Georgina George is planning to invest 1000 000 AUD into an investment which promises no tax whatsoever. Georgina is concerned that the investment makes use of artificial structures to achieve an effective tax rate of zero percent. Advise Georgina of any tax consequences that may be faced should her concerns turn out to be true. Your answer for Question One may not exceed 1000 words.

Case Study with Short Questions and Calculations: Piper Chapman

Piper (aged 40) is married to David (aged 45), and they have no children. Piper and David immigrated to Australia on 31 April 2016 on a permanent residence visa and have both subsequently registered for Medicare. Only Piper has private health insurance for the currentincome year (“CIY”) from Croo-Ku, which has a $500=00 excess.

Piper is a guest lecturer at Bo-tom University (BU) and volunteers at the local WA (a non- profit) providing free legal advice. Her salary from Bo-tom totalled $43,500. Due to a computer glitch, Piper was not paid $1,000 for lectures that she gave in the previous tax year. The salary that she received in the CIY includes the $1,000. PAYG (withholding) of $3,400 was deducted from the total salary, of which $300 related to the glitch from the previous year. The WA gave her four tickets to the Nouveau Opera Theatre valued at $800 as a once-off, unexpected Christmas gift.

Clothes purchased for work totalled $12 250. Piper purchased a portable printer on 10 November CIY for $280 that she used two-thirds of the time for printing lecture notes, and the other third of the time for printing family photos and private emails. The effective life of the printer is three years.

Piper is the senior partner of a law firm PC Limited. The firm employs thirty senior lawyers, sixty-five junior lawyers, and forty-three receptionists in the business. Fees received totalled $62,840,000. Invoices totalling $83,536,000 were issued. $280,000 from the previous year was received in the current year. Retainers received on 30 June CIY totalled $1 250,000. Piper has many clients who pay an annual retainer on 30 June each year in advance for the following year, and the firm always receives these amounts on the same date that they are paid. The retainer guarantees clients access to a lawyer within one hour of their call and expedites the handling of their matters by the firm. Clients are still liable to pay the firm an additional amount for any legal services that are required.

A compensation payment was received on 30 July CIY totalling $400,000. The firm’s office was damaged by fire in the previous tax year, and $63,000 of the above amount was paid by the insurer, Sl Easi-Sure, for loss of business profits. The balance of the monies was paid by the insurer to compensate the firm for the fire damage to the office building and its contents.

Piper completed a postgraduate degree in Psychology. The degree cost 25 000 AUD in the CIY. Piper also runs a home office over the weekends. The home office occupies 10 % of the floor space of her home. The interest on the mortgage bond financing her home totals 5000 per month. She uses her home office exclusively for her work as a lecturer and lawyer.

Other information

The firm is registered for Australian GST. All amounts here above exclude GST.
Piper prefers to use the prime cost method of depreciation.
David earned 110 000 AUD as a full-time lecturer for the CIY.
Piper received a salary of 95 000 AUD from the law firm for the CIY.
QUESTION 2 (20 marks)
Calculate Pipers income tax liability for the CIY.
QUESTION 3 (10 marks)
Critically discuss, in no more than 15 lines, the income tax treatment of the business income in the above case study.

QUESTION 4 (10 marks)

Calculate David’s income tax liability for the CIY.

THE END

Assessment Criteria and Performance Standards for Essays
Assessment criteria	Mark	Performance Standard
Assessment criteria	Mark	Low – Not achieve d	Low but some evidence of attainment	Achieved as required but some inaccuracies and errors	Achieved as required with very few inaccuracies or errors	Exceptional attainment with additional outcomes and information
Introduction	/5	0-1	2	3	4	5
Introduction	/5	No clear synopsis and introduction provided	Brief synopsis and introduction but incomplete and inaccurate	Synopsis and introduction provided but could be more concise and clear	Clear synopsis and introduction provided too wordy	Clear, concise and well- expressed synopsis and introduction provided
Topic relevance	/15	0-1	2	3	4	5
Topic relevance	/15	Topic irrelevant and inappropriat e	Topic lacks clear relevance, could be more direct and to the point	Topic relevance appropriate but sometimes strays from the major theme	Topic appropriate and relevant	Topic appropriate and relevant with particularly relevant insights
Depth of Research	/5	0-1	2	3	4	5
Depth of Research	/5	No evident research into the topic	Some research evident but few citations	Research is evident but limited. Citations appropriate to context	Research is evident and goes beyond recommended list with citations appropriate to context	Research is extensive with particularly insightful citations
Critical thinking, analysis & synthesis	/10	0-1	2	3	4	5
Critical thinking, analysis & synthesis	/10	Very little or no evidence of understanding of the topic	Some understanding of the topic evident but with little evidence of critical thinking and analysis	Understanding of the topic evident –some critical thinking, analysis and synthesis of available literature	Good understanding of the topic with evidence of critical thinking with deep analysis and synthesis of information	Very high understanding of the topic with insightful evaluative comments and conclusions
Conclusion	/5	0-1	2	3	4	5
Conclusion	/5	No clear conclusi on Provided	Brief conclusion provided but not particularly clear or relevant	Well summarised but conclusion is not particularly concise	Well summarised clear and relevant and concise conclusion	Exceptional conclusion –clear, concise and insightful
Writing style & grammar	/5	0-1	2	3	4	5
Writing style & grammar	/5	Very poor grammatical expression and spelling errors	Low levels of writing ability evident, simple expression with many spelling and grammatical errors	Average levels of writing ability with some spelling and grammatical errors	High level of writing ability –clear, concise expression with few grammatical or spelling inaccuracies	Very high level of writing ability with no grammatical or spelling errors.
Referencing	/5	0-1	2	3	4	5
Referencing	/5	None or few references and citations	Some references but lacking in accuracy or proper use of a referencing style	Appropriate references with some inaccuracies in the use of a referencing style	As previous but with additional independent input by the writer	References accurate and go well beyond those provided by lecturer