheme and $15,000 on new therapy beds for each room. She also replaced all the downlights in the ceilings with dimmable Wifi lights. This cost $2,500. During the Covid-19 lockdown Jacquie worked from home processing online orders. She set up her computer in the dining room and calculates she spent around 6 hours per day on weekdays working. The lockdown lasted for 3 months of the 2021 income tax year. All computer equipment and consumables Jacquie used were from her business and their costs have already been deducted. Required: Provide advice to Jacquie in relation to the tax consequences of the above transactions for the year ended 30 June 2021 and calculate her taxable income. Assume that she is an eligible small business, but refer to the normal deductibility rules in the first instance and then cite any special rules that might apply. Support your advice with reference to any relevant authorities.

Answer rating: 100% (QA)

For Case Study One 1 Kates Tax Residency Kates tax residency status for the 2022 income tax year dep... View the full answer