BLO2206 TAXATION LAW AND PRACTICE SEMESTER 1 2023
BLO2206 TAXATION LAW AND PRACTICE SEMESTER 1 2023
ASSIGNMENT 2 - Letter of Advice
DUE DATE:See VU Collaborate
LENGTH:1,500 words excluding footnotes and appendices.
SUBMISSION:The assignment is an individual piece of work. The only method for submission of the assignment is as a soft copy. The soft copy is to be uploaded to the collaborate website for this unit in the assessment Dropbox.
REFERENCING:AGLC, Harvard or Oxford are acceptable. Although you should only use one method in your assignment. For more information please see VU policy at HYPERLINK "https://www.vu.edu.au/library/get-help/referencing/referencing-guides" https://www.vu.edu.au/library/get-help/referencing/referencing-guides
VALUE:The assignment represents 30% of the mark for this unit.
NOTICE:Support your answers with legislation and case law where relevant.
Background facts:
Dr Cela immigrated to Australia with her parents in 1985 and has since been a resident for taxation purposes. While she had the privilege of a good education, her parents had a low level of education and worked in factories until they recently retired with a low superannuation balance and their family home.
Dr Cela has taxable income of $300,000 in the 2022 income year, and it will remain $300,000 for the next 11 years. She has been using negatively geared rental properties to reduce her taxable income for many years.
In order to assist her parents, Dr Cela has purchased an apartment near her home in Hawthorn for her parents to retire in. This enabled her parents to sell their home, then travel and live comfortably for the remaining decade on its proceeds and their low superannuation balance.
Instead of paying for the apartment with her own money that she has saved, Dr Cela took out a mortgage and decided to charge her parents 50% of the market rate of rent for the next decade. After a decade she plans to stop charging them rent and allow them to live in the apartment until they pass away. Dr Cela believes that having a mortgage and low rent would ensure that she can negatively gear the property and reduce her taxable income.
Dr Cela supplied the following income and expenses that she believes she would incur on an annual basis:
Year 1:
Rental income: $10,200 (50% of market rate) Interest expense: $17,500
Other rental expenses: $8,200 Net rental loss: $15,500
Year 10:
Rental income: $15,200 (50% of market rate) Interest expense: $17,500
Other rental expenses: $12,200 Net rental loss: $14,500
Year 11:
Rental income: $0 (will not charge rent) Interest expense: $17,500
Other rental expenses: $12,500 Net rental loss: $30,000
Task:
Dr Cela has asked you to prepare a letter of advice explaining the tax treatment of her rental property in years 1, 10 and 11. In that letter of advice, she would like you to:
Explain whether she is entitled to use the rental property loss to reduce her taxable income in each of the income years.
Using 2022 tax rates, explain to her what her tax payable will be in each of the income years. Assume that she is an Australian resident, without withholding tax, and has no other deductions or offsets.
Tell her if she could do anything else to improve her tax situation, such as applying for a Private Binding Ruling from the ATO.
The following material will assist you in answering the question:
HYPERLINK "https://www.ato.gov.au/law/view/document?DocID=TXR/TR9525/NAT/ATO/00001" TR 95/25.
HYPERLINK "https://www.ato.gov.au/law/view/pdf/pbr/tr1995-033.pdf" TR 95/33.
HYPERLINK "https://ebookcentral.proquest.com/lib/vu/detail.action?docID=5719168" Sadiq, 2019, Principles of Taxation Law, 2019, Thomson Reuters (Professional) Australia Pty Limited. HYPERLINK "https://www.ato.gov.au/uploadedFiles/Content/IND/downloads/Rental-properties-2020.pdf" Rental Properties Guide - ATO
This assignment should be written as a professional letter, therefore it should:
be dated,
have full address details,
be marked as private and confidential,
have a disclaimer,
be signed off by a partner with contact details, and
have an executive summary at the start.
This form of question requires students to present arguments on the application of the law to a given practical problem. In addressing a question which requires the application of the law, it is suggested that you adopt the following approach:
I:ISSUES - Identify the essential issues in the question
R:RULE - Identify the relevant law, i.e. relevant legislative provisions and cases A:APPLY - Apply the law to the problem
C: CONCLUSION form a reasoned conclusion on the application of the law
Issues:
To highlight that you are aware of the key issues in a question, you should raise these at the beginning of the answer. Stating the relevant issues clearly and simply at the outset will indicate to the marker that you have a good understanding of the matters at hand.
It is important to approach a problem with an open mind and not simply jump into what may appear to be the main issue while ignoring other relevant issues.
Relevant law
Once the essential issues have been identified, it is then necessary to identify the legislation and cases that are relevant to solving the problem. Always remember to cite any legislative provisions and cases that support your arguments. However, be sure to provide a balanced view, and do not forget to also mention any materials that do not support your arguments (with appropriate explanations).
You will need to express, in clear and concise terms, the effect of various provisions and principles arising from the legislation and cases studied. In general, it will not be necessary
to restate the facts of cases. Rather, it is the principles from the cases which are important. The facts of a case will, however, be important where you want to draw direct parallels with the case or distinguish the case based on its facts.
Be sure to use ATO material to argue your point as the ATO auditor is under a legal obligation to follow public ATO advice, so if you can structure your argument using this material it may be enough to persuade a grumpy auditor. ATO auditors are not bound to follow your view of precedent, but they are bound to follow their own internal rulings and procedures.
Applying the law
It is not enough to simply state the principles of law that are relevant to a problem-based question. It is necessary to apply the principles to the facts of the problem. This is similar to the position which arises in practice. A client who seeks legal advice will not just want to know what the law states the client will be primarily concerned with how the law applies to his or her given fact situation. It is imperative, therefore, that in answering the problem -based question you show how the relevant client is affected by the law. In other words, you should clearly state the consequences that flow from the application of particular provisions and case law to the particular fact situation.
Conclusion
Finally, it is necessary for you to come to a reasoned conclusion which is consistent with the views put forward in your arguments relating to the application of the law.
The conclusion should be brief and to the point and should directly answer the question posed. In some cases, you may not be able to provide a definite answer to a particular question, as you may need additional factual information which is not provided in the question. In these cases, you should state what further information is needed and explain how your answer would differ depending on the particular facts obtained. There may also be situations where the law on a particular point is conflicting. In these cases, you should clearly identify where the conflict arises and provide your opinion on the most appropriate resolution to the problem. This may require you to advance various policy arguments in support of your conclusion.
BLO2206 TAXATION LAW AND PRACTICE
Letter of Advice
DUE DATE:See VU Collaborate
LENGTH:1,500 words excluding footnotes and appendices.
SUBMISSION:The assignment is an individual piece of work. The only method for submission of the assignment is as a soft copy. The soft copy is to be uploaded to the collaborate website for this unit in the assessment Dropbox.
REFERENCING:AGLC, Harvard or Oxford are acceptable. Although you should only use one method in your assignment. For more information please see VU policy at https://www.vu.edu.au/library/get-help/referencing/referencing-guidesVALUE:The assignment represents 30% of the mark for this unit.
NOTICE:Support your answers with legislation and case law where relevant.
This question is based on a client matter of mine, which was recently resolved after an ATO dispute.
Background facts:
Sonia is a citizen of New Zealand (NZ) who immigrated to Australia on 1 July 2020. Since arriving in Australia, she has been living with friends, but has recently (2023) met a partner (named Jayden) and intends to move out of her share house and move in with Jayden.
Jayden is an Australian Citizen who is not yet officially Sonias partner. They will officially be each others spouse when they move in with each other.
Prior to moving to Australia Sonia purchased a home in NZ and lived in it for one year. Since 1 July 2020 she has been renting it out.
She plans to sell the NZ property soon to finance the purchase of a new Australian home.
Required:
What is Sonias current residency status in Australia? For example, is she a Foreign Resident or Australian Resident? If she is an Australian Resident, is she a Temporary Resident?
Could her residency status change when she moves in with her partner?
What are the current capital gains consequences of selling her NZ property? Will this change when she moves in with Jayden? If so, what is the relevant law and how does it apply to her situation?
Assistance:
You may find the following helpful in researching your response:
Sadiq, 2023, Principles of Taxation Law, Chapter 17, Pyrmont NSW.
ATO legal database. PBR 1052155737467, Subject: Capital Gains Tax.
Linkedin article. https://www.linkedin.com/pulse/residency-changes-new-zealand-citizens-living-patrick-sheehan/?trackingId=zQcFGJE4TGOsufYo%2BJv9gg%3D%3D
TIPS for Assignments:
This assignment should be written as a professional letter, therefore it should:
be dated,
have full address details,
be marked as private and confidential,
have a disclaimer,
be signed off by a partner with contact details, and
have an executive summary at the start.
This form of question requires students to present arguments on the application of the law to a given practical problem. In addressing a question which requires the application of the law, it is suggested that you adopt the following approach:
I:ISSUES - Identify the essential issues in the questionR:RULE - Identify the relevant law, i.e. relevant legislative provisions and cases
A:APPLY - Apply the law to the problem
C: CONCLUSION form a reasoned conclusion on the application of the law
Issues:
To highlight that you are aware of the key issues in a question, you should raise these at the beginning of the answer. Stating the relevant issues clearly and simply at the outset will indicate to the marker that you have a good understanding of the matters at hand.
It is important to approach a problem with an open mind and not simply jump into what may appear to be the main issue while ignoring other relevant issues.
Relevant law
Once the essential issues have been identified, it is then necessary to identify the legislation and cases that are relevant to solving the problem. Always remember to cite any legislative provisions and cases that support your arguments. However, be sure to provide a balanced view, and do not forget to also mention any materials that do not support your arguments (with appropriate explanations).
You will need to express, in clear and concise terms, the effect of various provisions and principles arising from the legislation and cases studied. In general, it will not be necessaryto restate the facts of cases. Rather, it is the principles from the cases which are important. The facts of a case will, however, be important where you want to draw direct parallels with the case or distinguish the case based on its facts.
Be sure to use ATO material to argue your point as the ATO auditor is under a legal obligation to follow public ATO advice, so if you can structure your argument using this material it may be enough to persuade a grumpy auditor. ATO auditors are not bound to follow your view of precedent, but they are bound to follow their own internal rulings and procedures.
Applying the law
It is not enough to simply state the principles of law that are relevant to a problem-based question. It is necessary to apply the principles to the facts of the problem. This is similar to the position which arises in practice. A client who seeks legal advice will not just want to know what the law states the client will be primarily concerned with how the law applies to his or her given fact situation. It is imperative, therefore, that in answering the problem -based question you show how the relevant client is affected by the law. In other words, you should clearly state the consequences that flow from the application of particular provisions and case law to the particular fact situation.
Conclusion
Finally, it is necessary for you to come to a reasoned conclusion which is consistent with the views put forward in your arguments relating to the application of the law.
The conclusion should be brief and to the point and should directly answer the question posed. In some cases, you may not be able to provide a definite answer to a particular question, as you may need additional factual information which is not provided in the question. In these cases, you should state what further information is needed and explain how your answer would differ depending on the particular facts obtained. There may also be situations where the law on a particular point is conflicting. In these cases, you should clearly identify where the conflict arises and provide your opinion on the most appropriate resolution to the problem. This may require you to advance various policy arguments in support of your conclusion.
