BUSN7021 Taxation Law — Case Study: Tax Liability and Planning Advice for an Individual Taxpayer

Quick Answer Summary: This Australian National University assessment requires you to analyse a detailed case study involving an individual taxpayer’s assessable income, allowable deductions, capital gains tax liability, and goods and services tax implications. You must apply the Income Tax Assessment Act 1936 (Cth) and 1997 (Cth), relevant case law, and ATO rulings to reach reasoned conclusions and provide practical tax planning advice. The submission takes the form of a 2,500-word written advice, due in Week 10 of the semester, and is worth 40% of the total unit mark.

Context and Purpose of the Assessment

This case study forms a core assessment component of BUSN7021 Taxation Law at the Australian National University, Research School of Accounting. The unit introduces students to the principles of Australian tax law with a focus on income tax, capital gains, deductions, and goods and services tax. The assessment task requires you to identify situations with income tax and GST implications, apply the relevant statutory provisions and case authorities, and calculate the taxpayer’s liability. The course is convened by Dr Sonali Walpola, and the prescribed text is Sadiq et al, Principles of Taxation Law, Thomson Reuters, 2025.

The case study is designed to mirror the work of a tax adviser preparing a written opinion for a client. You must demonstrate that you can identify all the tax issues raised by the facts, state the applicable law, apply it to the scenario, and reach a clear conclusion with supporting calculations. The task assesses learning outcomes relating to the identification of tax implications, the application of tax law principles to factual situations, the calculation of income tax and GST liability, and the analysis of tax implications across different legal forms. The skills you develop here feed directly into the final examination and into professional practice.

Task Description and Instructions

You are required to answer one comprehensive case study. The scenario presents a set of facts about an individual taxpayer, including sources of income, expenses, asset disposals, and business activities. You must analyse each item, determine its tax treatment, calculate the taxpayer’s taxable income and tax liability, and advise on any tax planning opportunities. Your response should follow a structured approach: identify the issue, state the relevant law, apply the law to the facts, and conclude with a clear answer.

The written advice should be approximately 2,500 words. The word count excludes calculations, tables, footnotes, and the reference list. You must use APA 7th edition referencing style for all sources, including legislation, case law, and ATO materials. The submission should be presented as a business report with appropriate headings, tables for calculations, and a clear conclusion with recommendations.

Case Study Scenario

Nadia Rahman is a resident of Australia for tax purposes. She works as a senior marketing manager for a large retail company and also operates a small online business selling handmade jewellery. During the current income year, Nadia received the following amounts:

• A salary of $178,000 from her employer, including a $12,000 performance bonus.
• $22,000 in net business income from her online jewellery business, after deducting business expenses of $8,500.
• $9,000 in dividends from Australian shares, with $3,857 in franking credits attached.
• $4,200 in interest from a term deposit.
• $18,000 from the sale of a rental property she owned for seven years.

Nadia incurred the following expenses:

• $7,500 on a postgraduate diploma in digital marketing, which she says will help her current role.
• $4,200 on a new computer and design software, used 70% for her jewellery business and 30% for her employment.
• $3,500 on travel to a jewellery trade fair in Sydney, including $800 on meals and entertainment.
• $2,800 on professional association membership fees for her marketing role.
• $1,200 on donations to a registered charity.

Nadia also sold a vintage car she had restored over three years. She bought it for $28,000 and sold it for $45,000. She spent $12,000 on restoration parts and labour. The car was not used for income-producing purposes.

Advise Nadia on her assessable income, allowable deductions, capital gains tax liability, and any goods and services tax implications arising from her jewellery business. Calculate her taxable income and provide tax planning advice for the coming year.

Submission Requirements and Formatting

• Format: MS Word. 12-point Times New Roman, 1.5 line spacing, 2.5 cm margins.
• Length: 2,500 words. A 10% leeway applies.
• Referencing: APA 7th edition. Legislation, case law, and ATO materials must be cited correctly.
• Structure: Business report format with an executive summary, introduction, body sections, calculations, and conclusion with recommendations.
• Submission: Via Wattle (ANU’s LMS). Turnitin similarity report will be generated.
• Late penalties: 5% per day, up to five days. After five days, no marks awarded.

Marking Rubric and Grading Criteria

Sample Answer: Tax Treatment of Business Income and Deductions

Nadia’s salary of $178,000, including the $12,000 performance bonus, is assessable as ordinary income under s 6-5 of the Income Tax Assessment Act 1997 (Cth). The bonus is paid in recognition of past services and is therefore ordinary income, even if it relates to a prior income year. Her net business income of $22,000 from the jewellery business is assessable under s 6-5 as ordinary income from a business carried on for profit, and the $8,500 in business expenses is deductible under s 8-1 as expenses incurred in gaining or producing assessable income. The $9,000 in dividends is assessable under s 44 of the Income Tax Assessment Act 1936 (Cth), and the attached franking credits of $3,857 must be included in assessable income and claimed as a tax offset under Div 207 of the ITAA 1997. The $4,200 in interest is assessable as ordinary income under s 6-5. The ATO’s guidance on income you must declare confirms that salary, business income, dividends, and interest are all assessable. Nadia’s postgraduate diploma in digital marketing raises a question about the deductibility of self-education expenses. Under s 8-1, a deduction is available if the course maintains or improves skills used in the taxpayer’s current income-producing activities. The digital marketing diploma appears to meet this test because it directly relates to her role as a senior marketing manager. The ATO’s Taxation Ruling TR 2020/1 on work-related expenses provides detailed guidance on self-education deductions and the requirement for a sufficient connection to current employment.

Follow-Up Paragraph 1: Capital Gains Tax on the Rental Property and Vintage Car

The sale of the rental property and the vintage car raises distinct capital gains tax issues. The rental property was held for seven years, and the capital gain must be calculated under Div 104 of the ITAA 1997. The cost base includes the purchase price plus incidental costs of acquisition and disposal, and any capital improvements. If Nadia held the property for more than 12 months, she is entitled to the 50% CGT discount under Div 115. The net capital gain is included in her assessable income under s 102-5. The vintage car is a different matter. Cars are exempt from CGT under s 118-5 of the ITAA 1997, regardless of whether they are used for income-producing purposes. This exemption applies to motor vehicles designed to carry a load of less than one tonne and fewer than nine passengers. The $17,000 gain on the car is therefore not assessable. Students often assume that all asset disposals trigger CGT, but the car exemption is a common exclusion. The ATO’s capital gains tax page explains the exemptions and the discount rules in detail. The franking credit offset also requires careful calculation, because the offset is limited to the amount of tax payable and any excess may be refundable.

Follow-Up Paragraph 2: How Do I Determine Whether a Home-Based Business Can Claim GST Credits?

A question students frequently search for is how GST applies to a small online business operated from home. Nadia’s jewellery business is a separate enterprise, and if her turnover exceeds the $75,000 registration threshold, she must register for GST. Even if she is not required to register, she may choose to register voluntarily to claim input tax credits on business purchases. The GST Act 1999 allows a registered entity to claim credits for GST paid on acquisitions used in carrying on the enterprise. The computer and design software, used 70% for the business, would qualify for a partial input tax credit if Nadia is registered. The trade fair travel expenses also need apportionment: the $800 on meals and entertainment may be subject to the entertainment provisions, and the ATO’s GST and entertainment guide explains the limits. The GST page on the ATO website provides a registration checker and guidance on input tax credits. Students should also consider whether the jewellery business qualifies as a hobby or a business. If the activity is carried on with a profit-making intent and in a business-like manner, it is a business for tax purposes. The ATO’s Taxation Ruling TR 97/11 sets out the factors that distinguish a business from a hobby. If the business is not registered for GST, no input tax credits are available, but the income is still assessable and the expenses are still deductible under s 8-1. Getting this distinction right is essential for a high distinction answer.

Follow-Up Paragraph 3: Common Misconceptions About Deductions and Tax Offsets

A common misconception among students is that any expense connected to work is fully deductible. The law requires a sufficient connection between the expense and the income-producing activity, and private or domestic expenses are not deductible under s 8-1. The donations to a registered charity are deductible under Div 30 of the ITAA 1997, but only if the charity is endorsed as a deductible gift recipient. The professional association fees are deductible under s 8-1 because membership maintains Nadia’s professional standing. The computer and software require apportionment, and only the business and work-related portions are deductible. The travel expenses for the trade fair are deductible to the extent they relate to the business, but the meals and entertainment component may be limited. Another misconception concerns franking credits. Students sometimes include the dividend in assessable income but forget the franking credit, or vice versa. Both steps are required. The ATO’s dividends and franking credits page explains the gross-up and offset mechanism. A third misconception is that the CGT discount applies to all assets. It does not; it applies only to CGT assets held for at least 12 months by individuals and trusts, not companies. Cars are exempt entirely. Understanding these distinctions is what separates a pass from a high distinction.

Frequently Asked Question

Can I claim a deduction for self-education expenses if the course is not directly related to my current job?

No. Under s 8-1 of the ITAA 1997 and the principles established in FCT v Highfield (1982) 13 ATR 611, self-education expenses are deductible only if the course maintains or improves the skills and knowledge used in your current income-producing activities. If the course is designed to retrain you for a new career, the expenses are not deductible. The ATO’s Taxation Ruling TR 2020/1 provides detailed guidance, including the requirement that there be a sufficient connection between the education and the current employment. Nadia’s digital marketing diploma appears to meet this test because it directly relates to her role as a senior marketing manager. If the course were in an unrelated field, such as law or medicine, the deduction would likely be denied. Keep records of enrolment, fees, and the connection between the course content and your current duties.

Why This Matters in Practice

The issues in this case study mirror the questions tax advisers answer for clients every day. A senior manager with a side business needs to know whether the business is a hobby or a business for tax purposes, whether GST registration is required, and how to apportion expenses between business and private use. A property investor needs to know how the CGT discount interacts with the main residence exemption. A taxpayer with share dividends needs to understand the franking credit mechanism. Getting these questions wrong has financial consequences for clients and professional consequences for advisers. The skills you develop in this assessment, reading legislation, applying case law, and reaching reasoned conclusions with clear calculations, are the same skills you will use in practice.

References and Learning Materials

Australian Taxation Office. (2024). Capital gains tax. https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax

Australian Taxation Office. (2024). Income you must declare. https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare

Australian Taxation Office. (2024). GST. https://www.ato.gov.au/businesses-and-organisations/gst-and-other-taxes/gst

Income Tax Assessment Act 1936 (Cth).

Income Tax Assessment Act 1997 (Cth).

FCT v Highfield (1982) 13 ATR 611.

Sadiq, K., Black, C., Clements, J., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., & Walpola, S. (2025). Principles of taxation law 2025 (18th ed.). Thomson Reuters.

Taxation Ruling TR 2020/1. https://www.ato.gov.au/law/view/document?docid=TXR/TR20201/NAT/ATO/00001

Next Assessment: Week 12 Take-Home Examination

Week 12 Take-Home Examination — BUSN7021 Taxation Law

The final assessment for BUSN7021 is a take-home examination released in Week 12. The exam consists of two problem questions covering the full breadth of the unit, including income, deductions, CGT, GST, and the tax treatment of different entities. You will have 72 hours to complete the exam and submit your answers via Wattle.

Each question requires a structured answer with legislation and case law references, similar to the case study but under time pressure. You must answer both questions, and each is worth 50% of the exam mark. The exam assesses your ability to apply tax law principles to unfamiliar scenarios and to communicate your analysis clearly and concisely. Prepare by reviewing the tutorial problems, the case study feedback, and the prescribed text. The exam is open-book, but time is limited, so effective note-taking and a clear structure are essential.

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