Ryan Collins

ASSIGNMENT FACTS

Ryan Collins is 35 years old and is an Australian resident for tax purposes. He is employed as an
auditor by a large Brisbane-based accounting firm and is based at the firm’s city office. He is currently
single, has no dependants and resides in his own home in the Brisbane suburb of Newmarket.
For the 2018/19 income year Ryan received a PAYG payment summary from his employer
containing the following details:
Gross salary payments $82,000
Allowance $ 3,542
Total tax withheld (PAYG credits) $21,112
Work-related expenses

• Ryan uses his own car to visit client premises, but his employer reimburses him for his work-
related usage of his vehicle at a rate of $0.75/km if he completes the relevant documentation.

During the 2018/19 income year, Ryan was reimbursed for 4,056 work-related kilometres.
In relation to his car, Ryan purchased it on 21 August 2017 for $59,995 (including GST) and
financed half of the purchase price. He has kept a valid logbook for the vehicle, which shows that
he travelled a total of 2,570 kilometres over a twelve-week period, of which 1,028 kilometres
were work-related. Ryan advises you he travelled a total of 10,140 kilometres in his car over the
2018/19 income year. During the 2018/19 income year, Ryan incurred the following expenses in
relation to his car:
Registration $915 (including GST)
Insurance $690 (including GST)
Petrol $3,640 (including GST)
Interest on the car loan $2,700
Parking fees (when visiting clients) $96 (including GST)
Tolls (driving to and from client meetings) $154 (including GST)
Speeding fine (incurred travelling to a client meeting) $177
Car washes $264 (including GST)
RACQ roadside assistance membership $167 (including GST)

• On 10 December 2018 Ryan paid $720 (including GST) for his annual CPA Australia
membership fee. The fee covers Ryan’s membership for the 2019 calendar year (1 January 2019
to 31 December 2019). Note that Ryan received a $500 allowance from his employer in
recognition of this annual work-related expense.

LAWS7012 Business Taxation
Semester 2, 2019

• As part of Ryan’s professional membership of CPA Australia, he is required to keep up to date
with his profession by completing 20 hours of structured continuing professional development
(CPD) activities per year. In order to meet this membership requirement, Ryan incurred $2,750
(including GST) in seminar registration fees over the 2018/19 income year.
During the 2018/19 income year Ryan disposed of some property as outlined below.
TRANSACTION 1: SALE OF WOOLWORTHS LTD SHARES
On 28 November 2008 Ryan entered into a contract to buy a parcel of 2,000 shares in Woolworths
Ltd via an online share broker. The contract settled on 2 December 2008. The shares cost $26.55
each, and the brokerage fee for the whole parcel was $110 (including GST).
Woolworths Ltd pays its ordinary shareholders fully franked dividends with Australian franking credits
at the company tax rate of 30% twice a year. However, during the 2018/19 income year, Woolworths
Ltd also paid its shareholders a special dividend at the time it paid its regular final dividend. Hence
Ryan received the following dividend payments on his Woolworths Ltd shareholdings:

Date of Dividend Cents per Share
12 October 2018 50c
12 October 2018 10c (special)
5 April 2019 45c

In May 2019, Ryan participated in the recent Woolworths Ltd share buy-back scheme. He offered
up all his shares for sale at the final price offer, but due to strong demand for the Buy-Back,
Woolworths Ltd only bought back a base amount of 180 shares per shareholder plus 15.32% of the

excess shares offered. Hence Woolworths Ltd only bought back 458 of Ryan’s shares in the Buy-
Back. As at 30 June 2019, Ryan still holds the remaining 1,542 shares.

The relevant details in relation to the share buy-back scheme are as follows:
Woolworths Ltd Off-market Share Buy-Back 2019
Buy-Back date 27 May 2019
Market price per share $33.6434
Final Buy-Back discount 14%
Buy-Back price per share $28.94
Capital component of the Buy-Back price $4.79
Dividend component of the Buy-Back price $24.15
CGT value $31.65

Note: The Woolworths Ltd off-market share Buy-Back in May 2019 was a real-life event. You will need to
conduct research into the income tax consequences of this buy-back for Ryan as a shareholder.

[Hint: refer to the ATO website for clarification on how the proceeds from the Woolworths Ltd Buy-
Back will be treated for income tax purposes].

LAWS7012 Business Taxation
Semester 2, 2019

 

TRANSACTION 2: SALE OF A RESIDENTIAL PROPERTY
Ryan was given a house located in the Brisbane suburb of Kedron by a generous uncle who had

won the lottery and had no further use for his old family home now that he was able to afford a jet-
setting lifestyle. The property was built in 1998 on a 700m2 block and had a market value of $550,000

on 18 March 2010 (the date that the title was transferred to Ryan). Ryan’s uncle paid for the stamp
duty on the transfer on the property to Ryan and the valuation costs, but Ryan was required to pay
his own legal fees of $900 (including GST).

At the time of being given this property, Ryan was renting an apartment in Sydney with his then-
girlfriend, so he decided to rent out the Kedron property to tenants and accordingly listed it for rent

with a local real estate agent on his first day of ownership. The property was centrally located so the
real estate agent had no trouble finding tenants to rent the property. Ryan continued to rent out the
Kedron property until 28 March 2016, at which point in time the latest tenants, who had previously

decided not to renew their lease and gave 4-weeks’ notice to that effect, moved out. Rather than re-
advertising the property for lease (and given that he was recently made redundant and had parted

ways with his girlfriend), Ryan decided to move back to Brisbane and into the house himself. Hence,
he moved into the Kedron house on 29 March 2016. Ryan continued to live there by himself until
he placed the property on the market and sold it for $750,000 under a contract dated 12 July 2018,
with the ownership transferring on 21 August 2018. [During the settlement period, Ryan bought the
property that he currently lives in at Newmarket, so on 18 August 2018 he moved from the Kedron
house to the Newmarket house].
Ryan incurred the following costs in relation to the sale of the Kedron property (all costs include
GST):

• $5,000 in advertising costs
• $8,500 in sales commission (paid to the real estate agent)
• $1,500 in legal fees

During Ryan’s total ownership period, he incurred the following expenses in relation to the Kedron
property (note that all expenses include GST):
Expense Amount incurred while
renting out the property

Amount incurred while
living in the property

Total amount

Insurance
premiums

$7,235 $2,895 $10,130
Council rates $33,720 $12,935 $46,655
Repairs and
maintenance

$2,860 $350 $3,210

Capital
improvements

$0 $27,500 $27,500

Note that when Ryan first started to rent out the property in 2010, he obtained a quantity surveyor
report at a cost of $295 (including GST), which estimated that the construction cost of the house was
$160,000. The capital improvement referred to in the table above relates to the construction of a new
deck, with the construction work being completed on 14 April 2017.

LAWS7012 Business Taxation
Semester 2, 2019

Page 4 of 6

FURTHER INFORMATION:
• Assume that all expenses can be substantiated.
• In relation to any capital allowances, Ryan would like to use the diminishing value method.
He does not have a low value pool and does not wish to start one.
• As at 1 July 2018, Ryan has net capital losses carried forward as follows:

Net capital loss $4,700
Net capital loss (collectables) $1,830

REQUIRED:
Using the Word document template provided on Learn.UQ, calculate Ryan’s:
(1) Net capital gain for the 2018/19 income year as per the assignment instructions.
(2) Taxable income for the 2018/19 income year.