You are working as a lawyer for a tax specialist firm, Jones & Jones. You and your Partner, Shannon Jones, have just attended a meeting with a client Judy Bench who has received a Notice of Amended Assessment from the Commissioner of Taxation for her 2019 income tax return. The Notice of Amended Assessment is dated 21 January 2020. Judy’s original Notice of Assessment was dated 26 November 2019.
Taxation Law Memorandum part B: Advice Assignment Australia
Background information:
Judy is a 27-year-old resident of Australia for tax purposes, who works full-time as the personal assistant to the executive editor of a well-known fashion magazine. She started this job on 1 July 2019 and is paid $10,000 per month. She is paid on the 3rd day of each month for the previous month. As such, she did not receive her pay for the month ended 30 June 2019 until the 3rd of July 2019.
Judy has always had a love of upcycling clothes – this is what lead her into the fashion industry! At the start of the 2019 income tax year, she moved into a neigh bourhood which had several Op Shops (second hand shops) and started to make purchases several times a week. She would spend her weekends at her sewing machine, turning these purchases of unwanted clothes into fashion masterpieces. Wearing the new clothing in public created a lot of interest, and Judy’s friends convinced her to start a Facebook “business” page through which she could sell her creations to the world at large. There was a large demand for her creations. Judy kept accurate records of her expenses ($16,000 in total) and her receipts ($9,000 in total), and can substantiate both figures with invoices and so on. Judy advertised her “business” page in various Facebook groups aimed at fashion enthusiasts, and often took out paid ads through the Facebook platform to increasing her page views. However, she has advised that she had no interest in really making profit from this venture, it was something that she really enjoyed doing and gave her an escape from her demanding job. She did not obtain an ABN as it seemed like too much hassle.
Judy has further explained that her employment required a wardrobe of high-quality clothes for her daily use. She was also required to attend evening functions at least once a month.There was no express condition of Judy’s employment that she had to wear or purchase any particular outfit, but it was obvious to her that she was required to dress a particular way at work and at these events. Specifically, she purchased 5 evening gowns, 4 suits and several dresses at a total cost of $6,000. Outside of work, she wore t-shirts and jeans. Judy has told you that it was very seldom that she had an opportunity to wear for private use any of her work clothes – not that she had much “down time”!
Judy often takes her laptop home with her so that she can answer emails and complete tasks that she ran out of time to do during the day. Again, her position is very demanding, and often requires her to work several hours a day outside of normal office hours. She works at the kitchen table, as her apartment is too small to have a designated “office”. Her partner is often home watching tv, preparing meals etc in the same room whilst she does this. She has calculated that the running costs for her apartment when she is working from home such as electricity costs for cooling and lighting total $300.
In the 2019 income tax year, Judy has received $12,000 in rental income from a residential property. During the income year, she travelled to this property for an inspection when her former tenants vacated the property. This trip cost her $500. Whilst conducting this inspection, Judy noticed several things that needed attention. Specifically, she acquired an up market second-hand dishwasher. At the time of purchase Judy was aware that the dish washer would need repairs. She paid $200 to have the dishwasher repaired and then installed it into the property. The property managers for the property also charged an administrative fee of $20 per week.
Taxation Law Memorandum part B: Advice Assignment Australia
Judy’s 2019 income tax return
Based on the above information, her 2019 income tax return was completed with the following details:
*Note: Judy has advised that she forgot to claim the administrative fee charged by the property managers in her original return.
The Commissioner’s Amendments
As stated above, Judy has been issued with a Notice of Amended Assessment by the ATO for the 2019 income tax return following an audit of her taxation affairs. The amended assessment resulted in taxable income of $140,250.
The reasons for the amened assessment are as follows:
Assessable income
In addition to the income additionally declared in Judy’s assessable income, the Commissioner has included Judy’s salary for the month ending 30 June 2018, because her employer was under a legal obligation to pay this amount to Judy as at this date.
Allowable deductions
The following deductions were denied in full:
1.The $16,000 expense relating to sales on Facebook have been disallowed as Judy’s activities were a hobby, not a business.
2.The $6000 for work related clothing expenses has been disallowed because these expenses were private or domestic in nature.
3.The $300 for home office expenses has been disallowed because these expenses were private or domestic in nature.
4.The $500 trip to inspect the rental property has been disallowed because from 1 July 2017, tax deductions for travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property are no longer allowed.
5.The $200 for repairing the dishwasher in the rental property was disallowed because item needed repair at the time of acquisition.
Taxation Law Memorandum part B: Advice Assignment Australia
Note no changes were made to the $900 work related travel expenses (that is, the deduction was allowed).
Taxation Law Memorandum part B: Advice Assignment Australia
Required:
With reference to relevant legislation, case law, and ATO guidance materials, prepare a memo to your Partner addressing the following:
(1) whether Judy might be able to object to any of the above amendments made by the Commissioner. You should highlight the strengths and weaknesses of any argument you are making. Note that if you do not think that there are grounds for objection in relation to any of the amendments, you must clearly outline why you believe this is the case.
(2) The objection process, and any relevant time frames of which Judy should be aware.
(3) How Judy should include the administrative fees charged by the property manager of her rental property in her 2019 income tax return.
Please note that professionalism is of the up most importance in drafting your memo. To achieve a professional, succinct style, you will need to use simple English and summarise as much as you can. You may wish to consider including an executive summary and using headings to improve the readability of your memo. Up to 5 marks will be awarded for the professional presentation (including appropriate referencing) of your memo.
Online Learning Support:
A great deal of online learning support is provided. A list of subject-specific and general information guides containing the best databases and resources available are accessible via the Library website: library.top.edu.au. The online Library Course available on Moodle is useful for learning about available services and how to successfully conduct research. Many useful support materials can also be located within the Academic Skills Development Module on Moodle.
For more information or further support, please contact our English Language and Academic Skills Coordinator at
Taxation Law Memorandum part B: Advice Assignment Australia
Academic English Support Program
An extensive Academic English program is provided. This program is aimed at developing skills and understanding of the rules and conventions that form the basis of academic work. The program includes:
1. The Academic Skills Development Module (available on Moodle)
2. Academic English and Study Skills workshops held throughout the semester
3. Individual consultations available by appointment
4. Academic English Support Guide (available via the online Library)
If you have any queries or would like to book a consultation, please contact our English Language and Academic Skills Coordinator at
Academic Misconduct
(a) Plagiarism
Plagiarism is the use of another person’s ideas or work without appropriate acknowledgement or credit. Plagiarism may be intentional or unintentional.
Intentional plagiarism is deliberately using text, ideas or concepts attributable to another person obtained from any source (including internet sources) without referencing the author and the publication. Intentional plagiarism is a serious matter, amounting to academic fraud. Student work established and proven as containing intentional plagiarism will result in a zero grade and be reported to the Dean of School. The student’s enrolment in the unit will be reviewed.
Unintentional plagiarism may occur if you do not understand appropriate ways of acknowledging sourced reference materials. If you are unsure, you should consult the lecturer, TOP’s academic skills coordinator and available publications to learn how to reference appropriately.
All written assignments must be submitted online through the Turnitin anti-plagiarism software (unless otherwise advised by the lecturer). The link for Turnitin can be found on TOP’s Moodle site.
Taxation Law Memorandum part B: Advice Assignment Australia
(b) Cheating
Cheating is any attempt to gain an unfair advantage over other students. This includes copying, plagiarism and third-party assistance in preparing assignments. All work submitted must be a student’s own work. In an exam cheating includes communicating with anyone other than supervisors during the exam period and the use of dictionaries, electronic devices, books or notes in the exam room where these not authorised. Cheating in any form will not be tolerated at TOP Education. Any student caught cheating in an examination will be given a FAIL grade in that unit and the incident reported to the Dean of School for further action.
(c) Third party assistance
Academic misconduct includes the submission of work that has been prepared or assisted by a third party (e.g. through the purchase of assignment submissions.Where a lecturer has evidence that a submitted assignment is not the student’s own work, the lecturer may interview the student to ascertain whether third party assistance has been obtained and if so report the incident to Dean of School for further action to be determined.
Taxation Law Memorandum part B: Advice Assignment Australia