HA3042 Tutorial Questions Assignment: Taxation Law Answer
Assessment Task – Tutorial Questions Assignment
Unit Code: HA3042
Unit Name: Taxation Law
Assignment: Tutorial Questions Assignment (Individual)
This assignment is designed to assess your level of knowledge of the key topics covered in this unit
Unit Learning Outcomes Assessed:
- Identify the sources of taxation law and the framework in which taxation is administered
- Identify various types of taxation including income tax, consumption taxes, goods and services tax, taxes on capital and fringe benefits tax
- Identify and apply the fundamentals of calculating the taxable income and tax payable for individuals and business entities
- Analyse the taxation issues associated with straight forward international transactions
- Communicate knowledge of taxation law, through written and/or oral communication, and be able to demonstrate critical thinking and legal analytical skills.
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 1 to 12 inclusive and submit these answers in a single document.
The questions to be answered are:
Question 1 – Week 6 – Specific Deductions(7 marks)
In Year 1, Crocodile Pty Ltd has $600,000 of assessable income and $1,000,000 of deductions. In Year 2, Crocodile has $300,000 of exempt income, $200,000 of assessable income and
$500,000 of deductions.
In Year 3, Crocodile has $500,000 of assessable income, $200,000 of exempt income and
$200,000 of deductions.
Advise Crocodile of its taxable income or tax loss in each year.
Question 2 – Week 8 – Fringe Benefits Tax(7 marks)
Samit borrowed money from his employer amounting to $15,000 on the 2nd September, 2019 because of an emergency situation. His mother was unwell and she lives abroad. Samit needs to urgently send the money to his parents. Because Samit is a good employee, his employer lent him the money with no interest. Furthermore, on the 28th February, 2020 due to compassionate reasons shown by the company – his employer - , the company decided that he was only required to repay $5,000. The employer is GST registered.
Please advise Samit and his employer on the tax implications of the above transaction. Please refer to the relevant Tax legislation and other appropriate sources, including cases, if required.
Question 3 – Week 12 - Transfer Pricing(7 marks)
Please refer to the direct quotation below from the Australian Taxation Office (ATO) website: www.ato.gov.au for this question. Consider the following extract:
“Base erosion and profit shifting (BEPS) refers to the tax planning strategies used by multinational companies to exploit gaps and differences between tax rules of different jurisdictions internationally. This is done to artificially shift profits to low or no-tax jurisdictions where there is little or no economic activity.”
Question 3 (Cont’d)(7 marks)
Please discuss whether taxing “Revenue” instead of “Profit” will solve the Transfer Pricing
issue. You must elaborate your answer with appropriate analysis and justification.
Note – Please use the following four (4) steps to answer this question:
- Identify the facts
- Identify the relevant Tax Laws and cases or other key Tax sources
- Apply the relevant laws and cases to the facts
- Provide a conclusion
Question 4 – Week 6 – Capital Allowances(7 marks)
Butterfly Pty Ltd is a small business that utilizes the low value pool for its fixed assets for all its eligible assets. All depreciable assets are 100% used for business purpose, and the closing low value as at 30 June 2019 was $6,250. Shown below in the table is the asset register for Butterfly Pty Ltd as at 30 June 2019.
|Asset||Cost||Opening Adjustable Value||Method||Effective Life||Decline in Value for This Period||Closing Adjustable Value|
|MacBook Pro||4,000||2,400||Diminishing Value (assume 40% rate)||5 years||960||1,440|
|MacBook Air||1,300||1,300||Diminishing Value||3 years||450||850|
|Office Equipment||10,000||7,000||Prime Cost||10 years||1,000||6,000|
|Furnitures||1,200||1,080||Prime Cost||10 years||120||960|
Note - Butterfly purchased a printer on 8 May 2020 for $750 and Butterfly also purchased a TV for the meeting room on 2 June 2020 for $900
Calculate the “decline in value” of the depreciable assets that Butterfly can use as deductions for the
2019-2020 income year.
Question 5 – Week 9 – Partnerships(11 marks)
Alastair is a retired programmer. His wife Fransiska is a retired accountant. Both wish to remain active in their old age and they invest in a Doll shop that is to be managed by their daughter Sophie, who is aged 35. The three of them form a partnership of three called “Wishful’s Doll Shop”.
Alastair and Fransiska contributed $90,000 each to fund the purchase of the shop. The partnership agreement provides:
- Both Alastair and Fransiska are to receive interest at the rate of 10% pa on each of their capital contribution of $90,000.
- Sophie will receive a salary of $45,000 for the management of the shop, as well as superannuation contributions of $9,000.
- A car will be leased by the business and provided to Carol. (100% used for business)
- All profits and losses are to be shared equally between the three partners.
The accounts for this income year show the following:
|Sales (excluding GST)||590,000|
|Cost of goods sold||290,000|
|Interest on capital paid to Alasdair and Tracy||27,000|
|Salary to Carol||45,000|
|Superannuation to Carol||9,000|
|Lease payments on car (excluding GST)||8,500|
|Other deductible operating expenses (excluding GST)||34,000|
Additional Information during the tax year:
- Alastair won a lottery for $100,000 (This is the first time Alastair bought a lottery)
- In his spare time Alastair also gives private tutoring for some programming languages.
- During the year he earned $15,000 from this activity
- Alastair lent $40,000 during the year as the business struggles in earlier months due to COVID- 19 lockdown. Alastair will receive 5% interest from the partnership on it.
With reference to the facts above:
- Calculate the net income of the partnership.
- What is the assessable income for Alastair during this tax year?
Question 6 - Week 11 - GST(11 marks)
Joshua Pty Ltd runs a furniture retailing business. During the tax year 19-20, Joshua provided customers with various loan arrangements to finance the purchase of furniture.
Total expenses relating to the loan arrangements (specific loan calculation software and computers) totaled $33,000 (inc. GST)
Joshua’s total expenses during the year (All expenses to run the business included the $33,000) were
$2.2 million (inc. GST). Joshua Pty Ltd is registered for GST purposes.
Discuss Joshua’s Ability to claim the $3,000 Input Tax Credit?
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.
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