Question 1 (15 marks)

a) Tamara is an Australian resident. She is a successful lawyer working at a large city law firm in Perth. Over the last 3 years she has made great property purchases in Brisbane, Perth and Townsville. In total she has 5 units in each location. Tamara lives at home with her parents and rents these properties out to the public. The properties are managed by local real estate agents. During the 2019- 20 income year she derived $150,000 in salary, $273,000 in rent and paid $13,650 in management fees, and $187,500 in interest to banks on loans taken out to purchase these properties. What is Tamara's taxable income for the 2019-20 income year? (5 marks)

b) Tamara's investment strategy and intention are to buy low, hold and make a profit on sale when prices pick up. At the start of each year she meets with her property advisor to assess the performance of each property, determine whether the property should be sold to realise the gain in price and in which suburb the next property purchase would be. During the 2019-20 income year Tamara sold 5 units and made a total gain of $250,000. Advise whether Tamara will be required to include the profit as ordinary income and, if so, how the capital gains should be treated. (5 marks)

c) Tamara's parents, Beth and Ben, own 10 hectares of land which is located just outside of Perth's residential suburbs. The land was purchased in November 1983. Tamara thinks that her parents should seek permits for a suburb development and name the suburb 'Greater Tamara'. The development may consist of 120 residential blocks, roads, park lands and a small shopping centre. Beth and Ben would make a huge profit if they sold each individual block as a house and land package. Beth and Ben seek your advice as to how they should realise this asset and the tax consequence that may arise. (5 marks)