Unit Name: Taxation Law
Word limit: (800 – 850) words
Due: Week 13 - Thursday, 15th October 2020 (11:30pm)
This assignment is designed to assess your level of knowledge of the key topics covered in this unit Unit Learning Outcomes Assessed:
• Gain a broad understanding of tax law
• Demonstrate ability to analyse and synthesise complex tax law issues
• Demonstrate ability to apply principles of tax law to complex legal problems
Each week students were provided with three tutorial questions of varying degrees of difficulty. The tutorial questions are available in the Tutorial Folder, for each week, on Blackboard. The Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer the provided tutorial questions. Your task is to answer a selection of tutorial questions from weeks 7 to 12 inclusive and submit these answers in a single document.
The questions to be answered are:
Question 1: (Note this question is based on the Week 7 Tutorial)
An extract of the Asset Register of Ace Pty Ltd (“Ace”) for the 2018 - 2019 Income year is shown as follows:
Opening Adjustable Value Method
Decline in Value for This Period Closing Adjustable Value
Printer 1,200 1,200 Diminishing Value 3 Years 400 800
3,000 2,400 Prime Cost
10 Years 300 2,100
2,600 1,040 Prime Cost
5Years 520 520
All depreciable assets are 100% for business use and Ace uses a low-value pool for all eligible assets. The closing value of the low-value pool at 30 June 2019 was $8,000. Ace purchased a camera on 20 Jan 2020 for $840.
Advise Ace of the Income Tax consequences arising out of the above information for the 2019 - 2020 Income year assuming Ace is not a small business entity.
( Word limit: Minimum of 120 words. Maximum of 150 words)
Question 2 :(Note this question is from the Week 8 Tutorial)
Your client is a medium-sized manufacturing company and has provided you with its accounting records for the financial year ending 30 June 2020.
The following amounts listed below from (a) – (f) are included in the accounting records. How would you treat them for tax purposes?
(Note – The exact amounts are to be calculated and discussed in your response)
(a) The provision for long service leave for the employees is $35,000. The actual amount paid during the year was $20,000 for the year ended 30 June 2020.
(b) The Insurance premium on the plant and equipment is $30,000, which was paid on 1 March 2020 for the next 12 months.
(c) As at 30 June 2020, there was an outstanding electricity account for $2,000 and a telephone account for $5,000 which are both still to be paid.
(d) A maintenance contract on the factory equipment for 12 months is $12,000. The payment was made on 1 October 2019.
(e) The sum of $200,000 was paid on 1 August 2019 to the Managing Director as compensation for the early termination of her employment contract. The employment contract had one year to go. It would have ended on 30 July 2020.
(f) There is interest expense of $70,000 on a loan which has three years to run that was originally used to purchase a computer repair business. The business ceased to operate on 30 June 2020.
How would your answers to (b) and (d) change if your client is a small-sized company?
( Word limit: minimum 120 to maximum 150 words)
(Note this question is from the Week 9 Tutorial)
Determine whether the following benefits are fringe benefits or exempt fringe benefits and, where applicable, state the relevant category of fringe benefit.
Provide reasons for your answers and calculate the exact fringe benefit amount(s), where appropriate, for the following cases listed below (a) – (g):
(a) A monthly payment of $120 is made to Jack. Jack is an employee, who sometimes uses his home phone for work purposes. Jack has estimated that the business use percentage of his phone bill is 20%.
(b) A payment of $1,000 employee’s superannuation contribution by the employer to a complying superannuation fund.
(c) A loan of $20,000 from the company to one of its shareholders with no interest being charged. The company’s rules do not permit loans to employees, but it is silent about loans to shareholders.
(d) A payment of a $50 Uber fare by the employer for the employee to travel home after working late.
(e) A bunch of flowers sent to a sick employee. The flowers cost $120.
(f) Provision of a car for an employee’s private use, including payment of all fuel costs by the employer. Consider whether any fringe benefits have arisen.
(g) Provision of sandwiches at a lunchtime seminar held at the employer’s premises.
( Word limit. Minimum of 120 words. Maximum of 150 words)
Question 4: (Note this question is from the Week 10 Tutorial)
Michael and Jenny are in a partnership. The partnership records, exclusive of GST, for the year ended 30 June 2020 are as follows
440,000 Gross receipts from Trading Stock
120,000 Purchases of Trading Stock
50,000 Partners' salaries (each)
3,000 Interest on a cash advance made to the partnership by Michael
100,000 Salaries for employees and rent paid
Other important details are stated below:
• Michael and Jenny share partnership profits equally
• o Gambling winnings of $500
o Net salary as a part-time Instructor (excluding PAYG Tax Instalments of $1,400) is $8,000
• o Subscription to professional journals of $200
• o Michael is a member of a private health fund
Calculate Michael 's Taxable Income for the Income year explaining your treatment of each item noted in this question.
(Word limit: Minimum of 120 words. Maximum of 150 words)
Question 5: (Note this question is from the Week 11 Tutorial)
A resident company pays a partly franked dividend of $700 (80% franked) to a resident shareholder. Explain the Income Tax implications of the shareholder if he/she is:
1. (a) an Individual who is subject to the Top Marginal Tax rate.
2. (b) an Individual with Marginal Tax rate of 15%.
3. (c) a company with other Assessable Income of $100,000 and a carried forward loss of $40,000.
4. (d) a company with other Assessable Income of $88,000 and deductions of $7,000.
5. (e) a partnership with two (2) resident Individual partners sharing partnership profits or losses equally.
(Word limit: minimum 120 to maximum 150 words)
Question 6: (Note this question is from the Week 12 Tutorial)
Advise the following tax payers of the GST consequences arising out of the following information and calculate the GST outputs or inputs, as required:
• Angela is a photographer. She recently purchased a new camera from the USA as the camera was not yet available in Australia. The camera cost AUD 1,818, which was shipped directly to her home.
• NIC Ltd is a large advisory firm that is registered for GST purposes. It accounts for GST on an accruals basis and submits its Business Activity Statements (BAS) on a monthly basis. NIC Ltd organises and pays for the accommodation of one of its managers, Daniel. This is treated as a fringe benefit for fringe benefits tax purposes.
On 10 June 2020, NIC Ltd received a tax invoice from the residential property agent where Daniel lives, Smart Strata Pty Ltd, for the payment of Daniel’s fees of $550 (including GST). NIC Ltd did not pay the membership fee for Daniel until 12 July. Smart Strata Pty Ltd accounts for GST on a cash basis and submits its BAS on a quarterly basis. (Explain the GST consequences for both NIC Ltd and Smart Strata Pty Ltd).
• MBR Pty Ltd has a total input tax credit of $1,000,000 comprising $80,000 of financial
supplies and the balance is taxable supplies.
(Word limit: Minimum of 120 words. Maximum of 150 words)