DEPARTMENT OF ACCOUNTING
AND CORPORATE GOVERNANCE
ACCG924 Taxation Law Session 2 2019
Information and Instructions
• Weighting of this assessment task: 25%
• Format of submission: Microsoft Word document, 12point type, double spaced.
• Method of submission: on-line, uploaded to iLearn
• Due date and time: Friday, 4 October 2019, at 11pm.
• Your written response to this assignment must be presented in a report format. Bullet points are not acceptable.
• Responses to this assessment task must not exceed 2,000 words.
• No extensions will be granted. There will be a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission – 20% penalty). This penalty does not apply for cases in which an application for special consideration is made and approved. No submission will be accepted after solutions have been posted.
Ø You must cite relevant cases, ATO rulings, and legislative references to support your answers.
Ø Your response must also provide reasons that explain and support your answers.
Joe Harper is an electrician and works as an independent contractor. He provides you with the following information for the purpose of preparing his income tax return for the year ended 30 June 2019.
- He received $150,000 as payment from clients for electrical services he provided. During the year he also paid $45,000 PAYG withholding tax to the ATO when he lodged his Business Activities Statements.
- He requested a client who owed him $3,000 for services he had provided in May to have the full amount paid to a charity (Red Cross) on 2 June 2019.
- On 13 May 2019, Joe received an iPad (market value $500) from one of his clients. It was accompanied by a note thanking Joe for his service.
- Upon the early and prompt completion of a job for a client, he received a non-transferable voucher with a market value of $2,000 for a two-night stay at a luxury resort on the 20th and 21st of June 2019. The client also offered Joe an all-expenses paid trip to the ‘Melbourne Electrical Trade Expo’. The Expo featured the latest technical developments and trade products. The cost of the trip was $1,250.
- On 3 August 2018, Joe sold some of his assets to finance the purchase a holiday house. Details of the assets that he disposed of are as follows:
Asset Date of acquisition Cost Date of disposal Sale Proceeds
10,000 CBA shares 10 October 1996 20,000 3 August 2018 700,000
1984 MG sports car 9 October 1985 7,000 3 August 2018 60,000
Painting A 15 August 1987 2,200 3 August 2018 2,500
Painting B 20 September
1998 1,200 3 August 2018 1,000
Speedboat 25 August 1998 24,000 3 August 2018 16,000
- During the 2019 financial year, Joe received rental income of $60,000 from a shop which he brought five years also. The following expenditures were also incurred during the year in respect of the shop:
Council rates 1,680
Painting of the internal walls of the shop 1,025
Painting of the external walls of the shop At the request of the local council, the trimmed back 1,160
shop awning that was protruding over a driveway Replaced part of a rotten wooden floor with a cheap 750
Concrete floor on 1 July 2018 1,200
Interest on shop mortgage (paid up to May) 5,078
Interest on shop mortgage (June interest is due on 5 July) 462
- Joe also made the following payments during the year:
• Red Cross $100
• Successfully bid $1,000 at an auction conducted by the Salvation Army for painting that had a market value of $150
2) Fee paid to a tax agent for preparing and lodging his 2017/18 individual income tax return ($500) and for lodging an objection to an income tax assessment from a previous year ($1,000)
3) Telephone calls
- to clients $300
- to his wife and kids $450
REQUIRED 1. Advise Joe on what amounts have to be included in his taxable income for the 2018/19 tax year. (21 Marks) 2. Calculate the taxable income which Joe need to declare in his income tax return. (4 Marks)