UNSW THE UNIVERSITY OF NEW SOUTH WALES AUSTRALIAN SCHOOL OF BUSINESS SCHOOL OF TAXATION AND BUSINESS LAW TABL2751 / LAWS3147 BUSINESS TAXATION / ELEMENTS OF INCOME TAX LAW SEMESTER 2, 2014 ASSIGNMENT DUE DATE AND TIME
Tuesday 7th October, 2014, 6:00 pm (Week 10 of semester)
LATE LODGEMENT
Late lodgement not accepted unless prior arrangements have been made with the lecturerin-charge.
PLACE OF LODGEMENT
You must submit your assignment both electronically and in hard copy: Electronic lodgement: via course Moodle site Hard copy lodgement: Designated Assignment Box on Ground Floor, West Lobby of ASB Building.
VALUE OF ASSIGNMENT
20%
LENGTH OF ASSIGNMENT
2,000 words (maximum)
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ASSIGNMENT INSTRUCTIONS PLEASE READ THE BELOW INSTRUCTIONS AND ENSURE YOU FOLLOW THESE IN COMPLETING YOUR ASSIGNMENT 1. The word limit is 2,000 words – this is the maximum word limit. 2. You are required to reference all legislation, cases, secondary sources that you have used to answer the assignment. There is no set referencing style required, but footnotes are preferable to „in text‟ referencing. (If you would like guidance as to a referencing style, you can refer to the „Australian Guide for Legal Citation „AGLC‟ – available http://www.law.unimelb.edu.au/files/dmfile/FinalOnlinePDF-2012Reprint.pdf ). Note however that you do not have to use the AGLC style, as long as your referencing is consistent throughout your assignment. Words, case names/case citations and legislative references in footnotes are not counted in the word count. However, you must not place substantive parts or central parts of your answer or argument in footnotes. 3. If your answer requires you to show substantial calculations (e.g. half a page), show these in an appendix/appendices to your answer and refer to these in the text of your answer. Appendices are not counted in the word count. Small calculations (e.g. two or three lines) should be incorporated into the text of your answer (or in footnotes at the relevant part of your answer). 4. Your answer must be typed. You must use one and a half (1.5) spacing and a font size of 12. You must leave at least a 2.54 cm margin from both sides of the A4 page (note that this is the „normal‟ margin setting in Microsoft Word). Your pages must be numbered sequentially. Your hard copy answer should be single sided. 5. Your assignment should include a reference list. 6. You should carefully proof-read your answer before submission. Incorrect spelling and incomplete sentences will be reflected in the grade for your answer. 7. You must keep a copy of the answer that you have submitted. 8. You must complete and attach a copy of the Official Assignment Cover Sheet at the front of your answer. Ensure that the Assignment Cover Sheet is properly stapled to your answer pages. (The Official Assignment Cover Sheet will be posted on Moodle under the Assessment icon). This includes signing the plagiarism declaration. 9. Do not place your assignment in a plastic sleeve. Do not place a plastic cover over your assignment. Do not ring-bind your assignment. Do not bind your assignment in any other way. All these items are a complete waste of resources. Stapling the top left hand corner of your assignment is sufficient. 10. In preparing an answer, you will inevitably discuss issues raised by the assignment with other students. There is nothing in the UNSW rules prohibiting such discussions. Indeed, you are encouraged to discuss issues arising from the assignment with other students. However, in the end, you must be able to state that the work that you have submitted is 2
your work. Importantly, you should ensure that you have not committed (either deliberately, or without intent) an act of plagiarism (e.g. presenting another‟s work or ideas as your own, failing to acknowledge the source of a quotation, submitting the same or similar version of work to that of another student). Due to the potential for damage to reputation, plagiarism is taken very seriously by the university, and therefore, the lecturer-in-charge of this course. 11. Although the broad topics raised in the assignment will be topics covered in the course, the assignment will raise issues that will not necessarily have been discussed in lectures or tutorials. This means that you may have to go beyond the prescribed materials for the course in regard to some issues. 12. Given that this assignment is a problem type question requiring you to undertake research, no staff member working on this course (e.g. lecturer, tutor(s)), or any staff member in the School of Taxation and Business Law), will provide assistance to you in writing and researching your answer. Any queries of an administrative nature relating to the assignment should be directed to the lecturer-in-charge. 13. Extensions will only be given in exceptional circumstances outside of a student‟s control. Request for an extension must be made to the lecturer-in-charge prior to the due date of the assignment. No other staff members apart from the lecturer-in-charge will grant extensions.
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ASSIGNMENT QUESTION
Martin purchased a derelict building on 1st January 2013 in Surry Hills for $500,000. To finance the purchase Martin borrowed $500,000 from Big Bank Ltd at 10% interest per annum. Before Martin bought it, the building had been leased by a charitable organisation to a women‟s refuge at a nominal rental of $100 per week. On 1st January 2013, there was still a year remaining under the lease. When Martin purchased the building he shouted, “I have a dream!” Martin‟s dream was that one day the building would be a multicultural café, the “World Community Café”, where people from all over the world would want to come and eat. Martin wanted the logo to be a world globe inside a coffee cup. On 14th February 2013, Martin applied to the local council for permission to redevelop the building as a café. The cost of putting together the application, including the architect‟s fees, was $35,000. On 14th February 2013, Martin also gave the women‟s refuge one month‟s notice to vacate the premises. The women‟s refuge refused to vacate and Martin incurred $10,000 in legal fees associated with ejecting the group. The women‟s ref uge finally vacated the building on 1st June 2013. The local council consented to the redevelopment on 1st May 2013. On 1st May 2013 Martin borrowed a further $700,000 from Big Bank Ltd, again at an annual interest rate of 10%, to undertake the necessary renovations for the redevelopment. The total cost of the renovation work was $700,000. $100,000 was spent on the central coffee making machine and the individual nozzles. $500,000 was spent on plastering and painting the inside of the building. $60,000 was spent replacing the existing awning to protect café customers from the weather. The old awning was made from cloth and was operated manually. The new awning is made from Kevlar and operates electronically. $40,000 was spent on a new stereo system that is Apple compatible. Martin had the stereo system at home between the time when he bought it (4th May 2013) and 1 January 2014. The café was due to open on 1st December 2013. However, on 15th November 2013, Martin received an injunction notice from a competitor, World Cup Coffee . The injunction prevented Martin from opening his café until a substantive matter was resolved in court. World Cup Coffee alleged that Martin‟s logo was substantially similar to theirs and that Martin‟s café would materially affect their business. (World Cup Coffee ‟s logo is a cup of coffee inside a globe of the world.) Martin incurred $50,000 in legal fees in relation to the injunction proceedings but was unsuccessful. Martin tried to find another concept and logo for his café before 1st December 2013 but he was so disillusioned by the legal proceedings that he lost interest in the café. Instead he opened an art gallery on 1 January 2014 which shows photos by artists from all around the world. Required:
Advise Martin of the tax consequences that will result to him on these facts. You need to consider both the 2012-2013 and 2013-2014 income years.
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