Term 1 Standard Examination 2014 Taxation Law and Practice A — LAWS19033

Term 1 Standard Examination 2014 Taxation Law and Practice A — LAWS19033
Page 1 of 5
Instructions Sheet 1. Write all answers in the Examination Answer Booklet provided. 2. This examination is worth a total of 70 marks. 3. This paper consists of six questions. Marks are indicated accordingly. 4. Write your answer clearly, use headings or subheadings to show which part of your answer refers to which question. Example: Question 2 (a).
Term 1 Standard Examination 2014 Taxation Law and Practice A — LAWS19033
Page 2 of 5
TOTAL 70 MARKS COMPULSORY QUESTIONS Students are to answer ALL questions.
Question 1 10 Marks Briefly explain the extent, if any, to which each of the following receipts would be assessable income, exempt income, non-assessable non-exempt income or a capital gain of an Australian resident taxpayer if derived in the current year of income: In your answers, refer as appropriate to the ITAA 1936, ITAA 1997, Tax Rulings and/or case law. (a) Wages received by a part-time member of the Australian Defence Force Reserves. (2 marks) (b) Receipt of an amount of $10,000 from an insurance company to compensate for loss of wages due to injuries suffered in a motor vehicle accident. (2 marks) (c) Proceeds of sale of home-made jams sold at the local markets. The seller only attends the markets twice a year when her trees are bearing an excess of fruit. (2 marks) (d) A lump sum legacy received from the estate of a deceased friend. (2 marks) (e) Payment to a professional basketball player for entering into an agreement not to play with another club. (2 marks)
Term 1 Standard Examination 2014 Taxation Law and Practice A — LAWS19033
Page 3 of 5
Question 2 10 Marks Briefly explain the extent, if any, to which each of the following payments made by an Australian resident taxpayer during the current year of income would be an allowable deduction: In your answers, refer as appropriate to the ITAA 1936, ITAA 1997, Tax Rulings, and/or case law.
(a) $50,000 fraudulently stolen from the takings of a clothing business by a valued employee. (2 marks) (b) Payments made to a babysitter who is employed to look after the children of a businesswoman while she goes to work. (2 marks) (c) Paul pays $10,000 for repairs to a bus he has just purchased for use in his taxi company. He has to have the repairs done before the bus is able to be licenced as a taxi. (2 marks) (d) Martha owns a business and borrows money using her house as security to purchase trading stock for the business. (2 marks) (e) Joanna pays her accountant $1,500 to complete her income tax return. (2 marks)
Question 3 15 Marks Seth, Karen and Jason are all equal partners in a clothing store which operates in Melbourne. In the 2013/2014 income year, the partnership recorded a trading profit of $160,000. The income in the trading profit included (among other items): Receipt of interest from United States deposit (net of 10% interest withholding tax) $7,200
Receipt of dividend from United Kingdom (net of 15% dividend withholding tax)
$5,100
Question 3 continued over next page
Term 1 Standard Examination 2014 Taxation Law and Practice A — LAWS19033
Page 4 of 5
Question 3 (continued) In calculating the net profit, deductions had been made for several amounts, among which were the following: Salary to Seth $30,000 Salary to Karen $40,000 Salary to Jason $55,000 Interest on capital paid to Karen $10,000 Wages paid to employees $25,000 Interest paid to Jason on a loan made to the partnership for acquiring a new cash register $6,000 Required: (a) Calculate the s 90 partnership net income for the 2013/2014 year of income. (10 marks) (b) Determine the distribution to each partner. (5 marks)
Question 4 15 Marks (a) Sections 97 and 98 ITAA36 are important in determining liability to tax on any income derived by a trustee of a trust. Explain how these sections operate to tax trust income. (5 marks) (b) Explain why a tax offset has a greater value to a taxpayer than an allowable deduction. Does the marginal tax rate of the taxpayer have any effect on whether a tax offset has greater value than an allowable deduction? (5 marks) (c) The date on which a particular depreciating asset is acquired may affect considerably the depreciation allowance for the year. Explain. (5 marks)
Question 5 10 Marks On 1 July 2013, a company purchased a new Toyota Corolla for $23,000 (GST input tax credits have been claimed on the purchase). Before delivery of the vehicle, air conditioning was installed at a cost of $1,000 and a mobile phone kit fitted for business purposes at a cost of $500. The vehicle was made available to the sales manager for his exclusive use for both business and private purposes.
Question 5 continued over next page
Term 1 Standard Examination 2014 Taxation Law and Practice A — LAWS19033
Page 5 of 5
Question 5 (continued) Expenses incurred on the vehicle during the period 1 July 2013 to 31 March 2014 were as follows: Registration and Insurance paid 1 July 2013 $750
Repairs and Maintenance $1,000 Fuel and Oil $2,100
The employee paid his employer $650 towards the cost of fuel used for private purposes. According to the log book, the vehicle travelled a total of 40,000 kilometres in the period 1 July 2013 to 31 March 2014, of which 30,000 kilometres of travel was workrelated. Required: Given that the employer company has elected to use the operating cost method to determine the taxable value of the car fringe benefit, calculate the fringe benefits tax payable in respect of the vehicle for the fringe benefits tax year ended 31 March 2014.
Question 6 10 Marks (a) Discuss whether the following supplies constitute a taxable supply, GST-free supply or input taxed supply under the provisions of A New Tax System (Goods and Services Tax) Act 1999. i. Sale of a sausage roll by a bakery which is registered for GST. (2 marks) ii. Sale of a punnet of fresh strawberries by a food store which is registered for GST. (2 marks) iii. Sale of a chocolate bar by a small business which is not registered for GST. (2 marks) (b) What input tax credits, if any, are available in respect of the following transactions? i. Purchase of stationery items by the owner of a newsagency for his own personal use for $330. The newsagency is registered for GST. (2 marks) ii. Purchase of a $550 tool kit by a plumber who is running his own plumbing business which is registered for GST. The tools are for use in the business. (2 marks)
– End of paper –
TO GET YOUR ASSIGNMENTS DONE AT A CHEAPER PRICE, PLACE THIS ORDER OR A SIMILAR ORDER WITH US NOW.