Assessment Task – Tutorial Questions Unit Code: HI6028 Unit Name: Taxation Theory, Practice and Law Assignment: Tutorial Questions 2 Due: 11:30pm 26th June 2020 Weighting: 25% Total Assignment Marks:...

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HI6028 Tutorial Question Assignment



Assessment Task – Tutorial Questions Unit Code: HI6028 Unit Name: Taxation Theory, Practice and Law Assignment: Tutorial Questions 2 Due: 11:30pm 26th June 2020 Weighting: 25% Total Assignment Marks: 50 marks Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit Unit Learning Outcomes Assessed: 1. Demonstrate an understanding of the Australian income tax system, the concepts of income and deductions, CGT, FBT, GST general anti-avoidance provisions and income tax administration; 2. Identify and critically analyse taxation issues; 3. Interpret the relevant taxation legislations and case law; 4. Apply taxation principles to real life problems. Description: Each week students were provided with three tutorial questions of varying degrees of difficulty. These 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 for weeks 6 to 10 inclusive and submit these answers in a single document. The questions to be answered are: Week 6 Mason is a car painter with Melbourne Collision Repair Centre. Mason studying BPA and his employer pays for his course fees at Holmes Institute costing Mason $12,000. Also, Mason lives in a unit apartment in Brisbane, which is provided to him by Melbourne Collision Repair Centre as his employer as fringe benefit. The market value rent for the apartment is $500 per week, and Mason pays $100 of rent per week for the apartment. Required: Advise the FBT consequences of Mason’s remuneration package (10 marks, maximum 200 words). 2 Week 7 Alex is a carpenter who purchased a vacant block of land in Sydney on 1 October 1980. On 1 September 1986, Alex built a house on the land. At the time, the land was valued at $110,000 and the cost of construction was $100,000. Immediately, after the construction finished, the property has been rented out. On 1 March 2019, Alex sold the property at auction for $1,400,000. Required: With reference to relevant legislation/case law, determine: a) Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method. (8 marks) b) How would your answer to a) differ if the owner of the property was a company instead of Alex? (2 marks, maximum 100 words) Week 8 Bowens Pty Ltd is a building materials supplier in Victoria. Bowens Pty Ltd has an annual turnover of $24 million, and works under the accrual method of accounting. Bowens Pty Ltd purchases concrete mixer for $660 each from Builder’s Choice Pty Ltd, a company in Geelong with an annual turnover of around $21 million, and works under the accrual method of accounting. Bowens Pty Ltd plans to sell the concrete mixers at a 200% mark-up to its customers. In October last year it purchased 110 concrete mixers but in December they discovered that 12 of the concrete mixers were faulty and subsequently returned these faulty concrete mixers to the manufacturer, obtaining a full refund. Assume both apply the accrual method of accounting. Required: With reference to relevant laws, discuss the GST consequences of this arrangement for both Bowens Pty Ltd and Builder’s Choice Pty Ltd. (10 marks, maximum 400 words). Week 9 Due to COVID-19 impact, Watson Co becomes insolvent and placed into voluntary liquidation by its directors. Dissolve liquidators have been appointed as the company liquidators. On the winding up of the Watson Co, Dissolve liquidators have started distributions and Paul as ex-shareholder of Watson Co received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant to the provision of Income Tax Assessment Act 1963, section 47(1). This distribution to Paul was from his $4,000 investment in the shares of Watson Co on 2nd February 2019. Required: With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the tax consequences of the above scenario for Paul. (10 marks, maximum 300 words). 3 Week 10 Steve and his cousin Alex started an equal partnership business, Euca Sanitizers, motivated by the increase in the recent demand for hand sanitizers during the COVID-19 pandemic. Steve lives in Sydney and is an Australian resident for tax purposes. Alex however, is resident of New Zealand and is a foreign resident for tax purposes in Australia. On 30 June 2020, Euca Sanitizers partnership net income is $300,000, 60% of this income is generated from selling hand sanitizers to Australian retailers and 40% comes outside Australia from sale of hand sanitizers to New Zealand retailers. Required: With reference to relevant provisions of ITAA 97/ITAA 36, discuss how the partnership income is taxed. (10 marks, maximum 200 words). Submission Directions: The assignment has to be submitted via Blackboard. Each student will be permitted one submission to Blackboard only. Each student needs to ensure that the document submitted is the correct one. Academic Integrity Academic honesty is highly valued at Holmes Institute. Students must always submit work that represents their original words or ideas. If any words or ideas used in a class posting or assignment submission do not represent the student’s original words or ideas, the student must cite all relevant sources and make clear the extent to which such sources were used. Written assignments that include material similar to course reading materials or other sources should include a citation including source, author, and page number. In addition, written assignments that are similar or identical to those of another student in the class 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 to suspension of enrolment. The penalty would be dependent on the extent of academic misconduct and the student’s history of academic misconduct issues. All assessments will be automatically submitted to SafeAssign to assess their originality. Further Information: For further information and additional learning resources, students should refer to their Discussion Board for the unit.
Answered Same DayJun 09, 2021HI6028

Answer To: Assessment Task – Tutorial Questions Unit Code: HI6028 Unit Name: Taxation Theory, Practice and Law...

Preeti answered on Jun 18 2021
149 Votes
Income Tax Questions
Question 1:
Advise the FBT consequences of Mason’s remuneration package.
Fringe Benefit Tax (FBT) is an additional tax levied on the employer for the benefits provided to the employee in addition to their salary package which is generally in form of kind such as house accommodation, car fac
ility, loan benefits, or expense payments (school fees, health insurance), etc. FBT year runs from April 1 to March 31 and levied at the top marginal rate of tax.
Calculation of the FBT payable varies upon the type of benefit provided to the employee. There may be three categories of benefits – (i) fully taxable, (ii) concessional taxed benefits, and (iii) tax exempt benefits. In case of expense payment benefits, it is calculated through the payment made by the employer to discharge the obligation of the employee. Similarly, taxable value for the housing fringe benefits is the market value of the housing rights exceed the rent paid by the employee.
In the instant case, taxable value of the FBT shall be as below-
    (A) Taxable Value of FBT for course fees
    Amount paid by the employer i.e. $12,000
    (B) Taxable Value of FBT for housing benefits
    Market Value of the housing Rights less Rent paid by employee i.e.
$500-$100 = $400 per week
(Australian Government, Australian Taxation Office. Calculating your FBT, 2020)
In case of any salary package arrangement with employer, remuneration gets reduced by the amount of FBT payable by the employer.
Question 2
With reference to relevant legislation/case law, determine:
a) Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method.
(i) Discount Method
As per Division 115 of the Income Tax Assessment Act, 1977, Discount method is applicable in case of an Individual, complying superannuation entity, life insurance companies and trust, on the CGT asset held for the period of more than 12 months and CGT arises on or after 21st September 1999. In the instant case, since all the conditions are satisfied, Discount capital Method can be applied (Australian Government, Australian Taxation Office, 2020)
As per Sec 115-100, discount percentage in case of Individual is 50%. However, indexation benefit is not available in this method. Working of capital gain or loss is as below-
    1.
    Capital Proceeds
    $1,400,000
    2.
    Less: Cost of Building
    $100,000
    3.
    Capital Gain (1-2-3)
    $1,300,000
    4.
    Discount (@ 50%)
    $650,000
    5.
    Discount Capital Gain (4-5)
    $650,000
(ii)
Indexation Method
    1.
    Capital Proceeds
    $1,400,000
    2
    Less: indexed cost of building (68.7 / 43.2 * 100,000)
    $159,028
    3.
    Capital Gain (1-2)
    $1,240,972
(Tax & Super Australia, Separate or aggregate CGT assets? The role of subdivision 108-D, 2020)
Since, capital gain is coming less in case of Discount method, Capital Gain in case of Alex would of $650,000 for the captioned transaction.
b) How would your answer to a) differ if the owner of the property was a company instead of Alex?
In case of owner being a company instead of Alex, method of discount capital gain would not be available as this method is not...
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