! AUSTRALIA TAX LAW !

BFF Fine Jewellery Pty Ltd (BFF) is an Australian resident company that manufactures jewellery which it sells directly to retail shops around Australia. The business premise is located in Macquarie Park, Sydney. The company has two directors and shareholders, Mr and Mrs Baldwin who each hold 10 shares in BFF. These shares were acquired for $1,000 per share on 10 January 2000 by Mr & Mrs Baldwin when BFF was incorporated.

Balance Sheet of BFF as at 30 June 2020 is as follows:

Assets	Liabilities
Cash at bank $240,000	Trade creditors $360,000
Accounts receivable $390,000	Bank loan $2,300,000
Trading stock $120,000
Plant & Equipment $65,000	Shareholders Equity
Business premise $2,620,000	Issued share capital $20,000
Residential premise $1,100,000	Retained earnings $1,855,000

Cash receipts and cash payments of BFF for the year ended 30 June 2020 are:

Cash receipts	$
Sales	$3,500,000
Proceeds from disposal of business premise	$2,350,000
Proceeds from residential premise	$3,500,000
Cash expenditure
Trading stock	$950,000
Wages	$600,000
Water and electricity	$110,000
Interest expenses bank loan	$115,000

Additional information:

1. Accounts receivable as at 30/6/2019 Nil

2. Trading stock on hand 1/7/2019 Nil

Trading stock on hand 30/6/2020

Cost $120,000

Replacement cost $165,000

Market selling value $350,000

Trading stock account doesnt include the stock costing $25,000 that is yet to be delivered because it is still on a freighter at sea. BFF holds the bill of lading for the trading stock and delivery to the warehouse is expected on 1 July 2020.

3. Mr and Mrs Baldwin decided to relocate its business operations to Singapore from 30 June 2020 and sold the following assets:

• Business premises: acquired on 1 May 2000 for $2,620,000 which included the administration office, factory and warehouse. Entered into a contract on 20 June 2020 to sell for $4,500,000. The legal fees and agent fees on the sale totalling was $225,000. The sale was settled, and the proceeds received on 30 July 2020.

• Residential premises: acquired from Mr & Mrs Baldwin for $1,100,000 on 10 February 2014. However, a registered valuer had advised BFF that the market value of the premises was only $750,000 at the time. Entered into a contract on 1 June 2020 to sale for $2,300,000. The legal fees and agent fees totalling $115,000. The sale was settled, and the proceeds received on 1 July.

Required:

The business is flourishing and expanding rapidly in Singapore. Mr and Mrs Baldwin received an offer on 1 February 2021 to sell their shares in BFF for $100,000 per share. Mr and Mrs Baldwin also sold their artwork for a capital loss of $35,000 in the same tax period. Explain the possible CGT implications if they accept the offer to sell their shares in BFF.