Posted: February 17th, 2026

Capital Gains Tax, Trusts, FBT, and GST

LAW6001 Taxation Law — Assessment 3: Case Study (Tax Planning and Comprehensive Advice)

This Torrens University Australia assessment requires you to research and develop a 3,000-word tax advice report addressing a comprehensive client scenario. You must identify and analyse assessable income, allowable deductions, capital gains tax implications, and tax planning recommendations. The case study incorporates uncertainty and requires you to apply the Income Tax Assessment Act 1936 (Cth) and 1997 (Cth), relevant case law, and ATO rulings to reach reasoned conclusions. The report must follow business report format with APA 7 referencing and is due in Week 10 of the trimester.

Context and Purpose of the Assessment

This case study forms a core component of LAW6001 Taxation Law at Torrens University Australia, part of Laureate International Universities. The assessment requires you to solve practical problems that arise from a comprehensive client scenario and to give appropriate advice based on Australian tax law. The task assesses your research skills, your ability to synthesise an original piece of work to specific content requirements, and your ability to produce a comprehensible piece of advice that addresses the client’s needs.

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The case study is designed to incorporate uncertainty. You must develop written advice for your client that identifies the facts and issues presented by each aspect of the scenario, applies the relevant legislation and case law, reaches a conclusion, and makes a recommendation. The skills you develop here mirror the work of tax advisers preparing written opinions for clients, and the task prepares you for professional practice in Australian taxation.

Task Description and Instructions

You are required to answer a comprehensive case study involving multiple independent client scenarios. Your response must identify and discuss the tax implications of the various issues raised, apply the relevant legislation and case law, and provide practical advice to each client.

Your case study is not just a list of answers. Your reasons for your conclusions and recommendations must be based on your research into the relevant cases and legislation. The format of the report should be a business report using APA 7th edition referencing style.

Case Study Scenario

The following cases are independent. You must address each case separately and provide comprehensive advice for each client.

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Case 1: Capital Gains Tax and Trust Taxation

Michael Convin, a resident individual taxpayer, has disposed of several assets during the current income year and seeks advice on the CGT consequences. He also operates a family discretionary trust and requires guidance on the tax treatment of trust distributions and the application of Div 7A. The scenario includes details of a main residence, shares, collectables, and a block of vacant land acquired at different times. You must calculate the net capital gain or loss, apply the CGT discount and exemptions, and advise on the most tax-effective structure for Michael’s future investments.

Case 2: Employment Termination Payments and Fringe Benefits

Barbra Purcell began her employment with the Republic Bank of Australia (RBA) in 2005 and was made redundant during the current income year. She received a termination payment, unused leave entitlements, and a company car that she was permitted to use for private purposes. You must determine the tax treatment of each component of the termination package, calculate any FBT liability, and advise Barbra on her tax position and any planning opportunities.

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Case 3: Business Income, Deductions, and GST

Ken Fong acquired a restaurant as a going concern on 17 July 2020 for $850,000, comprising land and buildings, plant and equipment, and goodwill. He has operated the restaurant as a sole trader since acquisition and has recorded various items of income and expenditure during the current income year. You must determine the assessable income, allowable deductions, and taxable income of the business, identifying how each amount has been derived. If any receipts or payments are not assessable or deductible, you must provide the reasoning for non-inclusion with reference to relevant legislation or cases. The scenario includes issues relating to trading stock, depreciation, capital works deductions, GST, and the potential use of a trust structure for future operations.

Submission Requirements and Formatting

• Format: MS Word. 12-point Times New Roman or Arial, 1.5 line spacing, 2.5 cm margins.
• Length: 3,000 words (±10%), excluding references and calculations.
• Referencing: APA 7th edition. In-text citations and a reference list are required.
• Structure: Business report format with an executive summary, introduction, body sections, calculations, and conclusion with recommendations.
• Submission: Via the LMS portal. Turnitin similarity report will be generated.
• Late penalties: Standard Torrens University late submission penalties apply.

Marking Rubric and Grading Criteria

Criteria	High Distinction (85–100)	Distinction (75–84)	Credit (65–74)	Pass (50–64)
Identification and analysis of tax issues	Comprehensive identification and critical analysis of all relevant tax issues with clear application of legislation and case law	Thorough identification and analysis of most relevant tax issues with good application of legislation and case law	Sound identification and analysis of key tax issues with satisfactory application of legislation and case law	Basic identification of some tax issues with limited application of legislation and case law
Application of law to facts	Compelling application of legal principles to the facts with insightful conclusions and practical advice	Strong application of legal principles to the facts with clear conclusions and practical advice	Competent application of legal principles to the facts with adequate conclusions	Limited application of legal principles with basic conclusions
Calculation accuracy	All calculations accurate and clearly presented with correct legislative references	Most calculations accurate and clearly presented with appropriate legislative references	Calculations mostly accurate with some legislative references	Some calculations accurate with limited legislative references
Research and referencing	Extensive use of high-quality sources with accurate APA 7 referencing	Good use of quality sources with mostly accurate APA 7 referencing	Adequate use of sources with some APA 7 referencing errors	Limited use of sources with frequent APA 7 referencing errors
Written communication	Clear, concise, and professional writing with excellent structure	Clear and professional writing with good structure	Generally clear writing with adequate structure	Writing lacks clarity with poor structure

Sample Answer: Tax Treatment of a Termination Payment and Fringe Benefits

Barbra Purcell’s termination package requires careful analysis under the employment termination payment rules and the fringe benefits tax provisions. The termination payment is an employment termination payment (ETP) under Subdiv 82-A of the Income Tax Assessment Act 1997 (Cth). The tax treatment of an ETP depends on whether it is a life benefit termination payment or a death benefit termination payment, and whether the employee has reached preservation age. Barbra began her employment in 2005 and was made redundant during the current income year. The unused leave entitlements are taxed separately as ordinary income under s 83-10. The company car provided for private use is a car fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (Cth). The taxable value of the car benefit must be calculated using either the statutory formula method or the operating cost method. The ATO’s fringe benefits tax guidance explains that the employer is liable for FBT, not the employee, but the benefit may still affect Barbra’s tax position through the reportable fringe benefits amount. The otherwise deductible rule may reduce the taxable value if Barbra would have been entitled to a deduction for the car expenses. The tax-free component of the ETP must be calculated based on the pre-1983 and post-1983 service periods, and the taxable component is taxed at concessional rates if Barbra has reached preservation age.

The Small Business CGT Concessions and Trust Structures

The interplay between the small business CGT concessions in Div 152 and the use of trust structures is a recurring issue in tax planning. Michael Convin’s scenario raises the question of whether a discretionary trust offers advantages over individual ownership for a small business or investment portfolio. The ATO’s capital gains tax concessions for small business guidance explains that the maximum net asset value test, the active asset test, and the basic conditions must be satisfied to access the 15-year exemption, the 50% active asset reduction, the retirement exemption, and the small business roll-over. For a trust, the concessions are available to the trustee and beneficiaries, but the trust must meet the conditions, including the requirement that the CGT asset is an active asset. A discretionary trust can provide asset protection and income splitting flexibility, but the recent amendments to Div 7A and the personal services income rules may limit the benefits in some circumstances. Students should also consider the impact of the trust loss provisions in Sch 2F of the Income Tax Assessment Act 1936 (Cth) if the trust has accumulated losses. This comparison between individual and trust ownership is a common exam and assignment focus, and markers reward students who articulate the trade-offs clearly.

 How Is Goodwill Treated for CGT Purposes?

A question students frequently search for is how goodwill acquired as part of a business purchase is treated for capital gains tax purposes. Goodwill is a CGT asset under s 108-5 of the ITAA 1997. If the business is sold, any capital gain on goodwill may qualify for the small business CGT concessions if the conditions in Div 152 are met. The cost base of goodwill includes the purchase price and any incidental costs of acquisition. If the goodwill was created by the taxpayer rather than purchased, the cost base may be nil or minimal, which can produce a significant capital gain on disposal. The ATO’s small business CGT concessions page explains that goodwill can be an active asset if it is used in carrying on a business. For Ken Fong’s restaurant acquisition, the goodwill component of the $850,000 purchase price must be identified and allocated. If Ken later sells the restaurant, the goodwill may qualify for the 50% active asset reduction and the 50% CGT discount, potentially reducing the effective tax rate on the gain. Students should also consider whether the goodwill is depreciating for tax purposes; generally, goodwill is not a depreciating asset under Div 40, so no decline in value deductions are available. The interaction between the CGT provisions and the small business concessions is a complex area that requires careful analysis of the facts.

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 Common Misconceptions About GST and Input Tax Credits

A frequent misconception among students is that GST registration is automatic once a business starts. In fact, registration is only required if the business turnover exceeds the $75,000 threshold, although voluntary registration is available. Ken Fong’s restaurant business likely exceeds this threshold, so he must be registered for GST. The GST Act 1999 allows a registered entity to claim input tax credits for GST paid on acquisitions used in carrying on the enterprise. However, not all expenses attract a full input tax credit; entertainment expenses, for example, are subject to specific rules. The ATO’s GST page provides detailed guidance on registration, input tax credits, and adjustments. Another misconception concerns the treatment of trading stock. Students sometimes assume that all trading stock purchases are immediately deductible, but the trading stock provisions in Div 70 of the ITAA 1997 require an annual stocktake and adjustments for opening and closing stock. A third misconception is that capital works deductions are available for all buildings. In fact, Div 43 deductions are only available for buildings constructed after 15 September 1987 (for non-residential) or after 15 September 1987 (for residential income-producing). Getting these distinctions right is what separates a pass from a high distinction.

Frequently Asked Question

Can I claim a deduction for interest on a loan used to purchase a vacant block of land?

No, unless the land is used to produce assessable income. Interest on a loan is deductible under s 8-1 of the ITAA 1997 only if the borrowed funds are used to produce assessable income or to carry on a business for that purpose. A vacant block of land that is not rented out or used in a business does not generate assessable income, so the interest is not deductible. The ATO’s interest deductions guidance confirms that the purpose of the borrowing determines deductibility. If the land is later used to produce income, such as by building a rental property, the interest may become deductible from that point. Students should also consider whether the interest can be included in the cost base of the land for CGT purposes. Under s 110-25 of the ITAA 1997, interest may form part of the third element of the cost base if it is incurred in acquiring the asset or in carrying on a business, but the rules are complex and depend on the specific circumstances.

Why This Matters in Practice

The issues in this case study mirror the questions tax advisers answer for clients every day. A client receiving a termination payment needs to know how much tax they will pay and whether the payment can be structured more tax-effectively. A business owner acquiring a restaurant needs to understand how goodwill, plant and equipment, and trading stock are treated for tax purposes. A property owner with a vacant block needs to know whether interest on the loan is deductible. Getting these questions wrong has financial consequences for clients and professional consequences for advisers. The skills you develop in this assessment, reading legislation, applying case law, and reaching reasoned conclusions with clear calculations, are the same skills you will use in practice.

References and Learning Materials

Australian Taxation Office. (2024). Capital gains tax concessions for small business. https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/capital-gains-tax-concessions-for-small-business

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Australian Taxation Office. (2024). Fringe benefits tax. https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax

Australian Taxation Office. (2024). GST. https://www.ato.gov.au/businesses-and-organisations/gst-and-other-taxes/gst

Australian Taxation Office. (2024). Interest deductions. https://www.ato.gov.au/individuals-and-families/investments-and-assets/investment-property/interest-deductions

Income Tax Assessment Act 1936 (Cth).

Income Tax Assessment Act 1997 (Cth).

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Barkoczy, S. (2023). Foundations of taxation law (15th ed.). Oxford University Press.

Sadiq, K., Black, C., Clements, J., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., & Walpola, S. (2025). Principles of taxation law 2025 (18th ed.). Thomson Reuters.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2023). Australian taxation law (33rd ed.). Oxford University Press.

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Next Assessment: Week 12 Final Examination

Week 12 Final Examination — LAW6001 Taxation Law

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The final assessment for LAW6001 is a centrally administered examination held during the examination period. The exam consists of problem-based questions covering the full breadth of the unit, including assessable income, deductions, CGT, GST, FBT, and the tax treatment of different entities. You will have three hours to complete the exam, plus 10 minutes reading time.

Each question requires a structured answer with legislation and case law references, similar to the case study but under time pressure. You must answer all questions, and the exam is worth 50% of the total unit mark. Prepare by reviewing the tutorial problems, the case study feedback, and the prescribed text. The exam is open-book, but time is limited, so effective note-taking and a clear structure are essential. The skills you have developed in the case study, identifying issues, applying the law, and reaching reasoned conclusions, will serve you well in the final examination.

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