Taxation LAW

Taxation LAW

LAWS3070

Spring 2022

TAKE-HOME EXAM

Due Date: Monday 19 September 2022, 5:00 PM

Assessment Value: 30% (30 Marks)

Word Length: 1750 words

Assessment Criteria: See Learning Guide

IMPORTANT NOTES:

Please read the FAQ posted under the Assessment Information tab in vUWS.

The exam consists of three (3) related questions.

Question 1 is worth 5 marks; Question 2 is worth 10 marks and Question 3 is worth 15 marks.

QQ1 & 2 tests SLO1 and SLO2;

Q3 tests SLO2.

You are required to answer all three questions.

An answer exceeding the prescribed word length will incur penalties (viz., deduction of marks for excessive length). See Learning Guide

All answers must be supported with references to relevant legislation, caselaw and/or tax rulings

Your textbook is only a secondary source of information. Preferably, you should instead rely on primary sources (eg, actual sections in the legislation, reported cases, tax rulings, etc)

The exam must be submitted via Turnitin (which can be located in the Assessment Information tab on vUWS)

This assessment is an Exam and therefore should be attempted alone.

No late submissions can be accepted.

Students who do not submit either a Take Home Exam on time or lodge a successful special consideration are at risk of a FNS grade for the unit even if they receive an overall mark of more than 50%. QUESTION

On 1 March 2016, Peter arrived in Australia from Hong Kong on a short-term temporary visa which allowed him to work up to 20 hours per week. After attending Open Day at Western Sydney University soon after arriving in Australia, Peter decided to enrol in a four-year electronic engineering degree at Western Sydney University. He was granted a student visa on 1 February 2017 and commenced studies on 1 March 2017.

Peter travelled around Australia for the first 6 months, staying in hotels. From October 2016 he has lived in a 3-bedroom rental house in Harris Park which he shares with another friend. In early 2022, Peter was granted permanent residency.

Since his arrival in Australia, Peter has been earning approximately AU$10,000 per quarter (i.e., AU$40,000 pa) in rent from an investment property he owns in Hong Kong. Since October 2016, Peter has also been working at a caf in Parramatta, earning approximately $1,000 per month.

Due to the Covid-19 pandemic, Peter was unable to return to Hong Kong to attend to maintenance and repairs on his investment property. Instead, he relied on his father, who lives in Hong Kong, to deal with any repair issues, collect the rent and deposit it into Peters bank account in Australia.

Peter likes fixing mobile phones. In 2020, he began repairing them in his spare time. He did this mostly for close friends and fellow students. At first, he just charged people for parts.

Finding that he was getting more repair requests, in 2021 Peter began charging $25 for each hour he worked fixing phones. He earnt $25,000 from this activity during the current tax year ending 30 June 2022.

In October 2021, Peter quit his job at the caf.

From January 2022, Peter began selling reconditioned phones which he assembled by using damaged phones and new parts left over from fixing other peoples phones. He stored dozens of phones in the spare room where he lived. Peter earnt $12,000 from this activity for the current tax year ending 30 June 2022.

Peter has come to you for tax advice in relation to the above activities. He said that:

He had never reported his Hong Kong rental income in his Australian tax returns because he considered this had nothing to do with Australia.

Required: By reference to case law, legislation and/or tax rulings advise Peter whether and, if so, why and when he was first required to include his rental income in his Australian tax return. (10 Marks)

He did not report any profit from his phone repair activity because he considered this to be a hobby.

Required: Advise Peter, by reference to case law, legislation and/or rulings whether he is correct to treat his repair activities as a hobby. (10 Marks)

With reference to case law, legislation and any applicable rulings, Advise Peter on the total amount of ordinary income he derived during the financial year ending 30 June 2022. Your answer should clearly identify and consider each item of income mentioned above. (10 Marks)

END OF EXAM