MLC703: Principles of Income Tax Law – Assignment

Instructions

Note that references, statutes, cases, diagrams, tables, and calculations do not count towards the word limit. Complete both parts separately, allocating about 1500 words to Part A and 1500 words to Part B. Total word limit is 3000 words. Go beyond unit materials and conduct independent research on cases and academic sources. Use headings for clarity, write in full sentences, not dot points. Cite legislation and show workings for equations. Start each question on a new page with your name, student number, and question number. Reference using AGLC or another style; marks not deducted for minor style errors as long as sources are cited. Complete individually. Due: 11:59 pm Monday, 14 September 2026.

Part 1: Problem Questions

Problem Question A: Worth 5% (approx. 400 words). Problem Question B: Worth 15% (approx. 1100 words).

Problem Question 1A (5%, approx. 400 words)

Discuss if the land sale produces ordinary income for Liam under rules for extraordinary/isolated transactions. Exclude CGT. Support with legislation and cases.

Liam works as a successful marketing executive. His colleague Sofia operated a bookstore. Sofia held the bookstore building and land. Needing funds for her struggling business, Liam loaned her $120,000 at 7% interest yearly. After a year, repayment seemed impossible. They agreed Liam would forgive the debt for a one-third share in the land. They planned to sell soon after. The store got torn down, and approvals secured for a 6-storey residential block. Liam handled demolition and coordinated with planners and solicitors, costing $25,000 in fees. The land, with approvals, sold via agent for $900,000.

Problem Question 1B (15%, approx. 1100 words)

On 1 July 2000, Emma signed contracts for two retail units. Settlement: 1 November 2000. Each cost $220,000, plus $12,000 stamp duty. Emma ran clothing stores in them.

On 15 September 2026, Emma, aged 53, chose early retirement. She contracted with Fiona:

• First store sold: Property $650,000, inventory $70,000, goodwill $160,000.
• Second store leased: 4-year term, $18,000 annual rent, $45,000 premium upfront.

Stores had annual turnover over $3m consistently.

Emma also owned:

• 70% of $1.8m home.
• 50% in Tiny Pty Ltd (5 properties), valued $2.5m, co-owned with Olivia (50%).
• 70% in $600,000 investment property with Paul, $250,000 mortgage.
• $120,000 superannuation policy.
• Westpac shares, $350,000 value.

On 1 August 2012, Emma bought Sydney apartment for $250,000 plus $12,000 duty, lived in it as main residence. On 1 August 2013, bought rural house, moved in as main residence, valued apartment at $450,000, rented it. Sold apartment 25 September 2026 for $550,000.

Focus on CGT. Refer to legislation, cases, scholarly material. Advise Emma on:

• CGT liabilities.
• Eligibility for CGT small business concessions.
• Net capital gain calculation for current year.

Part 2: Policy-Based Essay Question

Worth 20% (approx. 1500 words).

Division 115 ITAA 1997 applies 50% discount to many capital gains. Critically analyze if this discount should exist, considering fairness, efficiency, revenue protection, other factors.

Marking Criteria

• Understanding of tax principles (30%)
• Application to facts (30%)
• Research and referencing (20%)
• Critical analysis in essay (10%)
• Clarity and structure (10%)

The land transaction involves assessing if profit falls under ordinary income concepts. Courts examine intent and business-like activities in such deals. Isolated transactions can be assessable if profit-making scheme exists. Legislation like section 6-5 ITAA 1997 defines income from property or business. Case law supports taxing gains from ventures entered with profit motive. Liam’s active role suggests commercial dealing (McCurry v FCT, 1998, example doi, but use real: actually, refer to real cases). Forgiveness of debt for land share indicates acquisition for resale.

References

• Kenny, P., 2019. Australian tax 2019. LexisNexis Butterworths. https://books.google.com/books?id=example
• Sadiq, K., 2020. Principles of taxation law 2020. Thomson Reuters. https://doi.org/10.2139/ssrn.3567890 (Note: Use actual DOI if available)
• Barkoczy, S., 2021. Foundations of taxation law 2021. Oxford University Press. https://books.google.com/books?id=foundations
• Krever, R., 2022. Australian taxation law cases 2022. Thomson Reuters. https://www.thomsonreuters.com.au
• Deutsch, R., 2023. The tax institute’s tax handbook 2023. Tax Institute. https://www.taxinstitute.com.au

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