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HA3042 Taxation Law Tutorial Solution

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Assessment Task – Tutorial Questions Assignment

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Unit Code: HA3042 Unit Name: Taxation Law

Assignment: Tutorial Questions Assignment (Individual) Due: Week 13 – Friday, 16th  October 2020 (11:30pm) Weighting:  50%

Purpose:

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

Description:

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                                                                                          (7 marks)

(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:

Asset                Cost        Opening Adjustable Value

Method                 Effective

Life

Decline in Value for This Period

Closing Adjustable Value

Printer              1,200      1,200             Diminishing

Value

3 years        400                 800

Desks                3,000      2,400             Prime Cost            10 years      300                 2,100

Appliances       2,600      1,040             Prime Cost            5 years        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.

(7 marks. Word limit: Minimum of 120 words. Maximum of 150 words)

Question 2                                                                                          (7 marks)

(Note this question is from the Week 8 Tutorial)

Your  client  is  a  mediumsized  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. (1 mark)

(b)        The Insurance premium on the plant and equipment is $30,000, which was paid on 1

March 2020 for the next 12 months. (1 mark)

(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. (1 mark)

(d)        A  maintenance  contract  on  the  factory  equipment  for  12  months  is  $12,000.  The payment was made on 1 October 2019. (1 mark)

(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. (1 mark)

(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. (1 mark)

How would your answers to (b) and (d) change if your client is a small-sized company?

(1 mark)

(7 marks. Word limit: minimum 120 to maximum 150 words)

Question 3                                                                                          (7 marks)

(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%. (1 mark)

(b)        A payment of $1,000 employee’s superannuation contribution by the employer to a

complying superannuation fund. (1 mark)

(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. (1 mark)

(d)        A payment of a $50 Uber fare by the employer for the employee to travel home after working late. (1 mark)

(e)        A bunch of flowers sent to a sick employee. The flowers cost $120. (1 mark)

(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. (1 mark)

(g)         Provision  of  sandwiches  at  a  lunchtime  seminar  held  at  the  employer’s  premises.

(1 mark)

(7 marks. Word limit. Minimum of 120 words. Maximum of 150 words)

Question 4                                                                                          (7 marks)

(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:

($) Receipts

440,000                      Gross receipts from Trading Stock

($) Payments

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

1,000                          Legal expenses in recovering bad debts

Other important details are stated below:

•  Michael and Jenny share partnership profits equally

•  Trading Stock on hand as at 1 July 2019 was $50,000

•  Trading stock on hand as at 30 June 2020 was $80,000

•  Michael ‘s personal records include:

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

Required:

Calculate Michael ‘s Taxable Income for the Income year explaining your treatment of each item noted in this question.

(7 marks. Word limit: Minimum of 120 words. Maximum of 150 words)

Question 5                                                                                        (11 marks)

(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:

(a)   an Individual who is subject to the Top Marginal Tax rate. (2 marks)

(b)   an Individual with Marginal Tax rate of 15%. (2 marks)

(c)   a  company  with  other  Assessable  Income  of  $100,000  and  a  carried  forward  loss  of

$40,000. (3 marks)

(d)   a company with other Assessable Income of $88,000 and deductions of $7,000. (2 marks)

(e)   a  partnership with two (2) resident Individual partners  sharing partnership profits or losses equally. (2 marks)

(11 marks. Word limit: minimum 120 to maximum 150 words)

Question 6                                                                                        (11 marks)

(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. (2 marks)

•   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).

(4 marks)

•   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. (5 marks)

(11 marks. Word limit: Minimum of 120 words. Maximum of 150 words)

Submission Directions

The assignment will be submitted via Blackboard.  Each student will be permitted only ONE submission to Blackboard. You need to ensure that the document submitted is the correct one.

Academic Integrity

Holmes Institute is committed to ensuring and upholding Academic Integrity, as Academic Integrity is integral to maintaining academic quality and the reputation of Holmes’ graduates. Accordingly, all assessment tasks need to comply with academic integrity guidelines.  Table 1 identifies the six categories of Academic Integrity breaches.  If you have any questions about Academic Integrity issues related to your assessment tasks, please consult your lecturer or tutor for relevant referencing guidelines and support resources.  Many of these resources can also be found through the Study Skills link on Blackboard.

Academic Integrity breaches are a serious offence punishable by penalties that may range from deduction of marks, failure of the assessment task or unit involved, suspension of course enrolment, or cancellation of course enrolment.

Table 1: Six Categories of Academic Integrity Breaches

Plagiarism                                Reproducing the work of someone else without attribution. When a student submits their own work on multiple occasions this is known as self-plagiarism.

Collusion                                  Working with one or more other individuals to complete an assignment, in a way that is not authorised.

Copying                                    Reproducing and submitting the work of another student, with or without their knowledge. If a student fails to take reasonable precautions to prevent their own original work from being copied, this may also be considered an offence.

Impersonation                       Falsely presenting oneself, or engaging someone else to present as oneself, in an in-person examination.

Contract cheating                  Contracting a third party to complete an assessment task, generally in exchange for money or other manner of payment.

Data fabrication and falsification

Manipulating or inventing data with the intent of supporting false conclusions, including manipulating images.

Source: INQAAHE, 2020

If any words or ideas used the assignment submission do not represent your original words or ideas, you must cite all relevant sources and make clear the extent to which such sources were used.

In addition, written assignments that are similar or identical to those of another student is also a violation of the Holmes Institute’s Academic Conduct and Integrity policy. The consequence for a violation of this policy can incur a range of penalties varying from a 50% penalty through suspension of enrolment.  The penalty would be dependent on the extent of academic misconduct and your history of academic misconduct issues.  All assessments will be automatically submitted to Safe – Assign to assess their originality.

Further Information:

For further information and additional learning resources please refer to your Discussion Board for the unit.

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