Tax Assessment and Consequences for VDSE and Lillian Van de Stadt

Assume you are the associate who has received the following email from a senior partner in your firm. Using the template on the following page, respond to the email addressing each of

I had a meeting today with a new client Lillian Van de Stadt. She runs Van de Stadt Engineering Ltd in Lonsdale (VDSE). They manufacture specialist machine parts for the global market.

VDSE has recently signed up to a Federal Government program whereby they train welfare recipients as apprentices. VDSE is receiving $20,000 a year from the Federal Government per trainee, they currently have five in addition to their other apprentices. VDSE are also currently licencing one of their manufacturing methods to Globo-Tech Ltd. VDSE are currently receiving a fixed fee of $10,000 per month from Globo-Tech Ltd for the right to use the manufacturing method. She is interested to know how these payments might be assessed?

She also wants to give $15,000 to her long term secretary who is retiring this month. I understand that they have worked together for a number of years and that she has been a great personal confidante of Ms. Van de Stadt. The payment is intended to be a thank you for her loyal friendship, this is highly unusual as she has never previously given a non-performance related bonus to an employee. Ms. Van de Stadt wonders whether her secretary will be assessed on this payment? (Ignore any FBT consequences) Ms. Van de Stadt has also recently sold her house in Toorak Gardens. She bought the home on 1 Febuary 1996for $500,000 and sold for $1.5 million in  February of this year. She and her family have lived in this homecontinuously except for the period between 1 July 1998 and 1 July 2006, where the property was leased to tenants whist she was heading up the new VDSE factory in Perth.

Ms. Van de Stadt has also recently inherited a house in Melbourne and its contents from her late aunt, the property was acquired in 1990 for $1.2m. At the date of her aunts death, the property had a market value of $3.5m. Her aunt was living in the property at the date of her death, Ms. Van de Stadt has since been leasing the property out to tenants. She wants to sell the property and wants to know what the tax consequences might be on the inheritance and potential sale?

She’s already auctioned off the contents of the property mainly personal effects, household furniture ect. Estimated value of each item not exceeding $4,000-5,000, total contents sold for $17,800. However, there were some items of note particular a Heysen oil painting we assume was acquired sometime between 1958-1962 sold for $10,000. We assume it was purchased for approximately £500. Also a 1982 Bentley Turbo R sold for $58,000, an Edwardian Sterling Silver Soup Tureen sold for $6,000, the bill of sale indicates it was purchased in 2003 for $5,000 and a set of Fresh Water Pearls purchased in 2008 for $5,000 sold for $3,000. She is interested to know if there are any tax consequences from these sales?

1. Whether the $100,000 a year from the Federal Government is assessable as statutory income under Section 15-10 ITAA97
2. Whether the $120,000 per year from Globo-Tech Ltd for the right to use the manufacturing method is assessable as statutory income under section 15-20 ITAA97
3. Whether her secretary will have the $15,000 assessed as ordinary income under section 6-5?
4. What are the Capital Gains Tax Consequences arising from the sale of the house in Toorak Gardens / will the main residence exemption apply?
5. What are the Capital Gains Tax Consequences arising from the inheritance and potential sale of the Melbourne property / will the main residence exemption apply?
6. What are the Capital Gains Tax Consequences arising from the sale of;
7. The personal effects, household furniture ect; and
8. The Heysen oil painting; and
9. The 1982 Bentley Turbo R sold for $58,000; and
10. The Edwardian Sterling Silver Soup Tureen; and
11. The set of Fresh Water Pearls.

• Summarise the recent changes to the tax system that the Australian Government has introduced in response to COVID-19 and discuss what businesses are likely to be affected by these changes and how.
• Explain the recently introduced Multinational Anti-Avoidance Law (MAAL) introduced as part of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 (Cth) and the Diverted Profits Tax (DPT) introduced as part of the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Act 2017 (Cth). What business are likely to be affected by these law? How have these business responded to these new laws? Have these new laws been effective in changing corporate tax behaviour?
• Explain the recent instant asset write-off and accelerated depreciation changes in detail and discuss what businesses are likely to be affected by these changes and how?
• Explain the recent Land Tax changes in South Australia and discuss what businesses are likely to be affected by these changes and how?
• Explain the tax implications of working from home during the COVID-19 pandemic. Who is likely to be affected by these changes and how? Your answers should be approximately 1-2 pages in length and should cite all sources used. You may use whichever method of referencing you wish. There is no set structure to answer the research question. However, a good approach would be to write as if you were explaining the issue to a colleague or a client.

You will be assessed on the clarity of your explanation of the issue and the depth of your understanding of the issue, as evidenced by your discussion of the issue.