HI5028 TAXATION

T2, 2014 ASSIGNMENT 1

Due date: Friday Week 6

Instructions:

This assignment is to be submitted by the due date in both soft-

copy (Safeassign – Bb) and hard copy.

The assignment is to be submitted in accordance with

assessment policy stated in the Subject 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. Ensure that when

incorporating the works of others into your submission that it

appropriately acknowledged.

Maximum marks: 20 (20%)

Assignment 1: You should attempt both parts to this assignment

Note: you should incorporate all sections of the various Acts/regulations

where appropriate.

Part 1: Case study

Janet (taxpayer) residing in Australia is named as the sole beneficiary of a

property (1.85 hectares) with a large homestead as a result of the death

of a relative on 7/10/2010. The property is not used for commercial

purposes and at the date of death, the property was valued at

$1.45million. Settlement took place on 21/12/2010. After moving into the

homestead shortly after taking ownership, she planned to take a one-year

trip which she had been planning for some time in late 2011. The taxpayer

felt that the homestead was far too large for her (she is single), applied to

the ATO for an exemption for ABN registration and some fourteen months

later (16/2/2012), she obtained council approval to subdivide the property

into three, with the intention of building three units, one she will take up as

her own residence, the other two will be sold. Work commenced some

weeks after approval and on 12th December that same year, the

taxpayer returned and moved into one of the apartments. The other two

were sold in March/April in 2013, one selling for $1.35m (24/3/2013), the

other for $1.45m (9/4/2013).

You are to consider the CGT implications both from the relevant sections

(ITAA), rulings, etc. and from the values (if/where applicable). Assume that

the blocks are subdivided equally. For each determination that you make,

you should clarify. You should also clarify what Capital Gains and CGT is in

your answer (15 marks)

Part 2: Question

Explain using examples and relevant sections of the act, what the

differences between Ordinary Income and Statutory income are. Use your

own examples (not from MTG or Barkoczy text) (5 marks)