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LLB347 Week Five Associate Professor Felicity Deane

Question One (from Week 4) (Practice exam question) Marcus is a chef who was born in Canada and has retained his Canadian citizenship. On 20 May 2016, Marcus arrived in Australia on a working visa. He has no family in Australia and only one ageing uncle in Canada. Marcus owns his home in Canada, which he rented out while staying in Australia. For the year ended 30 June 2017, Marcus earns $15,000 in rental income on the Canadian property. On arriving in Australia, Marcus immediately settled into a one bedroom apartment in the centre of Brisbane to increase his employment opportunities. However, shortly after arriving, Marcus decided he wanted to establish an Italian restaurant in Brisbane. On 1 July 2016 he commenced operating a restaurant business in Brisbane, which he called ‘Marcaldo Italiano’.

For the year ending 30 June 2017, the business derived $200,000 in revenue from restaurant sales. In generating those sales, they spent $70,000 on food supplies and $30,000 on salaries and wages for casual staff. As part of a marketing gimmick, the business also sold small bookmarks with the name “Marcaldo Italiano” stamped on the front. Marcus purchased these bookmarks ready for resale at $1 each and then resold the bookmarks for $3 each. He purchased an initial supply of 20 000 bookmarks on 15 July 2016 at a total cost of $20,000. By 30 June 2017 they had sold 10 000 of these bookmarks for a total of $3 each, generating a total of $30,000 in bookmark sales. During the 2016-2017 financial year, Marcus also earned $10,000 as a sessional teacher with NICE Coy, a company which specialised in providing cooking lessons. As Marcus was required to respond to numerous student queries by email, his remuneration package included an allowance to cover the work related portion of his private internet usage. For the year ended 30 June 2017, NICE Coy paid Marcus a total internet allowance of $500. In addition, NICE Coy paid Marcus $2,000 to enter into an agreement to endorse NICE Coy as the ‘best provider of cooking lessons in Brisbane’ whenever Marcus was talking to the general public about his experience as a chef. As part of his job, Marcus was frequently required to use his own motor vehicle to travel between NICE Co’s various campuses. He owns a 2,000 cc non-rotary engine Mazda that he purchased on 1 July 2016 for $32,000. Marcus travelled a total of 40,000km in the financial year, of which he estimates 15,000km to be for work purposes, but he did not maintain a log book. In December 2017, Marcus paid a registered tax agent to prepare and lodge his 2017 income tax return. The agent’s fee was $500. In addition, Marcus was late paying the tax owing on his 2017 return, and was required to pay a general interest charge amount to the ATO of $100.

Between 1 July 2016 and 30 June 2017, Marcus incurred the following expenses:       

$100 on a short course on how to use PowerPoint in giving effective presentations. $400 on specialist cookbooks which he used approximately 50% of the time for preparing his tutorials and 50% for his own personal use. $300 in train fares between the restaurant and NICE Coy on the evenings that he was required to teach. $100 on a business suit which he wore when teaching. $5000 on petrol for which he kept receipts. $3000 on running costs for the car, but did not keep any receipts. $500 tax agent fees.



$100 general interest charge.

You are required to advise Marcus on his taxable income for the year ended 30 June 2017. Include in your answer your reasons and support your answer with reference to relevant authority where applicable. You are NOT required to address any Goods and Services Tax (GST) or Capital Gains Tax (CGT) issues arising in this question. Question Two Fiona is a marketing specialist. On 1 September 2016 Fiona purchased a camera for $600. Given the rapid improvements in technology in this area Fiona estimated she would need to replace the camera in 3 years. On 1 February 2019 Fiona sold the camera for $50 and on the same day purchased a replacement for $900. Fiona believes this new camera will last 4 years. Fiona has always tried to maximise her deduction claim each year. How should she claim depreciation and balancing adjustment in the 2019 financial year? Question Three James is a national manager for a large company. His work requires he travels a lot, however he also needs to spend a lot of time in his city of residence, Sydney. His company is global, but the Australian presence is small, therefore there is no company office in Sydney. This means, when James is at home, he has to have a home office. He has set up an office in his house, which takes up approximately 10% of the floor space. In the 2019 financial year the rent on his house is $700/week, the electricity is $300 per quarter, and the internet is $150/month. In the 2019 financial year James had to purchase a stand-up desk, which he was not reimbursed for, which totaled $1500. Identify the issues, the required information and approximate the deduction for James in the 2019 financial year. Question Four Eric is a non-business taxpayer who has maintained a low value pool of assets with a value of $5000 at the start of the income year. During the year Eric incurred the following relevant transactions: 1. 2. 3. 4.

He purchased a printer valued at $250 (which was used 100% for work purposes) He purchased a scanner valued at $600 (used 75% for work purposes) On 1 February he purchased a new computer for $2,320 (used 75% for work purposes) He traded in his old scanner for $200 (used 75% for work purposes)

Calculate the depreciation claim for the year and the value of the low-value pool at the end of the year....