INCOME TAXATION
ESSAY ASSIGNMENT - 2024 SEM 1
This Assignment forms 20% of the total assessment for this course and is compulsory. The mark for the Assignment is not be redeemable by other forms of assessment in the course.
Students have the choice to submit the Assignment answer individually or in a group of up to
five members. It is the responsibility of students to organise their own group. If an Assignment is submitted by a group, the mark given to the Assignment answer will be the mark received by each member of a group. Only one Assignment answer needs to be lodged per group.
The Assignment covers and assesses the topics up to and including the topic of “Non-assessable Income”. It does not cover and assess any part of the course covered after that topic.
Assignment due date & submission
The written Assignment answer must be submitted electronically only through MyUni via “Turnitin” by no later than 4.00 pm on Friday, 17 May. Further instructions will be provided for this closer to the due date.
Late submission of Assignments is dealt with in the Course Outline.
Assignment format
The Assignment answer must be no more than 2,000 words in content (excluding footnotes) and must have a word count noted on it. If the answer does not have a word count noted on it may not be marked. A penalty, of a reduction in mark, maybe imposed if the word limit is exceeded. The Assignment answer must be typewritten, double spaced on A4 and in a font size of not less than 12.
For this course, the use of footnotes is preferred over the use of endnotes. However, footnotes should not include content that is essential to the reasoning on an issue. Marks will only be given to the content of the body of the essay and generally will not be given to footnote content.
Students should ensure that the content of an Assignment answer is their own work and that no part of the answer is copied from another student, group or person, or from any online source, or is work that another person or artificial intelligence has authored or prepared.
Assessment criteria
1 The extent to which the Assignment answer identifies relevant income tax issues and sets out sound reasoning in support of the discussion, including applying the tax law to relevant facts and not just stating conclusions.
2 The extent to which the Assignment answer demonstrates research into relevant topics of the income tax law covered in the course, including having references to applicable statutory provisions of the enacted tax law and any applicable unenacted case law.
3 Whether the Assignment answer is easy to read and understand. Ease of reading can be achieved, for example, by the use of relevant headings and sub-headings.
Assignment question
Based on the following facts, you are required to:
(a) Advise Tom Cahill as to whether or nothe remained an Australian resident for the 2024 income year after he left Australia (10 marks); and
(b) Assuming Tom remained an Australian resident, work out his total assessable income for the 2024 income year, giving reasons why amounts are or are not assessable income (30 marks).
Ignore the effect of the “double tax” agreement with the United Kingdom of Great Britain.
Tom Cahill is an adult individual and “semi-professional” soccer player who returned to Adelaide from England on 6 July 2024. He had been in England playing soccer for the Cheltenham Town club that has a team in the Football League One division, which is below the national Premier League that is played in that country.
Prior to leaving Australia on 21 July 2023, Tom had been playing soccer for 5 years as a “semi-professional” in the Adelaide Amalgamated team, the only local soccer club that plays in the Australian National Soccer League. He started playing for that club in Adelaide at the age of 15 after having spent most of his childhood and youth recreational time pursuing his passion for soccer here.
It was while Tom was playing in an Australian National Soccer League game that he was spotted by a talent scout from the English Cheltenham Town club. Tom was then signed up by the club under a contract that was negotiated and made in Adelaide. The contract required that Tom be released from any contract he had to play for Adelaide Amalgamated, travel to England and start training exclusively for the Cheltenham Town club and for no other club. In return, the Cheltenham Town club agreed to pay Tom a lump sum “sign on” fee, and to provide him accommodation during the period he trained for the club. Also in return for Tom signing with the club, it agreed to offer to engage Tom for a 1 year period as an employee player for the club, but only if he met certain training, performance and attitude benchmark requirements set by the club. The terms of the engagement would also include an option, which the club could exercise, for the playing period to be extended for a further 4 years.
Before leaving Australia, Tom vacated and leased out his apartment that he owned in Adelaide in which he had lived. Tom also owned a BMW coupe car, shares in the Adelaide Bank Ltd and apartment furniture, all of which he sold to raise funds for his stay in England.
He kept a bank account with the Adelaide Bank into which his rental payments were to be deposited and from which rental expenses were to be paid. When he left Australia, Tom’s intention was to remain in England for as long as he could sustain a successful playing career, and to return home to Australia athis career’s end. On leaving, he was accompanied by his parents who were concerned to see him settle into his new club and his new townhouse accommodation in England. Once this had happened, they returned home to Adelaide.
After Tom had settled into his new club and townhouse accommodation, he set about meeting the club’straining, performance and attitude benchmark requirements. He so impressed the club’s officials that in late August 2023 he was offered the engagement to play for the club, as had been agreed under his “sign on” contract. Under the terms of his employee player engagement contract, Tom was entitled to match payments of $5,000 per game played and a bonus payment of $10,000 for each goal he scored. As an additional incentive for the club’s players to perform. at their best, the agreement terms also stated that players were eligible for a “best on ground” cash award of $20,000 that was to be paid by the club’s leading sponsor.
Having entered his employee player engagement contract, Tom was allowed by the club to remain in the townhouse accommodation provided by it on arent free basis.
Tom’s start to the playing season in September 2023 was most promising as he scored 1 goal in each of his first, fourth and ninth games. He was also “best on ground” in the fourth game he played. However, during his tenth game Tom collided with another player and seriously injured his knee. As aresult, he was not able to play anymore games for the season. Worse still, subsequent tests on his knee showed that it could not fully recover from the injury and so the club decided not to renew his playing period after the initial 1 year. On learning of this, Tom immediately left England and returned to Australia after only 11½ months away.
During the income year ended 30 June 2024, Tom received and derived the following:
1 Match payments totalling $50,000 from the Cheltenham Town club for the 10 games in which Tom played.
2 Bonus payments totalling $30,000 for all the goals Tom scored in those games.
3 The “best on ground” award of $20,000 from the club’s leading sponsor whose motive was to advertise the sponsor’sbusiness.
4 $25,000 as the lump sum “sign on” fee from the club that Tom then used to pay his air
fare and relocation costs, as well as air fares for his parents. After paying these costs, he had $5,000 left.
5 Additional periodic and regular payments from the club’s insurer totalling $60,000 as
compensation to replace match payments Tom was not able to earn because of his injury.
6 A further lump sum payment of $100,000 from the club’s insurer as compensation for a loss of income earning capacity resulting from the injury.
7 The rent-freetownhouse accommodation that had a market value of $20,000. It was a condition of his accommodation that he could not part with its possession.
8 $30,000 from the sale in July 2023 of his BMW coupe car. Tom bought the car in July 2020 at a cost of $55,000 for his personal use.
9 $50,000 from the sale in July 2023 of his shares in Adelaide Bank Ltd. Tom had bought the shares in June 2018 at a cost of $30,000. They were originally acquired as a long term investment for their dividend yield, but Tom sold them because of his move to England.
10 $5,000 from the sale in July 2023 of his apartment furniture, all of which Tom had acquired in June 2017, when he bought his apartment, at a cost of $15,000.
11 Rent totalling $25,000 from the lease of Tom’s apartment in Adelaide while he was in England.
12 An amount of $10,000 that Tom unexpectedly received from his grandparents on the eve of his departure from Adelaide. The amount was given to help Tom set himself up in England.
Cash amounts have been converted into Australian dollar amounts where relevant.