GENERAL INSTRUCTIONS ON ANSWERING THE TAX ASSIGNMENT
1.ANSWER the question in the same ORDER as issues are raised in the question. There is often a logic behind the examiner raising the issues in the particular order in the question.
2.The answer must have STRUCTURE. In other words, you must lay the basis for coming to your conclusion on an issue.
3.Generally the manner of structuring your answer will involve the following:
identifying the issue;
making reference to the statute law – particularly identifying which section you are considering (and why you are starting with that section). If parts or phrases of the section are particularly relevant to your answer identifying those parts or phrases in your answer without writing out the whole section;
making reference to relevant case law – do not refer to the facts but the principle established by the cases;
the relevant law/case law will often contain a test that must be satisfied – state the test clearly using your own words;
apply the law/test to your facts and come to a conclusion.
4.USE paragraphing for each new concept. Lack of paragraphing demonstrates a disguising, or lack of understanding, of the issues, and suggests the writer is not prepared to identify and deal with each issue separately.
5.DO NOT have an introduction or any “canvassing” of the issues/law generally at the beginning of your answer. Just identify and start with the first issue raised by the question.
6.DO NOT have a conclusion at the end of the question.
7.DO NOT provide footnotes, bibliography or give citations to the cases. (Note that this advice, and that given in 5 and 6 above, is specific to this subject and is given in the context of problem-based tax questions.)
8.DO NOT discuss the law in isolation from the facts in the question. In marking the question a line will be put through the purported “answer” up to that point where you start dealing with the question.
9.DO NOT use standard check lists.
10.DO NOT offer personal views or opinions such as whether you think something is fair or not.
11.DO proof-read your answer before submitting it. Check that your writing is clear, concise and accurate.
COMPULSORY ASSIGNMENT
Jim is an employee of Modern Kitchens Ltd (Modern Kitchens). He is employed as a carpenter and is paid a salary of $100,000 a year. Modern Kitchens carries on a business of manufacturing and installing new kitchens.
Jim also carries on his own business. He carries on his own business on weekends and outside normal working hours from his home. In his own business he provides handy-man type services and is paid on an hourly basis for the services he renders.
One of the clients that Jim provides his services to, in the course of carrying on his own business, is Quick Repairs Pty Ltd (Quick Repairs). From time-to-time Quick Repairs engages Jim to undertaken urgent weekend repair services for its customers.
Jim is married to Mary and they have a 20-year-old son Jack.
During the 2023 income year (1 July 2022 to 30 June 2023) the following events happen:
(a)Modern Kitchens pays Jim an additional amount of $20,000 in recognition of his excellent work in installing the new kitchens.
(b)A new owner takes over Modern Kitchens by acquiring all of its shares. In order to retain the personnel employed by Modern Kitchens the new owner offers each employee $20,000 in return for their agreement to continue as an employee of Modern Kitchens for the next 12 months. Jim accepts the offer and is paid $20,000.
(c)Modern Kitchens as part of the remuneration package provides its employees with a nil interest loan not exceeding a maximum loan of $100,000. James is provided a loan of $100,000 by Modern Kitchens (at nil interest) which he used to purchase a residential apartment that he intends to rent.
(d)Jim provides services to Quick Repairs on 20 June 2023 and sends an invoice of $1,000 to Quick Repairs for the services rendered allowing 14 days for payment.
(d)Jim receives payment of the invoice on 5 July 2023.
(e)Jim enrolls in a carpentry course costing $2,000 at the local TAFE college which is paid for by Modern Kitchens.
(f)Jim enrolls in a plumbing course costing $5,000 at the local TAFE college which is paid for by Quick Repairs to enable Jim to undertake not only carpentry work for Quick Repairs on weekends but also plumbing work.
(g)In the course of undertaking plumbing work for Quick Repairs Jim replaces an electric water heater with a gas heater. The electric water heater is in good condition and worth $1,000. Jim installs the electric water heater in his home.
(h)Modern Kitchens vacates its office premises over one weekend and moves its business to new premises. Modern Kitchens engages Jack and the children of other employees to assist in cleaning up the former office premises and, for the two days of work, gives each of them a $1,000 gift voucher for use at David Jones stores. The gift voucher is not able to be cashed in or transferred.
(i)In consideration for Jim performing services worth $5,000 for Quick Repairs, Quick Repairs provided $5,000 worth of electrical services to Jim by installing new electrical wiring in his home.
(j)Jim does minor carpentry work repairing a fence for his next-door neighbour who is 90 years old. The work only takes a couple of hours and Jim does not want any payment for the work. However, the neighbour insists on giving Jim $10.
Advise Jim, Mary, Jack and Modern Kitchens as to whether they are assessable (under the income tax or fringe benefits legislation) in respect of the amounts/benefits received and provided under the above scenarios for the income year ended 30 June 2023.
[Students are not required to consider deductibility or to undertake any calculations of the tax payable in answering this question but, if applicable, should consider the “otherwise deductible rule” under the relevant legislation.