BUS303 Team Project Question

During the current income tax year ended 30 June, Tomroy, who is an Australian resident, operated a horse property in Victoria. Tomroy’s depreciation schedule for the year ended 30 June is set out below. All assets have a 100 per cent business use and he uses the diminishing value method. All values exclude GST. All depreciating assets were acquired after 10 May 2006.

Additionally, on 1 July of the current tax year, he purchased a new barbed wire fence for $55,000, as the old barbed wire fence was in need of fixing up. He scrapped the old fence on 1 August when the new fence was installed. All values exclude GST.

On 1 July of the current tax year, Tomroy also acquired a 11-metre shipping boat for $193,636 (excluding GST) to explore for gold in the Coral Sea.

Tomroy’s CGT transactions were as follows:

a. He sold shares for $100,000 on 30 June of the current tax year. The shares cost $50,000 on 23 July 1989.

b. On 1 July, a piece of artwork worth $10,000 was stolen from his house. The painting was a gift from a friend, and it was worth $7,000 when it was gifted on 1 September 1998. It was not insured.

c. He acquired a house for $400,000 for rental. Other costs were stamp duty of $23,000 and the legal costs to purchase of $2,000. The contract was dated 1 March 1992 and all costs were paid on 31 March 1992.

His costs of holding the house included interest of $70,000 and repairs of $63,000. The house was not eligible for capital allowance deductions. A $11,000 cost of a new shed was incurred on 2 May 1998. There were $1,000 of capital allowance deductions for the shed.

On 31 December, he sold the house for a contract price of $800,000. His advertising costs on sale were $3,000 and the sales commission was $29,000.

Tomroy is considering some additional investments in properties and has been following news items related to the CGT discount. According to a recent 9News report, Tomroy has learned that Senator Pocock suggested that proposed reforms to the capital gains tax discount on investment properties may contribute to addressing Australia’s housing affordability crisis.

You are required to prepare a report for Tomroy providing the following information which is of interest to him:

1. A depreciation schedule for the income tax year ended 30 June for all depreciating assets.

2. Reasons for the amounts included/excluded from the depreciation schedule — provide justification using Sections, cases, commentaries and ATO rulings where applicable. (Note: Provide headings for each item.)

3. Calculate the net capital gain or loss (if applicable) under the ITAA 1997 for the above CGT transactions.

4. Provide an analysis for each CGT event.

5. A discussion of whether you agree or disagree with Senator Pocock’s statement that the anticipated reforms to the capital gains tax discount on investment properties have the potential to enhance equity and sustainability within the Australian housing market.

Instructions

The report should at a minimum comprise of the following:

a. An executive summary that conveys the overall purpose, problems and solutions to the case.

b. An introduction that clearly outlines the report structure, processes and strategies adopted by the team in solving the case.

c. The main body of the report that responds to the information needs of Tomroy d. A conclusion

NB: Students should refer to the marking rubric for guidance on the specific expectations for the assessment. 

Formatting Requirements

Font type: Times New Roman

Font size: 12

Spacing: 1.5 spacing

Word Count: Maximum of 1,500 words excluding references and appendices Reference Style: APA