BULAW5916 Taxation Law & Practice

1

BULAW5916 Taxation Law & Practice

Assignment Topic – Semester 1, 2018

Purpose

To extend familiarity with locating legal decisions and undertaking research into an

aspect of currently debated taxation law and practice.

It is important for you to have time to think through how to structure and present your

responses, and to review and discuss what the law is in a particular area. Whilst

discussion with others is encouraged, the final piece of work must be your own.

Word Limit

Estimated 2,500 in total. Please be aware that assignments less than the required

length will risk not covering tasks A, B and C adequately. .

Note: All Federation University Australia rules relating to referencing, citation and

acknowledgement must be complied with.

Due Date

By 11.00 p.m. Friday in Week 9 – submission through Moodle.

It is recommended that you process your assignment through TURNITIN before

submission.

Note: Please refer to the Course Description for further details of the assignment

(Assessment Task 2), and for acceptable referencing styles.

Required:

Read the Topic and then complete tasks A (40 marks), B (40 marks) and C (20 marks).

Your overall mark out of 100 for this assignment will then be converted to a result out

of 30, as this assignment is worth 30% of your total marks for this course.

2

Topic

Tax reform continues to remain an ongoing topic of debate in Australia. During March

the dividend imputation debate being held both in Parliament and throughout the media

became increasingly heated.

In a recent political update from the Australian Labor Party the Leader of the Opposition,

the Honorable Bill Shorten MP, said “Here are the simple facts: Labor’s reforms to

excess dividend imputation credits will crack down on a tax loophole that mainly

benefits millionaires who don’t pay income tax……..”.

The Liberal National Coalition government disagrees. The article ‘The real story of

Labor’s dividend imputation reforms’ reproduced by the Grattan Institute on March

2018, noted “The government claims that 54 per cent of people affected by Labor’s

policy — some 610,000 individuals — have taxable incomes of less than $18,200. And it

says that 86 per cent of the value of all franking credits refunded are received by those

with taxable incomes of less than $87,000 a year.”

Task A

Describe how the existing system of dividend imputation operates, and the reason for its

introduction in the 1980s. Then identify and explain Labor’s proposed reforms to the

dividend imputation system. (Labor’s Policy)

In your response you should refer to relevant legislation and tax rulings, and identify

which taxpayers benefit under the current system; and whether (and if so, how) these

taxpayers will be affected under Labor’s Policy

AND

Task B

With reference to appropriate legal sources, evaluate the advantages and disadvantages

of Labor’s Policy, coming to a conclusion about whether this is “good policy”. In your

response you should identify generally accepted attributes of a good tax policy.

AND

3

AND

Task C

Sigma Pty. Ltd. (Sigma) is a private company with Australian residency. It has 10

shareholders. In the 2015/2016 year Sigma’s aggregated turnover was $12 million; and

in 2016/2017 it was $9 million.

Sigma had taxable income of $1 million at the end of the 2015/2016 financial year. In

August 2016, Sigma’s directors passed a resolution to pay a fully franked dividend (of its

retained earnings) of $100,000 to each of its shareholders.

Yolande is an Australian resident who holds shares in Sigma. She is on the highest

marginal tax rate for the year ending 30 June 2017.

Required: Complete the following questions and tasks.

1. What is Sigma’s corporate tax rate for each of the 2015/2016 and 2016/2017 tax years? (2 marks)

2. Is this different to the corporate tax rate for imputation purposes for each of these years, and if so why? (2 marks)

3. Based on the information above, and referring to relevant tax rate tables, calculate the tax payable by Sigma – and Yolande – for the year ending 30 June

2017. (7 marks)

4. Would your answer be different if Yolande had purchased her shares in Sigma Pty. Ltd. on 30 May 2017? If so, why? (2 marks)

5. Would there be a difference in the overall tax payable by Yolande and Sigma IF Sigma’s aggregated turnover for the 2016/2017 financial year was $20 million

rather than $9 million? Why? Calculate any difference in the overall tax payable.

( 7 marks)