Microsoft Word - HI6028 Individual Assignment T1 2020 HI6028 Taxation Theory, Practice and Law...

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Microsoft Word - HI6028 Individual Assignment T1 2020

HI6028 Taxation Theory, Practice and Law Individual Assignment T1.2020 XXXXXXXXXX1

HOLMES
INSTITUTE

FACULTY OF
HIGHER
EDUCATION

Assessment Details and Submission Guidelines
Trimester T1 2020
Unit Code HI6028
Unit Title Taxation Theory, Practice & Law
Assessment Type Assignment
Assessment Title Individual Assignment
Purpose of the
assessment (with
ULO Mapping)
Students are required to follow the instructions by your lecturer to
confirm any relevant information. You also need to follow any relevant
announcement on Blackboard to confirm the due date and time of the
assignment.

The individual assignment will assess students on the following learning
outcomes:
1. Demonstrate an understanding of the Australian income tax system,
the concept of deductions, CGT, general anti-avoidance provisions
and income tax administration. (ULO 1).
2. Identify and critically analyse taxation issues. (ULO 2).
3. Interpret the relevant taxation legislations and case law. (ULO 3).
4. Apply taxation principles to real life problems. (ULO 4).
Weight This assignment task accounts for 25 % of total marks in this unit.
Total Marks This assignment task accounts for 25 marks of total marks in this unit.
Word limit Max 2000 words (acceptable to be 10% above or below this word limit).
Due Date Refer to the Unit Outline, as Normal & Block Modes have different due
dates.
Submission
Guidelines
Instructions: Please read carefully to avoid mistakes.
 Answer all questions.
 This assignment along with a completed Assignment Cover Page is
to be submitted on Blackboard by the due date in soft-copy only.
 The self-check links are no longer available as a separate link in
each unit’s assessment. Students are now limited to attempt any
given assignment submission a maximum of three times. After every
attempt you will receive a SafeAssign originality report with
Blackboard Learning Management System. This will provide detailed
information about the matches found between your submitted works
and existing sources.

HI6028 Taxation Theory, Practice and Law Individual Assignment T1.2020 XXXXXXXXXX2

 The assignment is to be submitted in accordance with assessment
policy stated in the Unit Outline and Student Handbook.
 It is the responsibility of the student submitting the work to ensure
that the work is in fact his/her own work. Incorporating another’s
work or ideas into one’s own work without appropriate
acknowledgement is an academic offence.
 The assignment must be in MS Word format, no spacing, 12-pt Arial
font and 2 cm margins on all four sides of your page with
appropriate section headings and page numbers.
 Reference sources must be cited in the text of the report, and listed
appropriately at the end in a reference list using Harvard referencing
style. You also must refer to relevant legislation and/or case law in
your answer. Reference sources must be cited in the text of the
eport, and listed appropriately at the end in a reference list using
Harvard referencing style.
 Note: Assessment task is set around the work that you have done in
class. You are not expected to go outside the content of the unit but
you are expected to explore it.
Individual Assignment Specifications
Purpose:
This assignment aims at assessing students on the Learning Outcome (LO) from 1 to 4 as
mentioned above.
Assignment Structure should be as the follows:

QUESTION 1: DIFFERENCE BETWEEN CAPITAL AND REVENUE EXPENDITURE Weighting
Identification of material facts (issues) regarding John’s prepaid rent. 2 %
Identification and analysis of legal issues / legal question and relevant taxation law
in regards to casino’s rental (e.g. ITAA 1936 and ITAA 1997).
2 %
Thorough yet succinct application of tax law (e.g. ITAA 1936 and ITAA 1997) to
material facts in John’s case.
2 %
Detailed and accurate identification of the lump sum rental payment are reached. 3 %
Co
ect information and taxation law have been used and properly cited. A detailed
analysis has been performed.
3 %
Ability to show excellent understanding of the cases and/or section of legislation, its
context and application of taxation law.
3 %

HI6028 Taxation Theory, Practice and Law Individual Assignment T1.2020 XXXXXXXXXX3

QUESTION 1 TOTAL MARKS: 15 %
QUESTION 2: TRAVELLING BETWEEN TWO PLACES OF WORK Weighting
Identification of material facts regarding the deductibility of Alex’s travelling
expenses discussed in the assignment question.
1 %
Identification and analysis of legal issues / legal question and relevant taxation law. 2 %
Thorough yet succinct application of ITAA 1997 to material facts. 2 %
Detailed and accurate conclusions are reached from the scenario discussion. 1 %
Co
ect information and taxation law have been used and properly cited. A detailed
analysis has been performed.
2 %
Students are able to demonstrate understanding of the cases and/or section of
legislation, its context and application of taxation law.
2 %
QUESTION 2 TOTAL MARKS: 10 %

Assignments’ Instructions and Requirements

QUESTION XXXXXXXXXXMARKS)
John has applied and been approved a licence to operate a casino in Melbourne, which later on he
named it The Casino East. John has received 10-year licence from Victorian Government to operate
the casino. He also received approval for Casino’s building for a long period of time (90 years).
John was instructed by the relevant Government agency to pay $180 million for the approved
casino’s licence and $80 million as prepaid rent covering the first 10 years of casino’s rental. John
has negotiated to pay $400,000 rental per year for the remaining 80 years of the lease.
With reference to relevant legislation and case law discuss whether casinos prepaid rent is
considered a revenue expense or a capital expense.
QUESTION XXXXXXXXXXMARKS)
Alex Kingsford is a mechanical engineer working for ABC Engineering in Melbourne. Alex owns a
property in Dandenong, Victorian where he and his family are residing. He also runs a home-
ased food catering business, preparing food for local residents and school canteens. Catering
usiness is well-structured. Alex works 15 days a month and earns a substantial income from the
catering services business. He is travelling from ABC Engineering workshop to his home-
ased business by car or sometimes Uber. When he lodged his tax return in July 2019, he has

HI6028 Taxation Theory, Practice and Law Individual Assignment T1.2020 XXXXXXXXXX4

equested a deduction for a substantial amount of travelling expenses between the ABC
Engineering workshop and home-based food business.
Alex is now seeking your advice. With reference to relevant legislation and case law discuss
whether Alex’s travelling expenses between the ABC Engineering workshop and his home-
ased catering business is an allowable deduction.

Assignment Structure should be as the following (students’ responses involves calculations,
and students must refer to the relevant legislation and/or cases whenever required
according to the questions).

Marking criteria

Marking criteria Weighting
Question 1
Identification of material facts (issues) regarding John’s prepaid rent. 2 marks
Identification and analysis of legal issues / legal question and relevant taxation
law in regards to casino’s rental (e.g. ITAA 1936 and ITAA 1997).
2 marks
Thorough yet succinct application of tax law (e.g. ITAA 1936 and ITAA 1997) to
material facts in John’s case.
2 marks
Detailed and accurate identification of the lump sum rental payment are reached. 3 marks
Co
ect information and taxation law have been used and properly cited. A
detailed analysis has been performed.
3 marks
Ability to show excellent understanding of the cases and/or section of legislation,
its context and application of taxation law.
3 marks
QUESTION 1 TOTAL MARKS: 15 marks
Question 2
Identification of material facts regarding the deductibility of Alex’s travelling
expenses discussed in the assignment question.
1 mark
Identification and analysis of legal issues / legal question and relevant taxation
law.
2 marks
Thorough yet succinct application of ITAA 1997 to material facts. 2 marks
Detailed and accurate conclusions are reached from the scenario discussion. 1 mark
Co
ect information and taxation law have been used and properly cited. A
detailed analysis has been performed.
2 marks
Students are able to demonstrate understanding of the cases and/or section of
legislation, its context and application of taxation law.
2 marks
QUESTION 2 TOTAL MARKS: 10 marks

HI6028 Taxation Theory, Practice and Law Individual Assignment T1.2020

hi6028-individual-assignment-t1-20203-3vkovbqq.pdf

Suvrat · Accepted Answer

Question 1
With reference to relevant legislation and case law discuss whether casinos prepaid rent is considered a revenue expense or a capital expense.
Answer 1 
Facts of the case: John has received 10 year license from Victorian Government to operate the casino. He also received Casino’s building for a long period of time which is 90 years. John was instructed to pay $180 million for license and $80 million as prepaid rent covering the first 10 years of casino’s rent. The rent reduced to $400,000 per annum for remaining 80 years.
Issue: Whether prepaid rent paid of $80 million to be considered as revenue expenditure or capital expenditure.
Interpretation of tax law and case law: According to s51 of ITA1936: All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic, or are incurred in relation to the gaining or production of exempt income. Also according to s8-1 of ITAA1997 General Deductions, the taxpayer can deduct from his/her assessable income any loss or outgoing to the extent that:
· It is incurred in gaining or producing your assessable income;
· It is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.
As per the contract John has regarding building, he was instructed to pay $80 million prepaid rent for the first 10 years of the lease. It was required to carry on its business to gain or produce assessable income. 
The same was established in Star City Pty Limited v FCT [2007] FCA 1701 (Federal Court, Gordon J, and 9 November 2007), in which star city pty limited was instructed to pay $120 million prepaid rent for casino for first 12 years of lease. In the case commissioner argued that the amount prepaid was an outgoing of capital or of a capital nature, on the basis that it,
· Formed part of the consideration for the grant of the casino license
· Was made for the purpose of obtaining a lease of the casino site; and/or 
· Was made in order to obtain the exclusivity of the casino license in the first 12 years of operation,
The same was rejected by the court on the basis that the prepayment was made to secure the use of land for the purpose of generating income from the casino, and not for the purpose of acquiring any asset of an enduring mature. The state remained the owner of the land and the taxpayer had no option to purchase the land at the end of the term of lease. The period of 99 years did not represent all or a major proportion of the life of land. In relation to the fact that the annual rent reduced after first 12 years was explained by the court: "The explanation for the difference in rate of annual rental offered by Star City Consortium (and accepted by the CCA) is no doubt (as the Commissioner accepted) connected with the period of exclusivity of the casino licence ending at the point at which the rate of rental changes".
The Commissioner also argued that if the prepayment was allowable as a deduction under s 51 ITAA 1936 or s 8-1 ITAA 1997 (as modified by s 82KZM of ITAA 1936); it was nevertheless not deductible by reason of the operation of Part IVA ITAA 1936. This argument was also rejected by the Court on the basis that the taxpayer derived no tax benefit from the scheme under which the payment was made. The "alternative postulate" proposed by the Commissioner (if the scheme had not been entered into or carried out) was not something that "might reasonably be expected to happen". The taxpayer did not offer it,

Microsoft Word - HI6028 Individual Assignment T1 2020 HI6028 Taxation Theory, Practice and Law Individual Assignment T1.2020 XXXXXXXXXX1 HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION Assessment Details...

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