Business School

 

BULAW 3731 Income Tax Law and Practice

Assignment Topic

Semester 2, 2016

 

 

General Information

Word Length

It is recommended that you prepare an assignment of 2000 words. Do not exceed 2200 words. An essay of 1800 words or less is unlikely to fulfil the assignment requirements.

Submission details

By 11.00 p.m. on Friday of week 9. Submission via Moodle.

Feedback and return of work

General comments and feedback to be provided during lecture in week 11. Marked papers to be returned during tutorials.

Marking criteria:

Analysis

Approximately 60% of the marks are allocated here:

• Depth of understanding of the topic and identification of relevant issues
• Accuracy of the law (legislation and cases) used to support discussion
• Clarity and coherence of the debate/discussion (think of leading the reader along a pathway, explaining the features, their important and impact)
• Quality of discussion and argument
• Attempt to canvass a range of views and to offer an individual opinion on the state of the law/need for reform (depending on topic)

Research

Approximately 30% of the marks are allocated here:

• The use made of appropriate legal sources, in particular primary legal sources, for eg. The Income Tax Assessment Act 1936 (Cth) and cases (it is appropriate to rely on the summaries of cases located in secondary sources.
• The breadth and use made of relevant secondary legal sources, in particular a number of legal texts, internet sites and, where possible, academic journal articles.

 

 

Presentation

Approximately 10 % of the marks are allocated here:

• Readable connected prose, not point form summaries
• Effective use of HEADINGS
• Consistent and accurate acknowledgement of sources using a recognized style, both in relation to in-text referencing and reference list/bibliography.
• Identification of the reference style being used (note on title page)
• Typed with double spacing.

Reference style to be used for the assignment:

APA

Suggested time to devote to this task:

It is recommended that students spend approximately 20 hours on this task.

Late Submission

Assessment tasks submitted after the due date, without prior approval/arrangement, will be penalised at 10% of the available marks per day. Requests for extension of time must be made with the lecturer concerned and based on Special Consideration guidelines http://policy.federation.edu.au/student_services_and_administration/enrolment/special_consideration/ch01.php

Plagiarism:

Plagiarism is the presentation of the expressed thought or work of another person as though it is one’s own without properly acknowledging that person.

Students must not allow other students to copy their work and must take care to safeguard against this happening. In cases of copying, normally all students involved will be penalised equally; an exception will be if the student can demonstrate the work is their own and they took reasonable care to safeguard against copying.

Plagiarism is a serious offence.  Please refer to the following documents available from the University website:

Statute 6.1: Student Discipline

Regulation 6.1: Student Discipline

Regulation 6.1.1: Plagiarism

 

 

CHECKLIST TO BE ATTACHED TO ESSAY/ASSIGNMENT IN BULAW 3731

 

Name:

Student No.:

 

Please check that you have done the following.  Tick the boxes to show you have!

• Submitted an assignment that is your own work. (You may discuss the issues with others but you cannot copy another’s work, give your work to someone else to copy, or work closely with another student on how to structure or answer the questions).
• The assignment is 2000 words long (excluding abstract, references, bibliography).
• Read and tried to aIDress the criteria in the Unit Description.
• Read and aIDressed the issues raised in the University’s Presentation of Academic Work.
• Read Regulation 6.1.1, Plagiarism and asked questions if you are unsure about what it means.
• Referenced direct quotes (use quotation marks or indent) AND summarising from another person’s work in the body of the essay. (This includes internet sources).
• Indicated what referencing style you have chosen Harvard/APA and USED IT.
• Answered all parts to the question.
• Proof read the assignment for spelling, punctuation and grammar errors.
• Where required, used relevant sections of legislation, legal rules/principles
• Where required, used cases to support your points or arguments. These cases can be obtained from textbooks, or the CCH online libraries, articles found via AGIS PLUS TEXT database etc.
• Put case citations in the body of the work as well as listing the case in the List of References.
• Discussed the issues as required and put arguments and gave your view.
• Used a range of resources.
• Included a title page with your name, student number, unit code and name, lecturer’s name
• Have a margin so comments can be aIDed; put page numbers and your name and student number on each page.

 

Signed by student:   ____________________________________________

Topic

Part A

RIP Pty Ltd is a resident private company carrying on the business of undertaker/funeral director. It operates out of premises comprising office facilities, a chapel and assembly area and professional rooms. Its other assets include a fleet of motor vehicles.

For the year ended 30 June 2016 the company reported a net profit of $2.45m. Its income arises from the provision of funeral services financed as follows:

1. Fees payable under a ‘net, 30 days’ invoice.
2. Fees payable under several external insurance contracts to which bills are issued under a ‘net, 30 days’ arrangement. For instance, some funeral costs are paid by the Transport Accident Commission, others are paid out of private life assurance plans.

• Fees received from RIP Finance Pty Ltd, a company providing credit under an instalment repayment plan.

1. Amounts paid under a funeral plan in which clients make periodic contributions to meet future funeral costs. ‘Easy Funeral Plan’ is a fixed price contract. When the agreed amount is paid, the client is guaranteed a ‘deluxe funeral arrangement’. If the contract price in not fully paid at date of death, the deceased’s estate is billed under (i) or (iii), above. The amount is not refundable or transferable. At 30 June the credit balance Easy Funeral Plan is $225,000.

From time-to-time amounts paid pursuant to the Easy Funeral Plan are not drawn upon. The clients might die abroad or remains not be recovered and no funeral service is provided. No refund issues arise.

At 30 June, the company transfers from Easy Funeral Plan amounts estimated to have arisen in connection with defaulting members (ie, members who have ceased making scheduled payments and who are not expected to make up arrears). These are credited to a ‘Forfeited Payments Account’ that has a balance at 30 June of $16,200.

Required (70% of the answer)

[Note: it is necessary to refer to appropriate case law on the issues.]

314. Refer to the decision in Arthur Murray (NSW) Pty Ltd v FCT (1965) 114 CLR 314. In your own words, briefly describe the facts, issues and conclusion in that case. [Note: Case reports and extracts of Arthur Murray are widely available or the decision may be accessed via hcourt.gov.au]
     1. Advise RIP Pty Ltd when income is derived (i) generally, and (ii) when it derives its income from funeral services and related activities.
     2. Does the Arthur Murray principle apply to the company’s accounting treatment of amounts in Easy Funeral Plan? Explain.
     3. Does the Commissioner or any taxpayer have a choice in the method of accounting for tax?
315. Advise the company of the tax treatment of $16,200 in ‘Forfeited Payments Account’ in item (iv).

Part B 

2016. RIP Pty Ltd holds a stock of three types of caskets as well as a range of accessories (such as religious and secular icons). In June 2016 the company prepaid $25,000 for material to be delivered in August 2016. The company obtained considerable discounts for the advance purchase.
2017. A fully franked cash dividend of $21,000 was received from RIP Finance Pty Ltd.

• An amount of $57,000 was paid on 1 March 2016 for two year’s rental of storage space. The lease expires on 28 February 2018. In the company’s financial accounts an amount of $9,500 was expensed and $47,500 capitalised.

1. On 1 June 2016 the managing director of RIP commenced three months long service leave and was paid $22,000 in advance. In the company’s accounts the amount was debited against a Provision for Long Service Leave Account.
2. In 2013 the company’s Board of Directors decided existing accommodation was inadequate and it resolved to construct a purpose built facility. In that year $250,000 was paid for preliminary architectural designs. In 2014 land costing $1.25m was acquired and $50,000 paid to demolish an existing structure. Construction of the new premises commenced on 1 September 2014 at a cost of $2.5m. Fitting and equipment was installed on 1 June 2015; operations began on 1 August 2015. On-site car parking costing $125,000 was completed on 30 September and landscaping of the site was completed on 31 January 2016 at a cost of $40,000.

 

Required (30% of the answer)

Advise the company about the following:

[You must refer to appropriate sections of the legislation and relevant case law.]

1. The nature of trading stock, generally, whether the caskets and accessories would be trading stock for tax purposes and how the amount of $25,000 is treated for tax purposes.
2. What adjustments (if any) should be made to the company’s reported profit for tax purposes in regard to items (ii), (iii) and (iv).

• What deductions (if any) are available for expenditure set out in item (v). Explain.