diff_months: 19

Income Tax Law Assignment

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Added on: 2022-11-18 05:29:02
Order Code: 476801
Question Task Id: 0

Question 1 (200 words) (10 marks)

Taite arrived in Australia on 1 August 2020 from Europe to follow a boyhood dream. He has always dreamed of a gap year visiting Australia and experiencing the sun, sand and surf. He has saved some money to finance his travels and plans to follow the various fruit picking and other casual non government labour type employment opportunities.

Taite does not stay in any one place for long before moving on to the next work opportunity. He stays at a variety of places including backpacker hotels and accommodation offered by employers.

Taite leaves Australia on 30 June 2021 and makes his way back home to Europe by following the “hippie trail” from Bangkok to Istanbul and then back home to recommence his University studies.

Required

Determine whether Taite is a resident of Australia for tax purposes and provide written advice in the form of a letter to Taite. Construct your answer with reference to the four

  • residency tests, relevant case and relevant legislation

Question 2 (200 words) (10 marks)

In 2020 the world experienced the COVID 19 pandemic. This infection had an enormous impact of many individuals. It also impacted businesses, governments and economies. One impact the pandemic had was to put many government budgets into deficit as tax collections fell far below the government’s spending.

The Australian tax system has a heavy reliance on income tax and the taxation of the individual taxpayer.

Discuss potential changes to the Australian:

  • Tax mix
  • Tax unit
  • Types of tax, including new taxes

Which could be made to recover the deficit.

Question 3 (100 words) (5 marks)

Explain the function of the following sections of the Australian Constitution:

  • s51
  • s53
  • s55
  • s99
  • s114

Question 4 (250 words) (15 marks)

  1. Identify and briefly describe the principles set out in the Code of Professional Conduct for tax agent professional and ethical
  2. Freddie Khan is a registered tax He has a client called Jaspreet Smith who runs a number of business activities in Australia and India. Freddie has a standard set of questions he asks each client. However, Jaspreet has not been honest with Freddie and as a result an amount of $10 000 was not included in Jaspreet’s return Discuss whether Freddie has breached any of the principles set out in the Code of Professional Practice
  3. Discuss the objections, appeals and review process

Question 5 (20 marks)

Consider the information for the 2020/21 income year for Susan Black a resident Australian individual office worker

Item

$ Amount

Gross Wages

45 000

Clothing Allowance

1 000

Melbourne Cup Winnings

10 000

Reportable Fringe Benefit

5 000

Award from softball team as most valuable player

250

Child Maintenance payments from ex spouse

12 500

Personal injury Accident compensation

25 000

Loss of income insurance payments

5 000

Loan from bank to buy car

45 000

Sale of stamp - see note 1

400

 

 

 

Item

$ Amount

Work related deductions

350

Loan application fee - car

415

Interest on car loan

800

Interest on investment loan for BHP shares

1 250

Donation to Liberal Party

2 500

Nice outfit to wear to work meetings

3 000

Vet bills for sick cat

1 750

Doctor’s fees for sick certificates

240

Tax agent fee for 2020/21 year paid on 9/12/21

570

 

 

 

 

 

Notes

  1. Susan collects stamps and sold one on ebay for $400 in the relevant She has not ever sold any other stamps
  1. Susan also has shares in BHP under the dividend reinvestment plan. She was paid $4000 in fully franked
  1. The car loan was taken out on 21/3/21. The loan is for 6 years

Required

Complete the following table for Susan and determine which items are assessable and which are deductible with reference to the relevant legislation and/or case law principles (15 marks)

 

Item

Assessable?

Deductible?

Explanation

Gross Wages

 

 

 

Clothing Allowance

 

 

 

Melbourne Cup Winnings

 

 

 

Reportable Fringe Benefit

 

 

 

Award   from    softball   team    as    most valuable player

 

 

 

Child Maintenance payments from ex spouse

 

 

 

Personal injury Accident compensation

 

 

 

Loss of income insurance payments

 

 

 

Loan from bank to buy car

 

 

 

Sale of stamp

 

 

 

Work related deductions

 

 

 

Loan application fee - car

 

 

 

Interest on car loan

 

 

 

Interest on investment loan for BHP shares

 

 

 

Donation to Liberal Party

 

 

 

Nice outfit to wear to work meetings

 

 

 

Vet bills for sick cat

 

 

 

Doctor’s fees for sick certificates

 

 

 

Tax agent fee for 2020/21 year paid on 9/12/21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Calculate the balance of Susan’s assessment (5 marks)

Assessable income

 

 

Minus      Allowable deductions

 

 

= Taxable Income

 

 

Tax payable on taxable income

 

 

Minus      non refundable tax offsets

 

 

= Net tax payable

 

 

Plus      Medicare Levy 2%

 

 

Minus refundable tax offsets

 

 

= Total amount of tax payable

 

 

Minus Tax Credits (PAYG tax paid)

 

 

= Refund Due or Amount Owing

 

 

Question 6 (15 marks)

XYZ Pty Ltd is a private company incorporated in Australia. During the relevant income year they received $250,000 from sales of lolly pops in Australia, $20,000 interest from a bank account in the United States and a $6,000 dividend from shares held in a company in France.

XYZ Pty Limited is not a small business entity and prepared the following statements for 2020/21:

Revenue

$

$

Gross fees (worldwide)

520,000

 

Fully franked dividend (Australian)

5,500

 

Dividend from France (net of $500 withholding tax)

6,000

 

Exempt income

8,000

 

Unfranked dividend (Australian)

2,000

 

Interest from USA

5,000

 

Total Revenue

 

546 500

Expenses

 

 

Fines and penalties

6,000

 

Depreciation Accounting rates– note 1

88,000

 

PAYG credits paid

111 000

 

Other deductible expenditure

127,000

 

Total Expenses

 

332,000

Net Profit

 

 

Note 1

 

214,500

In the 2020/21 income year the company collected $48 000 in GST Note 2

The deduction for decline in value using tax rates was $115,000.

Note 3

The company commenced business in 2009 as a taxi service. On 27 August 2017, all of the company’s shares were sold to the Gerald family. On 18 October 2017, the company ceased its limousine service and began operating as a driving instructions service. The company had previously incurred the following tax losses: 

2017/18                       $20,000

2018/19                       $10,000

2019/20                       $20,000

Required

  1. Prepare a statement reconciling net profit with taxable income for the 2020/21 tax (10 marks)
  2. Calculate tax payable for the 2020/21 tax year using the following table (2 marks)

Assessable income

 

 

Minus     Allowable deductions current year

 

 

Minus CFL from previous years

 

 

= Taxable Income

 

 

Tax payable on taxable income @30%

 

 

Minus      tax offsets

 

 

= Net tax payable

 

 

Minus Tax Credits (PAYG tax paid)

 

 

= Refund Due or Amount Owing

 

 

  1. If ABC did not pass any residency tests, determine the amounts assessable in Australia (3 marks)

Question 7 (100 words) (5 marks)

Explain the difference between tax planning, tax avoidance and tax evasion. Comment on the enforcement activity the FCT could undertake in each category.

Question 8 (100 words) (5 marks)

Explain the difference between the following:

  • Public ruling
  • Private Ruling
  • Product Ruling
  • Class Ruling
  • Tax Determination 

Question 9 (15 marks)

Put and Call operate a hairdressing salon as partners. Put is entitled to 65% of the profits after allowing for partner’s salaries, interest on capital, interest on advances and interest on drawings. Call is entitled to 35% of the profits.

For the 2020/21 income year, the partnership derives $318 000 of sales and incurred

$107 000 of expenses.

The expenses included the purchase of a new hair curling megadevice for $8000. The megadevice was acquired on 1/11/18. It has an effective life of 4 years and is depreciated using the diminishing value method.

The partners use the device 25% of the time for private purposes.

Put and Call paid themselves wages of $75 000 and $80 000 respectively. In addition Put received $6 500 interest on capital and paid $1750 interest on her drawings to the partnership.

Call loaned money to the partnership and was paid $17 500 interest on the loan. Call was also paid $7000 interest on capital and paid $2500 interest on drawings to the partnership.

Required

  1. With reference to the relevant law, calculate the decline in value deduction associated with the megadevice
  1. Calculate the s90 Partnership Net Income (PNI) and complete a partnership schedule showing the overall distribution to each of the

Name

IOC

IOD

Salary

Distribution

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Calculate the taxable income and the tax assessed on taxable income for Call

Assessable income

 

 

Minus      Allowable deductions

 

 

= Taxable Income

 

 

Tax payable on taxable income

 

 

Minus      non refundable tax offsets

 

 

= Net tax payable

 

 

Plus      Medicare Levy 2%

 

 

Minus refundable tax offsets

 

 

= Total amount of tax payable

 

 

Minus Tax Credits (PAYG tax paid)

 

 

= Refund Due or Amount Owing

 

 

  • Uploaded By : Katthy Wills
  • Posted on : November 18th, 2022
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