ACC30005 Taxation - Semester Two 2020 Case Study / Assignment - Page 2 of 20 1. CASE STUDY SCENARIO You are a Graduate Tax Advisor, employed by Tax Advisors Pty Ltd. Your Partner has assigned you the following client file after attending a meeting with the client Client Background Judy Somerville is employed by Ansett Airways Limited ('Ansett') since 2003 as a long-haul flight attendant based in Melbourne, Australia. The nature of Judy's position with Ansett sees her flying to international ports where she spends 183 days away from her home base each calendar year The remaining days of each calendar year are spent in Australia, and Judy uses this non- flying time to organise the importation of textiles into Australia from Textiles Inc. (a company registered in the USA). Until recently, Judy was the exclusive distributor of textiles to retailers in Australia Client File Contents The client file has the following relevant documents: Extract of bank statement for selected transactions during the financial year ended 30 June 2020 (together with accompanying notes from Judy), as attached at Annexure A; Income Statement (2020) from Ansett, as attached at Annexure B: Dividend Statement from Westfields Ltd, as attached at Annexure C: Extract of Contract of Sale of Real Estate between Judy Somerville (the vendor) and the purchaser, as executed on 1 May 2020, as attached at Annexure D; Extract of 'Exclusive Distributor Termination Agreement between Judy Somerville and Textiles Inc, as executed on 30 June 2020, as attached at Annexure : Fixed asset register as at 30 June 2019, as attached at Annexure F: Internal file note from your Partner that provides details of the discussions with the client at the meeting, as attached at Annexure G. Scope of Engagement between Tax Advisors Pty Ltd and Judy Somerville Your Partner has requested that you review the file in its entirety (as below) in order to undertake the engagement work as agreed between Tax Advisors Pty Ltd and Judy Somerville, as outlined in the "Required' section of this document. ANNEXURE A BANK STATEMENT EXTRACT (ANNOTATED & SELECTED TRANSACTIONS ONLY) Date Transaction Note Debit Credit Balance 1 Apr 20 Norman Harvey Ltd 1 14,128.00 7,293.00 Debit Card Transaction 1 Apr 20 Myer Coles Pty Ltd 2 2,345.00 4,948.00 Invoice 65 Textiles 15 Apr 20 Ansett Airways Ltd 5,203.00 10.151.00 Salary Deposit 3 May 20 Real Property Pty Ltd 3 54,000.00 64,151.00 Early Deposit Release 6 May 20 Textiles Inc 4 1,920.00 62,231.00 Textiles Purchase 15 May 20 Stillwell Bib Pty Ltd 10,000.00 52.231.00 Debit Card Transaction 15 May 20 Skin Care Australia 5 629.00 51,602.00 Debit Card Transaction 15 May 20 Tim Rivers 6 1,008.00 50,594.00 Salary Payment 17 May 20 Traffic Infringement Office 7 220.00 50,374.00 Speeding Fine 20 May 20 Abel & Abel Solicitors 8 5,950.00 44,424.00 Invoice 13129 25 May 20 Maze Restaurant 9 450.00 43,974.00 Debit Card Transaction 21 May 20 First Newspapers Advertising 10 2,550.00 41,424.00 Invoice 39221 10 Jun 20 Institute of Aviation 6,300.00 35.124.00 Course Fees 30 Jun 20 Victoria State Bank 430.00 34,694.00 Interest Charge 30 Jun 20 Australian Taxation Office 11 3,000.00 31,694.00 PAYG Instalment 30 Jun 20 Textiles Inc. 8 49,950.00 81,644.00 Damages 30 Jun 20 Westfields Ltd 12 700.00 82,344.00 Dividend 30 Jun 20 Woodlands Pty Ltd 13 1,500.00 80.844.00 Serviced Office Rent 30 Jun 20 Tim Rivers 6 7,500.00 73,344.00 Redundancy SAUD 1 9,865 4,263 23,000 20,000 2 3 72,000 (18.000) 1,920.00 25,500.00 12,500.00 4 5 629.00 6 Notes Regarding Bank Statement Extract Note Description / Further Information Acquisition of Furniture & Office Equipment Desks and Chairs (acquired 1 July 2019) Partitions (acquired 20 August 2019) Outstanding debtors at 30 June 2019 Debts written off > 12 months old Judy provisions bad debts equal to 3% of the outstanding debtors. Obtained an Early Release of Deposit for Property Sold. Net of Agents Commission of $18,000. Stock Purchase of Textiles (USD $2,000.00 = AUD $1,920.00) Stock at Start Stock at End Skin care products purchased due to flight attendant role. Salary Payment for Employee Tim Rivers Redundancy Payment for Employee Tim Rivers Note the minimum superannuation guarantee contribution is included in the above amounts, where relevant. Speeding fine incurred whilst travelling from Melbourne Airport to Retailer for Textiles business. Legal fees incurred in relation to distributor agreement. Settlement sum received in relation to distributor agreement. Client dinner at Gordon Ramsey's Maze Restaurant 10 Advertising contract payment. Paid one month in arrears and prepaid up to 30 September 2020. PAYG instalments (quarterly equal payments) 12 Fully-franked dividend received (refer Dividend Statement) Office rent paid for 1 June 2020 to 31 July 2020. 1,008.00 7,500.00 7 220.00 8 5,950.00 49,950.00 450.00 9 2,550.00 11 3,000.00 700.00 13 1,500.00 ANNEXURE B Income Statement 2020 FOR Judy Somerville Income Statement - individual non-business Income Statement for year ending 30 June 2020 Payee details NOTICE TO PAYEE Ms Judy Somervile The income statement shows an amount in the total to held box you must lodge a tax retum If nota 10 Diamond Avenue was had you may all have to lodge a tax retum Waverley Vie 3150 For more information on whether you have to ledger but payment and how it is you can -phone 13 28.00am and opin (EST) Puried ouring which payments were made 01/07/2019 30/06.2020 Payee's talle number 564 355771 TOTAL TAX WITHIELDS 19812 $ 12.252 AS Gross payments CEP payments Other income Reportable tringebrets amount D$ ES Allowances Total 53,321.00 .comprising of - Laundry: $2,000.00 - Uniform: $1,241.00 Payer details Payer's ABN or withholding payer number 90111222333 Payerne ANSETT AIRWAYS LIMITED Branch number Signature of authorised person DIRECTOR, HUMAN RESOURCES ANNEXURE C DIVIDEND STATEMENT WESTFIELDS LTD ABN 96 123 456 789 Dividend Statement Ms Judy Somerville 10 Diamond Ave Waverley VIC 3150 Notification of Final Dividend Record Date: 1 March 2020 | Payment Date: 30 June 2020 Security Number Unitranked Amount Franked Amount Franking Credits Ordinary Shares 201 0.00 700.00 300.00 Your dividend payment has been remitted to the following account on the payment date: Bank: Victorian State Bank BSB Number: 011-111 Account Number: 123456790 Account Name: Judy Somerville Please note that your tax fle number has been received and recorded. Please retain this Dividend Statement for taxation purposes. *End of Dividend Statement ANNEXURED EXTRACT OF CONTRACT OF SALE OF REAL ESTATE CONTRACT OF SALE OF REAL ESTATE FORM 1 - PARTICULARS OF SALE (EXTRACT) VENDOR'S ESTATE AGENT Real Property Victoria of 123 Wellington Road, Clayton, Victoria T. (03) 99998860 F. (03) 88889909 Judy Somerville of 10 Diamond Avenue, Waverley Victoria, 3150 VENDOR PURCHASER Scott Jackson of 200 Church Street, Brighton, Victoria, 3186 PROPERTY ADDRESS Unit 1/300 Glenlerie Road, Hawthom, in the State of Victoria Australia LAND The land is desorded in the attached copy) and plants) as Lot 12 on Pian of Subdivision 094821 being all that piece of land more particularly described in Certificate of Title Volume 12345 Folio 123 and includes al Improvements and fixtures GOODS All fixed floor coverings, electric light fittings, window furnishings and a fixtures and fittings of a permanent nature PAYMENT Price $ 720.000 Deposit $_72.000 10% of the price payable on signing hereof (of which $72.000 has been paid Balance SAL.COM payable at settlement GST (refer to general condition 13) The price includes GST (if any) unless the words plus GST appear in this box If this is a sale of a farming business or going concern then add the words farming business of going concern in this box If the margin scheme will be used to calculate GST then add the words margin scheme' in this box: SETTLEMENT is due on 05/07/2020 unless the land is a lot on an unregistered plan of subdivision in which case settlement is due on the above date or 14 days after the vender gives notice to the purchaser of registration of the pian, whichever is the later. Signed by the Purchaser SIGNATURE ON FILE 29/04/2020 Print name of person signing SCOTT JACKSON State nature of authority if roplicable to director","attorney under power of attomey This offer wil lapse unless accepted within clear business days (3 business days none specified) Signed by the Vendor SIGNATURE ON FILE 30/04/2020 Print name of person signing Judy Somerville State nature of authority if soplicable (e director","attorney under power of womey" ANNEXURE E EXTRACT OF EXCLUSIVE DISTRIBUTOR TERMINATION AGREEMENT Exclusive Distributor Termination Agreement Date: This agreement is dated the 30 day of June 2020. Between the Parties: Distributor Judy Somerville 10 Diamond Avenue, Waverly, Victoria3150. Australia Supplier Textiles Inc. of 200 Santa Monica Boulevard, Santa Monica, CA 90405. USA Recitals: 1. Textiles Inc. is the manufacturer of the Textiles product and holds a registered patent over its design. 2. Textiles Inc. entered into an exclusive distributor agreement with the Distributor on 1 September 2018 3. The agreement referred to in Recital 2 was, amongst other things. (a) for a form of five (5) years, concluding on 31 August 2023; and (b) provided for the Distributor to have exclusive distribution rights of the Textiles product during the term in Australia 4. Textiles Inc. now requires more traction in the Australian market and wishes to engage more distributors and contract directly with retailers in relation to its Textiles product The Parties Agree: 1. Termination (a) The Supplier and Distributor agree that the Exclusive Distributor Agreement dated 1 September 2018 is terminated from the date of this agreement (b) The Distributor agrees to and will take all necessary steps to assign all contracts it has with its Australian based customers to the Supplier, with effect from the date of this agreement 2. Release (a) The Supplier and Distributor agree and acknowledge that both the Supplier and Distributor shall be immediately and forever released and discharged from any action or claim known or unknown including, without limitation, any claim for costs, interest to which each either the Supplier and/or Distributor may be entitled to against each other. 3. Restraint of Trade (a) As consideration for the Settlement Sum in clause 4 of this agreement, the Distributor agrees that for a period of not less than three years from the date of this agreement, that the Distributor will not (a) directly or indirectly solicit business away from the Supplier: (b) trade in the products manufactured or sold by the Supplier. (c) entice any employee or contractor away from the Supplier, andior (d) assist or engage any other person to undertake (a) to (c) in this cause. 4. Settlement Sum (a) in consideration of clauses 1, 2 and 3 of this agreement and based on an estimate of the potential loss suffered by the Distributor, the Supplier agrees to pay the Distributor a Settlement Sum of $49,950.00 Australian dollars to the Australian bank account nominated by the Distributor 5. General (a) This agreement is subject to the laws of Victoria, Australia ANNEXURE F FIXED ASSET REGISTER Ms Judy Somerville FIXED ASSET REGISTER File Number: 323 121 900 as at 30 June 2019 Asset ID Asset Description Acquisition Original Date Cost Private Use % Op. Adj. Method Rate Value. 4230.00 20% DV 1 2 3 Computer Printer Furniture 1/09/10 1/09/10 1/09/10 20% 3384.00 712.00 3300.00 Amount Closing Adj. Disposal Proceeds Value Date 935.46 2,448.54 196.82 515.18 273.95 3026.05 890.00 3300.00 33.30% 33.30% 10% DV PC 0% ANNEXURE G FILE NOTE File Note Preparer: P. Slade (Partner) Client: Judy Somerville Date/Time: 20 July 2020 Subject: Meeting with Client on 20 July 2020 at 10am The purpose of this file note is to document details of discussions with Judy Somerville in relation to her tax affairs for the year ended 30 June 2020. 1. Judy entered into a Contract of Sale in respect of her investment property located in Hawthorn, Victoria. An extract copy of the contract has been provided to us and is on file at Annexure D. Judy has advised us of the following information: a Property purchased on 1 October 2016 direct from the developer as new residential premises for $440,000 (incl GST). b. Acquisition costs at the time included stamp duty of $21.470, legal costs of $990 and building inspections of $550 Judy also undertook minor renovations in the 2019/20 financial year to upgrade the kitchen which cost $6,600 after the tenant had damaged the appliances and cupboards 2. Judy is no longer selling Textiles to Australian retailers as the parent company terminated this agreement. This agreement is attached Annexure E which provides for a settlement and restraint of trade. 3. Judy advised that despite the termination of the Textiles agreement, she has paid First Newspapers for advertising up to 30 September 2020 and paid a redundancy to her employee on 30 June 2020 in the amount of $7.500.00. Judy has $12.500 worth of Textiles in stock that she can no longer sell, and Textiles Inc. now refuses to allow her to return the stock. 4. Judy rented a small serviced office for her business at the Tullamarine Business Centre, where the lease commenced on 1 November 2019 for 12 months. The Tullamarine Business Centre provided a free fit out and two months rent-free valued at $12,000. 5. Judy provided us with an extract of her bank statement with annotations. In particular. Judy advised that she is studying at the Institute of Aviation as she hopes to move into Flight Operational and Airport Planning Management within the airline where she currently works. Judy indicated that her HECS / HELP debt has already been exhausted from prior studies. 6. Judy borrowed $70,000 from the Victorian State Bank in early 2020 for her business at an interest rate of 7.35% per annum, as a revolving line of credit secured over her own personal home. Since drawing the loan proceeds, Judy has used $10,000.00 as a deposit for a BMW which she intended to use for her business. Other Notes 1. Judy is a sole trader and her accountancy fees for the 2019/20 financial year are $5,500. 2. Our firm organised Judy's GST registration for her business on its commencement on 1 September 2018 and she accounts for GST on a cash basis. REQUIRED Judy Somerville has engaged Tax Advisors Pty Ltd to advise her of all her tax issues which will arise from the documents provided in respect of the income year ending 30 June 2020. Your Partner has requested that you: Prepare a letter of advice to Judy Somerville which identifies all relevant tax issues that will arise out of all the documents provided, critically analyzing and applying the taxation treatment to the issues, i.e., you will need to argue and support your view and consider differing views (if applicable), and finally, indicate your recommended action based on your better view, i.e., your conclusion. Be sure to consider all issues, including but not limited to issues that may not be as obvious, for example tax accounting, tax periods, potential levies, surcharges, offsets and substantiation requirements. You must ensure that your analysis used to determine your recommended action is fully supported with relevant authority, for example, tax legislation and case law. The letter must not exceed 2,500 words, excluding footnotes, any appendices with calculations, and the reference list. Assignments exceeding 250 words (10%) will not be assessed and you will receive zero marks (fail grade). If you need to undertake calculations, it is advisable to include the workings in an appendix. You must indicate your word count on the front of the assignment If you need more information, ensure you clearly state what information you need and why it is required. Note** Team/Group Contract/Agreement between all group members to be submitted to tutors by 21 September 2020 (See Appendix A) and then before assignment submission in week 10, 12 October 2020 students must also give tutors a Group Contribution Table (See Appendix C) It is highly recommended that students begin categorizing the list of transactions as a group and look at the assignment requirements in its entirety, for example, the various employment. business and investment issues, before assigning individual member tasks under the group contract [20 marks] Please note in the interest of equity to all students, academic staff will not be able to provide any assistance with this research-based assignment. ACC30005 Taxation - Semester Two 2020 Case Study / Assignment - Page 2 of 20 1. CASE STUDY SCENARIO You are a Graduate Tax Advisor, employed by Tax Advisors Pty Ltd. Your Partner has assigned you the following client file after attending a meeting with the client Client Background Judy Somerville is employed by Ansett Airways Limited ('Ansett') since 2003 as a long-haul flight attendant based in Melbourne, Australia. The nature of Judy's position with Ansett sees her flying to international ports where she spends 183 days away from her home base each calendar year The remaining days of each calendar year are spent in Australia, and Judy uses this non- flying time to organise the importation of textiles into Australia from Textiles Inc. (a company registered in the USA). Until recently, Judy was the exclusive distributor of textiles to retailers in Australia Client File Contents The client file has the following relevant documents: Extract of bank statement for selected transactions during the financial year ended 30 June 2020 (together with accompanying notes from Judy), as attached at Annexure A; Income Statement (2020) from Ansett, as attached at Annexure B: Dividend Statement from Westfields Ltd, as attached at Annexure C: Extract of Contract of Sale of Real Estate between Judy Somerville (the vendor) and the purchaser, as executed on 1 May 2020, as attached at Annexure D; Extract of 'Exclusive Distributor Termination Agreement between Judy Somerville and Textiles Inc, as executed on 30 June 2020, as attached at Annexure : Fixed asset register as at 30 June 2019, as attached at Annexure F: Internal file note from your Partner that provides details of the discussions with the client at the meeting, as attached at Annexure G. Scope of Engagement between Tax Advisors Pty Ltd and Judy Somerville Your Partner has requested that you review the file in its entirety (as below) in order to undertake the engagement work as agreed between Tax Advisors Pty Ltd and Judy Somerville, as outlined in the "Required' section of this document. ANNEXURE A BANK STATEMENT EXTRACT (ANNOTATED & SELECTED TRANSACTIONS ONLY) Date Transaction Note Debit Credit Balance 1 Apr 20 Norman Harvey Ltd 1 14,128.00 7,293.00 Debit Card Transaction 1 Apr 20 Myer Coles Pty Ltd 2 2,345.00 4,948.00 Invoice 65 Textiles 15 Apr 20 Ansett Airways Ltd 5,203.00 10.151.00 Salary Deposit 3 May 20 Real Property Pty Ltd 3 54,000.00 64,151.00 Early Deposit Release 6 May 20 Textiles Inc 4 1,920.00 62,231.00 Textiles Purchase 15 May 20 Stillwell Bib Pty Ltd 10,000.00 52.231.00 Debit Card Transaction 15 May 20 Skin Care Australia 5 629.00 51,602.00 Debit Card Transaction 15 May 20 Tim Rivers 6 1,008.00 50,594.00 Salary Payment 17 May 20 Traffic Infringement Office 7 220.00 50,374.00 Speeding Fine 20 May 20 Abel & Abel Solicitors 8 5,950.00 44,424.00 Invoice 13129 25 May 20 Maze Restaurant 9 450.00 43,974.00 Debit Card Transaction 21 May 20 First Newspapers Advertising 10 2,550.00 41,424.00 Invoice 39221 10 Jun 20 Institute of Aviation 6,300.00 35.124.00 Course Fees 30 Jun 20 Victoria State Bank 430.00 34,694.00 Interest Charge 30 Jun 20 Australian Taxation Office 11 3,000.00 31,694.00 PAYG Instalment 30 Jun 20 Textiles Inc. 8 49,950.00 81,644.00 Damages 30 Jun 20 Westfields Ltd 12 700.00 82,344.00 Dividend 30 Jun 20 Woodlands Pty Ltd 13 1,500.00 80.844.00 Serviced Office Rent 30 Jun 20 Tim Rivers 6 7,500.00 73,344.00 Redundancy SAUD 1 9,865 4,263 23,000 20,000 2 3 72,000 (18.000) 1,920.00 25,500.00 12,500.00 4 5 629.00 6 Notes Regarding Bank Statement Extract Note Description / Further Information Acquisition of Furniture & Office Equipment Desks and Chairs (acquired 1 July 2019) Partitions (acquired 20 August 2019) Outstanding debtors at 30 June 2019 Debts written off > 12 months old Judy provisions bad debts equal to 3% of the outstanding debtors. Obtained an Early Release of Deposit for Property Sold. Net of Agents Commission of $18,000. Stock Purchase of Textiles (USD $2,000.00 = AUD $1,920.00) Stock at Start Stock at End Skin care products purchased due to flight attendant role. Salary Payment for Employee Tim Rivers Redundancy Payment for Employee Tim Rivers Note the minimum superannuation guarantee contribution is included in the above amounts, where relevant. Speeding fine incurred whilst travelling from Melbourne Airport to Retailer for Textiles business. Legal fees incurred in relation to distributor agreement. Settlement sum received in relation to distributor agreement. Client dinner at Gordon Ramsey's Maze Restaurant 10 Advertising contract payment. Paid one month in arrears and prepaid up to 30 September 2020. PAYG instalments (quarterly equal payments) 12 Fully-franked dividend received (refer Dividend Statement) Office rent paid for 1 June 2020 to 31 July 2020. 1,008.00 7,500.00 7 220.00 8 5,950.00 49,950.00 450.00 9 2,550.00 11 3,000.00 700.00 13 1,500.00 ANNEXURE B Income Statement 2020 FOR Judy Somerville Income Statement - individual non-business Income Statement for year ending 30 June 2020 Payee details NOTICE TO PAYEE Ms Judy Somervile The income statement shows an amount in the total to held box you must lodge a tax retum If nota 10 Diamond Avenue was had you may all have to lodge a tax retum Waverley Vie 3150 For more information on whether you have to ledger but payment and how it is you can -phone 13 28.00am and opin (EST) Puried ouring which payments were made 01/07/2019 30/06.2020 Payee's talle number 564 355771 TOTAL TAX WITHIELDS 19812 $ 12.252 AS Gross payments CEP payments Other income Reportable tringebrets amount D$ ES Allowances Total 53,321.00 .comprising of - Laundry: $2,000.00 - Uniform: $1,241.00 Payer details Payer's ABN or withholding payer number 90111222333 Payerne ANSETT AIRWAYS LIMITED Branch number Signature of authorised person DIRECTOR, HUMAN RESOURCES ANNEXURE C DIVIDEND STATEMENT WESTFIELDS LTD ABN 96 123 456 789 Dividend Statement Ms Judy Somerville 10 Diamond Ave Waverley VIC 3150 Notification of Final Dividend Record Date: 1 March 2020 | Payment Date: 30 June 2020 Security Number Unitranked Amount Franked Amount Franking Credits Ordinary Shares 201 0.00 700.00 300.00 Your dividend payment has been remitted to the following account on the payment date: Bank: Victorian State Bank BSB Number: 011-111 Account Number: 123456790 Account Name: Judy Somerville Please note that your tax fle number has been received and recorded. Please retain this Dividend Statement for taxation purposes. *End of Dividend Statement ANNEXURED EXTRACT OF CONTRACT OF SALE OF REAL ESTATE CONTRACT OF SALE OF REAL ESTATE FORM 1 - PARTICULARS OF SALE (EXTRACT) VENDOR'S ESTATE AGENT Real Property Victoria of 123 Wellington Road, Clayton, Victoria T. (03) 99998860 F. (03) 88889909 Judy Somerville of 10 Diamond Avenue, Waverley Victoria, 3150 VENDOR PURCHASER Scott Jackson of 200 Church Street, Brighton, Victoria, 3186 PROPERTY ADDRESS Unit 1/300 Glenlerie Road, Hawthom, in the State of Victoria Australia LAND The land is desorded in the attached copy) and plants) as Lot 12 on Pian of Subdivision 094821 being all that piece of land more particularly described in Certificate of Title Volume 12345 Folio 123 and includes al Improvements and fixtures GOODS All fixed floor coverings, electric light fittings, window furnishings and a fixtures and fittings of a permanent nature PAYMENT Price $ 720.000 Deposit $_72.000 10% of the price payable on signing hereof (of which $72.000 has been paid Balance SAL.COM payable at settlement GST (refer to general condition 13) The price includes GST (if any) unless the words plus GST appear in this box If this is a sale of a farming business or going concern then add the words farming business of going concern in this box If the margin scheme will be used to calculate GST then add the words margin scheme' in this box: SETTLEMENT is due on 05/07/2020 unless the land is a lot on an unregistered plan of subdivision in which case settlement is due on the above date or 14 days after the vender gives notice to the purchaser of registration of the pian, whichever is the later. Signed by the Purchaser SIGNATURE ON FILE 29/04/2020 Print name of person signing SCOTT JACKSON State nature of authority if roplicable to director","attorney under power of attomey This offer wil lapse unless accepted within clear business days (3 business days none specified) Signed by the Vendor SIGNATURE ON FILE 30/04/2020 Print name of person signing Judy Somerville State nature of authority if soplicable (e director","attorney under power of womey" ANNEXURE E EXTRACT OF EXCLUSIVE DISTRIBUTOR TERMINATION AGREEMENT Exclusive Distributor Termination Agreement Date: This agreement is dated the 30 day of June 2020. Between the Parties: Distributor Judy Somerville 10 Diamond Avenue, Waverly, Victoria3150. Australia Supplier Textiles Inc. of 200 Santa Monica Boulevard, Santa Monica, CA 90405. USA Recitals: 1. Textiles Inc. is the manufacturer of the Textiles product and holds a registered patent over its design. 2. Textiles Inc. entered into an exclusive distributor agreement with the Distributor on 1 September 2018 3. The agreement referred to in Recital 2 was, amongst other things. (a) for a form of five (5) years, concluding on 31 August 2023; and (b) provided for the Distributor to have exclusive distribution rights of the Textiles product during the term in Australia 4. Textiles Inc. now requires more traction in the Australian market and wishes to engage more distributors and contract directly with retailers in relation to its Textiles product The Parties Agree: 1. Termination (a) The Supplier and Distributor agree that the Exclusive Distributor Agreement dated 1 September 2018 is terminated from the date of this agreement (b) The Distributor agrees to and will take all necessary steps to assign all contracts it has with its Australian based customers to the Supplier, with effect from the date of this agreement 2. Release (a) The Supplier and Distributor agree and acknowledge that both the Supplier and Distributor shall be immediately and forever released and discharged from any action or claim known or unknown including, without limitation, any claim for costs, interest to which each either the Supplier and/or Distributor may be entitled to against each other. 3. Restraint of Trade (a) As consideration for the Settlement Sum in clause 4 of this agreement, the Distributor agrees that for a period of not less than three years from the date of this agreement, that the Distributor will not (a) directly or indirectly solicit business away from the Supplier: (b) trade in the products manufactured or sold by the Supplier. (c) entice any employee or contractor away from the Supplier, andior (d) assist or engage any other person to undertake (a) to (c) in this cause. 4. Settlement Sum (a) in consideration of clauses 1, 2 and 3 of this agreement and based on an estimate of the potential loss suffered by the Distributor, the Supplier agrees to pay the Distributor a Settlement Sum of $49,950.00 Australian dollars to the Australian bank account nominated by the Distributor 5. General (a) This agreement is subject to the laws of Victoria, Australia ANNEXURE F FIXED ASSET REGISTER Ms Judy Somerville FIXED ASSET REGISTER File Number: 323 121 900 as at 30 June 2019 Asset ID Asset Description Acquisition Original Date Cost Private Use % Op. Adj. Method Rate Value. 4230.00 20% DV 1 2 3 Computer Printer Furniture 1/09/10 1/09/10 1/09/10 20% 3384.00 712.00 3300.00 Amount Closing Adj. Disposal Proceeds Value Date 935.46 2,448.54 196.82 515.18 273.95 3026.05 890.00 3300.00 33.30% 33.30% 10% DV PC 0% ANNEXURE G FILE NOTE File Note Preparer: P. Slade (Partner) Client: Judy Somerville Date/Time: 20 July 2020 Subject: Meeting with Client on 20 July 2020 at 10am The purpose of this file note is to document details of discussions with Judy Somerville in relation to her tax affairs for the year ended 30 June 2020. 1. Judy entered into a Contract of Sale in respect of her investment property located in Hawthorn, Victoria. An extract copy of the contract has been provided to us and is on file at Annexure D. Judy has advised us of the following information: a Property purchased on 1 October 2016 direct from the developer as new residential premises for $440,000 (incl GST). b. Acquisition costs at the time included stamp duty of $21.470, legal costs of $990 and building inspections of $550 Judy also undertook minor renovations in the 2019/20 financial year to upgrade the kitchen which cost $6,600 after the tenant had damaged the appliances and cupboards 2. Judy is no longer selling Textiles to Australian retailers as the parent company terminated this agreement. This agreement is attached Annexure E which provides for a settlement and restraint of trade. 3. Judy advised that despite the termination of the Textiles agreement, she has paid First Newspapers for advertising up to 30 September 2020 and paid a redundancy to her employee on 30 June 2020 in the amount of $7.500.00. Judy has $12.500 worth of Textiles in stock that she can no longer sell, and Textiles Inc. now refuses to allow her to return the stock. 4. Judy rented a small serviced office for her business at the Tullamarine Business Centre, where the lease commenced on 1 November 2019 for 12 months. The Tullamarine Business Centre provided a free fit out and two months rent-free valued at $12,000. 5. Judy provided us with an extract of her bank statement with annotations. In particular. Judy advised that she is studying at the Institute of Aviation as she hopes to move into Flight Operational and Airport Planning Management within the airline where she currently works. Judy indicated that her HECS / HELP debt has already been exhausted from prior studies. 6. Judy borrowed $70,000 from the Victorian State Bank in early 2020 for her business at an interest rate of 7.35% per annum, as a revolving line of credit secured over her own personal home. Since drawing the loan proceeds, Judy has used $10,000.00 as a deposit for a BMW which she intended to use for her business. Other Notes 1. Judy is a sole trader and her accountancy fees for the 2019/20 financial year are $5,500. 2. Our firm organised Judy's GST registration for her business on its commencement on 1 September 2018 and she accounts for GST on a cash basis. REQUIRED Judy Somerville has engaged Tax Advisors Pty Ltd to advise her of all her tax issues which will arise from the documents provided in respect of the income year ending 30 June 2020. Your Partner has requested that you: Prepare a letter of advice to Judy Somerville which identifies all relevant tax issues that will arise out of all the documents provided, critically analyzing and applying the taxation treatment to the issues, i.e., you will need to argue and support your view and consider differing views (if applicable), and finally, indicate your recommended action based on your better view, i.e., your conclusion. Be sure to consider all issues, including but not limited to issues that may not be as obvious, for example tax accounting, tax periods, potential levies, surcharges, offsets and substantiation requirements. You must ensure that your analysis used to determine your recommended action is fully supported with relevant authority, for example, tax legislation and case law. The letter must not exceed 2,500 words, excluding footnotes, any appendices with calculations, and the reference list. Assignments exceeding 250 words (10%) will not be assessed and you will receive zero marks (fail grade). If you need to undertake calculations, it is advisable to include the workings in an appendix. You must indicate your word count on the front of the assignment If you need more information, ensure you clearly state what information you need and why it is required. Note** Team/Group Contract/Agreement between all group members to be submitted to tutors by 21 September 2020 (See Appendix A) and then before assignment submission in week 10, 12 October 2020 students must also give tutors a Group Contribution Table (See Appendix C) It is highly recommended that students begin categorizing the list of transactions as a group and look at the assignment requirements in its entirety, for example, the various employment. business and investment issues, before assigning individual member tasks under the group contract [20 marks] Please note in the interest of equity to all students, academic staff will not be able to provide any assistance with this research-based assignment