Question but not so easy! Hi I meant anyone who is proficient and capable of understanding Australian Taxation system ? I have a very big question and I need a solution for it.
Even accountants are confused... Trevor and Janet Monk had emigrated from England in August 2007. Trevor is a qualified builder while Janet completed her accounting degree just prior to coming to Australia. The decision to emigrate was confirmed when Trevor’s wealthy Australian uncle died In July 2007 and bequeathed the following assets to Trevor, his only heir: - An operational cattle station, Greenpastures, in Western Australia which produces cattle for beef and dairy (milk) production. As at July 2007 the market value of the land was $6,500,000, livestock $1,800,000, plant, equipment and structures: beef production $160,000, dairy production $165,000. Trevor’s uncle had purchased Greenpastures in 1995 for a total of $4,000,000. He paid $2,000,000 for the land and he then purchased livestock for $1,000,000 and plant, equipment and specialised structures (some in used condition) for another $1,000,000. Trevor’s uncle then set up a beef and dairy business. Half of the value for plant, equipment and structures was used in the dairy business and the remainder is used in the beef business. Depreciable assets were, and continue to be, depreciated at a rate of 7% (prime cost) for tax purposes. Greenpastures was bequeathed directly to Trevor and Janet’s private company Trejan Pty Ltd in which ownership is as follows: Trevor, 10 shares; Janet 10 shares; Sally Monk (18 year old daughter) 5 shares; Fred Monk (21 year old son) 5 shares. Greenpastures is operated by a manager and has its own bores which supply water. The recent drought has only served to increase its profitability as the price of beef has increased. For the year ended 30th June 2008 the station had $8,000,000 in assessable income and $6,200,000 in allowable deductions. Trevor intends to keep the station running in its current structure except that he intends to concentrate on the beef production side, and, to this end, sold all the dairy side of the business for $1,000,000 in September 2008. Included in this price was • an amount of $150,000 plant, equipment and any structures. Most of these items were existing depreciable assets of the cattle station when Trevor’s uncle purchased Greenpastures in 1995, as no items had been sold. However, included in this September 2008 sale was an additional milking machine which had been purchased second hand on 1 July 2005 for $30,000. • an amount of $400,000 for dairy cattle, which had a book value of $280,000. In ADDITION to the above, for the year ended 30 June 2009 normal business assessable income from operating the cattle station is expected to be $7,000,000 with allowable deductions of $5,400,000. The only other income of Trejan Pty Ltd for the 2009 financial year is interest from a cash investment of $40,000, cash dividends of $200,000 (plus $50,000 franking credits) and the $3,500,000 income from fees for building the mansion conversion (see below) . Against this income, Trejan had $3,000,000 in deductible costs . Trejan Pty Ltd is expected to declare and pay a fully franked dividend of $1,000 per share in May 2009. A 40 room Edwardian mansion on the banks of the Swan river in Perth, Western Australia which was bequeathed to Trevor and Janet as tenants in common in equal shares. Trevor’s uncle had purchased the 700 square metre home on 2 hectares of land in September 1982 for $8,000,000. In September 1990 he carried out major additions and renovations which added 300 square metres, upgraded all internal fixtures and fittings and added a helipad. The additions and renovations cost $3,000,000. At the time of his uncles death, this property had a market value of $20,000,000. This property was Trevor’s uncle main residence when he was alive. Since October 2008 Trevor has been working on the property to convert it into four luxury units. Trevor has subcontracted his private company to undertake the conversion for $3,500,000. An additional $1,000,000 in costs (including state duties of $750,000) were incurred in converting the original single title into four strata titles- two of these titles are in Trevor’s name and two in Janet’s. Trevor and Janet each paid $500,000 each. The four units have been sold off-the-plan for $6,000,000 each. A 10% deposit was paid by each purchaser and received by Trevor and Janet in September 2008. The units will be completed, and the balance due in December 2009. A rural property in the northern New South Wales coastal town of Byron Bay bequeathed to Trevor. This property is on 5 hectares and has a sprawling luxury homestead and was purchased on 25th September, 1985 for $500,000. Trevor’s uncle renovated it and used it as his living quarters while his home was being renovated, but for the remainder of the time it was used as a conference and holiday accommodation for his 15 permanent staff that ran his cattle station. Trevor and Janet intent to use this as their home for the next 10 years after which they intend to sell it and retire to a luxury apartment in the city centre. Required: 1) how (and why) the above events have affected Trevor’s, Janet’s and Trejan Pty Ltd’s taxable income for the tax years ending 30 June 2008, 30 June 2009 and 30 June 2010, and 2) the affects of capital gains tax legislation on assets, including those assets which continue to be held after the above dates. (please note that you do not have to work out taxable income, but the affect on taxable income). Hints: There is a lot of information in the above case, therefore you should list each item which has potential tax repercussions and research the item in the context of the transaction. • Your discussion should clearly state the issues, the related tax law, case precents and/or tax rulings. You should refer to at least six relevant cases and/or rulings. • Also if you identify a situation where Trevor or Janet could have organised things differently to legally reduce their and/or their company’s tax, you must clearly outline both what has occurred and the alternative. • Any necessary assumptions must be clearly stated.
Hi Fam, Which course is this for? It seems a little more in depth than a 1st year degree. I'd say either specifically a Capital Gains Tax subject for a degree level or even a Masters or Taxation? Cheers, Dan
fam sorry too many questions and frankly none has a day to spend writing your essay for you. Try the web and study the ATO website for examples and rullings Australian Taxation Office Homepage
