BULAW5916 Taxation Law and Practice Assignment Semester 1 2026

BULAW5916

Taxation Law and Practice

Semester 1, 2026

Assignment

Due Date: 4:00 pm, Thursday Week 9 (30 April 2026)
Submission: Electronic submission via Turnitin on Moodle
Weighting: 30% of final grade
Word Limit: 2,000 words (±10%). Assignments exceeding 2,200 words or below 1,800 words risk failing or loss of marks. Provide a word count on the cover page.

Purpose

This assignment develops your ability to identify tax issues, apply relevant legislation and case law, and communicate advice clearly. It simulates real-world scenarios where clients seek guidance on the tax treatment of transactions, requiring you to analyse facts, apply rules, and reach reasoned conclusions.

Requirements

• Answer both questions (including both parts of Question 1).
• Use complete sentences for all written responses (except calculations).
• Support answers with references to case law (primarily Question 1 Part 1), Income Tax Assessment Act 1997 (primarily Question 1 Part 2 and Question 2), and relevant ATO rulings where appropriate.
• Do not refer to legislation outside the ITAA 1936 and ITAA 1997, foreign tax laws, residency, or source issues.
• State assumptions clearly and identify any additional information needed from the client.
• Avoid excessive narrative of facts without analysis.

Questions

Question 1 (20 marks)

Pacific Trading Pty Ltd is an Australian resident company conducting merchandising and logistics operations. It held an exclusive agency agreement with a Singapore-based shipping company, signed on 1 August 1985 for a term of 40 years.

In 2025, following the Singapore company’s corporate restructure, the agreement was terminated after 40 years of operation. Pacific Trading negotiated termination compensation of $9 million, calculated on expected profits for the remaining term. The Singapore company paid this amount without dispute. The agency contributed approximately 70% of Pacific Trading’s annual profits. Upon termination, related minor shipping activities also ceased.

Part 1 (primarily case law): Advise the directors on the income tax consequences of the $9 million receipt.

Part 2 (primarily ITAA 1997): Explain how the tax treatment would differ if the agreement had been signed on 1 October 1985.

Question 2 (10 marks)

In February 2004, Pacific Trading Pty Ltd purchased land for $2.1 million as a potential site for a new warehouse and administration office. In June 2009, the company decided to proceed with construction. Building work commenced in August 2009, was completed in May 2010, and the company occupied the premises from July 2010. Construction expenditure totalled $5.9 million, qualifying for capital works deductions at 4% per annum, which the company has claimed each year.

On 10 January 2026, the company accepted an offer of $15 million for the land and building due to operational changes. Contracts exchanged on 20 January 2026, with settlement on 28 February 2026. The company’s financial statements include a $7 million profit on disposal ($15 million less original cost of $8 million).

Advise Pacific Trading Pty Ltd on the tax implications of the disposal, calculate the capital gain, and state whether the company has overstated or understated its taxable income by including the $7 million accounting profit.

Sample Response Excerpt (Question 2)

The disposal triggers CGT Event A1 under section 104-10 of the ITAA 1997. Land and building are treated as separate CGT assets, but apportionment is unnecessary here as costs are clearly identified. The land cost base remains $2.1 million. For the building, section 110-25 reduces the cost base by capital works deductions claimed since occupation in 2010. Over approximately 16 full income years to disposal in 2026, deductions total 4% × $5.9 million × 16 = $3.776 million. The building’s reduced cost base is therefore $5.9 million − $3.776 million = $2.124 million. Total cost base is $4.224 million, producing a capital gain of $10.776 million. As Pacific Trading Pty Ltd is a company, the 50% general discount does not apply (subsection 115-10). The $7 million accounting profit understates the assessable capital gain by the amount of prior deductions claimed, consistent with the policy that amounts previously deducted should not receive double benefit (Australian Taxation Office, 2023).

Assessment Criteria

Marks are awarded for:

• Accurate identification and explanation of relevant tax issues
• Appropriate application of case law, legislation, and rulings to the facts
• Clear reasoning and logical conclusions
• Independent analysis and professional communication
• Proper formatting, referencing (Harvard style recommended), and adherence to word limit

Suggested References (Harvard style)

• Barkoczy, S. (2024) Australian Tax Casebook. 16th edn. Oxford University Press.
• Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. (2023) Australian Taxation Law. 33rd edn. CCH Australia.
• Kenny, P. and Blissenden, M. (2022) Australian Tax 2022. LexisNexis Butterworths.
• Dirkis, M. (2021) ‘Compensation receipts and the boundary between income and capital’, Australian Tax Forum, 36(3), pp. 421–456.
• Sadiq, K. (2020) Australian Taxation Law Cases 2020. Thomson Reuters. https://www.thomsonreuters.com.au