Peter-one, Peter-two and Peter-three are brothers carrying on an investment business through

their company, Stark Industry Investments Pty Ltd (SII Co). They each own one third of the shares

in SII Co.

While scrolling through Facebook, Peter-one saw an advertisement for newly built apartments

from F.E.A.S.T. Building Company (FBC) in Brunswick East from $450,000. He thought it would be

a good investment for SII Co, so he immediately signed a contract for a 2-bedroom apartment for

$600,000 (Apartment 1). When he went to tell his brothers, he was surprised that Peter-two had

signed another contract for the apartment next door for $600,000 (Apartment 2). Even more

surprising was that Peter-three had signed a contract for another apartment on the same floor

for $600,000 (Apartment 3). They laughed at the coincidence while pointing at each other.

They decided the best thing to do would be for SII Co to take out a single loan with Strange Bank

to finance all three purchases. All three apartments were transferred to SII Co at settlement in

November 2021. After this, SII Co leased them out as residential properties to families who might

otherwise have no way to find a home.

For the income year ending 30 June 2022, SII Co had the following receipts:

$1,800,000 loan from Strange Bank to purchase the apartments,

$40,000 rent from the apartments,

$21,000 fully franked dividends from Octavius Co, a small Australian company,

$5,100 AUD cash dividends from Electro Co, a Chinese company (this amount was net of

$900 AUD Chinese tax which had been withheld and remitted to the Chinese Revenue

Office on SII Cos behalf).

For the income year ending 30 June 2022, SII Co had the following outgoings:

$1,800,000 payment for the apartments,

transfer duty payable on the purchase of the apartments (calculated in part A below),

$1,000 land tax on the apartments for the 2022 calendar year,

$24,000 interest expenses on the loan for the apartments,

$14,000 in dividends paid to the three Peters as shareholders in October 2021 (with

$4,800 franking credits attached), and

$14,000 in dividends paid to the three Peters as shareholders in April 2022 (with $6,000

franking credits attached).

The three Peters usually get Green Goblin Tax Accounting Services (GGTAS) to file their tax returns

each year. GGTAS advertises its tax accounting services with the tagline You know, Im

something of a tax agent myself. GGTAS charges fees for their services and the three Peters rely

on their services to correctly complete their tax return. However, it has just come to their

attention that GGTAS is not registered with the Tax Practice Board (TPB).

Required:

A. Advise the transfer duty consequences and calculate the transfer duty payable by SII Co.

(7 marks)

B. Assume the relevant tax rate is 30% for all companies mentioned (SII Co does not elect to

be an SBE). Discuss the income tax consequences for SII Co (and comment on any activity

in the franking account) for the tax year ending 30 June 2022. It is not necessary to

calculate the taxable income or the closing balance of the franking account. (18 marks)

C. Discuss the actions that the TPB could take against GGTAS. (5 marks)