LAW6001 Assessment Brief 3 Case Study T2 2019 Page 1 of 9

Context:
This assessment assesses your research skills, your ability to synthesise an original piece of
work to specific content requirements and your ability to produce a comprehensible piece of
advice which addressing the client’s needs.
LAW6001 Assessment Brief 3 Case Study T2 2019 Page 2 of 9
It also assesses your written communication skills. The ability to deliver to a brief is an
essential skill in the workplace. Clients may well approach advisors seeking a combination of
specific information needs and advice on the tax implications of a particular arrangement in
the Australian tax jurisdiction. It is therefore important to be able to identify all the issues
presented by an arrangement and to think about the potential consequences of different
approaches to addressing the client’s needs.
Instructions:
Your case study needs to identify and discuss the tax implications of the various issues
raised. In order to produce your case study, you will need to review relevant case and
legislation. The subject manual and set texts are starting points only; you will be expected to
use these initial materials to identify potential useful resources. You will then need to review
your selected resources to see if they value add to your analysis.
Your case study is not just a list of answers. Your reasons for your conclusions and
recommendations must be based on your research into the relevant cases and legislation.
Question 1 (10 marks)
Adam Collins was born in Australia and works as an international airline pilot. He is married
to Narelle and they have two school aged children. Adam and Narelle own a house in
Sydney and receive interest on savings from their joint Australian bank account. Adam pays
for Australian private health insurance for the family and has share investments in the airline
on which he receives dividends. From 1 November 2017 until 1 April 2018, Adam was based
at the airline’s hub in Dubai and lived in an apartment leased by the airline. The airline paid
five months of Adam’s $500,000 annual salary directly into a bank account that he
established in Dubai. Adam took annual leave in December and returned to Australia to
spend Christmas with the family.
In May 2018, Adam accepted an offer to relocate with Narelle to Dubai for an indefinite
period. The couple flew to Dubai on 1 July 2018. They established a joint bank account with
a local bank and in November 2018 purchased an apartment close to Dubai airport. The
children moved to a boarding school in Sydney. Adam and Narelle maintained their joint
bank account and private health insurance in Australia and rented out their Sydney home.
Adam took six weeks of annual leave during December 2018 and January 2019 and
returned to Australia with Narelle to spend time with their children and inspect their home.
Required
Advise Adam Collins as to whether he is an Australian resident or non-resident for tax
purposes for the 2017/18 and 2018/19 years. You must include relevant section numbers
and cases in your explanation.
LAW6001 Assessment Brief 3 Case Study T2 2019 Page 3 of 9
Question 2 (10 marks)
In June 2018 Orpheus Parker purchased a ground floor two-bedroom townhouse in Neutral
Bay, Sydney. He decided to rent out part of his townhouse on Airbnb while still living in the
property. The total floor area of the townhouse is 850 sq feet (79 m2). The floor space of
Orpheus’ bedroom and his private area is 250 sq feet (23.2 m2). The rented second
bedroom area is 200 sq feet (18.6 m2). The shared area comprising lounge, kitchen and
laundry cupboard is 400 sq feet (37.2 m2).
The property has been listed since 1 September 2018 and Orpheus has achieved consistent
occupancy rates. During the period of 1 September 2018 to 30 June 2019, the room was
rented for 150 days. Orpheus only offered the room to solo travellers and he has received a
total of $22,500 in rental income. During this period, expenses relating to occupancy costs,
such as mortgage interest, municipal rates, strata levies and home insurance amounted to
$50,000. Orpheus also spent $250 on expenses relating to renting the room, i.e., advertising
fees and consumables supplied for the room.
Required
Advise Orpheus Parker of the tax consequences of using his townhouse to produce rental
income for the 2018/19 income year. Does Orpheus need to register for GST by doing
Airbnb? You must include relevant section numbers in your explanations.
Question 3 (15 marks)
In 1975, Joe Messina purchased five hectares of land 40 km from Sydney’s CBD. The land
was used for agricultural pursuits, with produce sold through Sydney markets. In the year
2000 the government proposed construction of an airport adjacent to Joe’s land.
Subsequently, in 2005 Joe sold the land for $700,000 and used this entire amount to acquire
a large block of land closer to Sydney with the intention of keeping the land as a retirement
nest-egg. In 2016, Joe was approached by a real estate developer to construct eight
townhouses on the land. Joe accepted the proposal and employed architects, builders and
obtained development approval from the local council. Joe oversaw the development and
engaged real estate agents to market the townhouses for sale upon completion. During the
course of the 2018/19 income year seven townhouses were sold for $650,000 each. Joe
retired to the remaining townhouse.
Required
Advise Joe Messina about whether the proceeds from his land and building transactions
constitute assessable income and the basis on which they may be assessed. You must
include relevant section numbers and cases in your explanation.
LAW6001 Assessment Brief 3 Case Study T2 2019 Page 4 of 9
Question 4 (20 marks)
Harrison Carter, an Australian resident, seeks advice on the CGT consequences of the
following events.
1. He exchanged contracts for the acquisition of an investment property, at market
value, on 24 January 1999, paying a 10% deposit of $80,000. Property settlement
was deferred until 5 December 2001, when the balance of $720,000 was paid, title
transferred, and his name was recorded as the registered proprietor. At the time of
settlement the market value of the property was $1m. He sold the property on 14
June 2018 for $1.3m.
2. He acquired 10,000 shares in Star Entertainment Ltd in October 1985, paying $4 per
share. He decided to sell his entire shareholding, for $12 per share, and signed a
share transfer document and handed the transfer and share script to the Stock
Exchange on 20 June 2018. The transfer was not registered with Star Entertainment
Ltd until 10 July 2018.
3. He incurred a capital loss in 2018/19 amounting to $65,000.
Required
Advise net capital gains (losses) to be included in Harrison Carter’s tax return for the years
ending 2018 and 2019. Include ALL available methods for calculating a capital gain for both
years. You must explain the timing of a CGT event with relevant section numbers and cases.
LAW6001 Assessment brief 3 Case study T2 2019 Page 5 of 9
Learning Rubrics

LAW6001 Assessment brief 3 Case study T2 2019 Page 6 of 9

LAW6001 Assessment brief 3 Case study T2 2019 Page 7 of 9

LAW6001 Assessment brief 3 Case study T2 2019 Page 8 of 9

LAW6001 Assessment brief 3 Case study T2 2019 Page 9 of 9