Sample/practice exam 11 September 2017, questions PDF

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Main Exam ID NUMBER: SEAT NUMBER: TEACHING PERIOD:

2

YEAR:

2017

ONSHORE SITES: CF COLLEGE: LAW AND JUSTICE PLEASE LIST ALL CODES AND TITLES FOR WHICH THIS PAPER IS TO BE USED: UNIT OF STUDY CODES BLO5539

UNIT OF STUDY TITLES AUSTRALIAN INCOME TAX LAW & PRACTICE

DURATION OF EXAMINATION

3

THIS EXAMINATION COUNTS FOR

HOURS +

15 MINUTES READING TIME

70 % OF THE ASSESSMENT IN THIS UNIT

EXAMINATION PAPERS DETAILS TOTAL NUMBER OF PAGES (Incl. this one):

7

NUMBER OF QUESTIONS:

5

NUMBER OF QUESTIONS TO BE ATTEMPTED:

5

SPECIAL INSTRUCTIONS TO CANDIDATES You must cite relevant cases and legislations in your answers. EXAMINATION MATERIAL PERMITTED TO BE USED BY CANDIDATES Open book exam. All materials except VU library books are allowed. EXAMINATION MATERIAL SUPPLIED BY EXAMINATION ADMINISTRATION ANSWER BOOK: YES GRAPH PAPER: NO COMPUTER MULTIPLE CHOICE ANSWER SHEET NO CAN THE EXAM PAPER BE RELEASED TO STUDENTS? NO CAN THE EXAM PAPER BE RELEASED TO LIBRARY? YES EXAMINER(S): Dr Yongqiang Li PHONE EXT:

03 9919 1801 or 0410357955

Page 1 of 7 Examination Paper Cover Sheet CRICOS Provider No: 00124k

Resident Individual Tax Rates [2015-16] Taxable Income

Tax On This Income

0 to $18,200

Nil

$18,201 to $37,000

19c for each $1 over $18,200

$37,001 to $80,000

$3,572 plus 32.5c for each $1 over $37,000

$80,001 to $180,000

$17,547 plus 37c for each $1 over $80,000

$180,001 and over

$54,547 plus 47c for each $1 over $180,000

Non Resident Individual Tax Rates [2015-16] Taxable income

Marginal rate of tax

$0 - $80,000

32.5%

$80,001 - $180,000

37%

Over - $180,000

45%

Major tax offsets (rebates)   

Dividend franking credit offset Low income tax offset Superannuation spouse contribution tax offset



Redundancy payments statutory limit for 2015-16 year is first $9,780 is tax free plus $4,891 for each completed year of service is also tax-free

BLO5539 AUSTRALIAN INCOME TAX LAW & PRACTICE

Semester 2, 2017

Page 2 of 7

QUESTION 1

(15 Marks)

Calculate tax payable for the following taxpayers. Where more than one taxpayer can be identified, calculate tax for each identified taxpayer. Include levies and surcharges where applicable. If you think you need further information explain what that information is and why you need it. All calculations are for the current financial year unless otherwise indicated. All taxpayers are resident unless it is clear from the facts of the question the taxpayer is not a resident. NOTE: Give a very brief explanation of how you arrived at the tax payable figure. As an example only, you might be told John had salary of $70,000 and had sold painting for $15,000 which he bought for $1000. Simply say you include 50% of the capital gain made on the sale of the painting. As the salary is self-explanatory you do not need to give any explanation of it. (i) Michael was married. His wife did not work. He had assessable income for the year of $130,000 and deductions of $8,000. (3 marks) (ii) Mary ran a home decorators business, called Mary’s Décor, selling all sorts of goods for the home, including the kitchen. Mary had sales for the financial year of $350,000. On larger items Mary would allow 30 days credit on items sold. At the end of the financial year $60,000 remained outstanding of the $350,000. She had also charged interest on overdue payments. The interest she had charged and which was owing amounted to $8,000. She had only received $5,000 of this interest. Mary had $230,000 of deductions. (3 marks) (iii) Peter was 17 completing year 12 at high school. He had a part time job which he earned $12,000 from. He was also a beneficiary in a trust and he received $10,000 from the trust. Peter had no deductions (3 marks) (iv) Rankin Royal Marine Pty Ltd had an aggregated turnover for the financial year of $6.5 million. Rankin owned a warehouse which it decided to sell. It had deductions of $6 million. It bought the warehouse in February 2000 for $$800,000 and sold the warehouse in July 2015 for $1.1 million. (3 marks) (v) Michael Banner was successful in applying for a job in London. He was to take up his new job in March 2016. He was leaving Australia 25 February 2016. He was to work up until the Friday before. His salary would be $70,000. He deductions of $3,000 against his salary. He also received a fully franked dividend of $7,000. He sold a number of assets he no longer needed. He sold his car for $3,000 (he bought it for $15,000). He sold three paintings, one bought in 2001 for $300 and sold for $800, another bought for $400 and sold for $60 and third bought for $1,200 and sold for $900. He also sold a flat he owned and rented out (he lived in another flat he rented form someone else). He bought the flat in 2009 for $450,000 and sold it in January 2016 for $900,000. (3 marks)

BLO5539 AUSTRALIAN INCOME TAX LAW & PRACTICE

Semester 2, 2017

Page 3 of 7

QUESTION 2 (15 Marks) Discuss whether the following expenditure is revenue in nature, capital in nature or private and domestic in nature. a) $2,000 expenditure in bringing out a new employee from America to work for a company in Australia ( 3 marks) b) $200 parking fine incurred by a courier company while delivering parcels to clients during business hours (3 marks) c) $20,000 feasibility study to examine whether it’s worthwhile entering into a new business venture of selling a new product (3 marks) d) A Taxpayer was robbed $10,000 while taking the previous day’s business takings to bank. The money was not recovered and the taxpayer incurred a loss. The taxpayer uses the accruals or earning basis (3 marks) e) Company made a $5,000 provision for long service leave (3 marks)

BLO5539 AUSTRALIAN INCOME TAX LAW & PRACTICE

Semester 2, 2017

Page 4 of 7

QUESTION 3 (15 Marks) BuildCon Pty Ltd is a medium-sized building company. Included in the accounting figures are the following amounts. Advise BuildCon on how they should treat them for tax purposes? (a)

Provision for long service leave for 10 employees — $25,000. The actual amount paid during the year was $12,000. (3 marks)

(b)

As at 30 June 2016, there is an outstanding electricity account for $1,500 and telephone account for $4,500. (3 marks)

(c)

The sum of $165,000 was paid to the sales manager as compensation for the early termination of his employment contract. The employment contract had one year to go; it would have ended on 30 June of the following year. (3 marks)

(d)

Interest expense of $56,000 on a loan that has five years to run that was originally used to purchase a computer repair business which ceased to operate on 30 June 2015. (3 marks)

(e)

The CEO paid his daughter $50,000 for her work as a trainee in the company for one week. (3 marks)

BLO5539 AUSTRALIAN INCOME TAX LAW & PRACTICE

Semester 2, 2017

Page 5 of 7

QUESTION 4 (15 Marks) On 1 June 2015, Harry purchased a new laptop computer for $6,000 for use in his business. The Commissioner has assessed the effective life of laptop computers as three years. Harry decided to upgrade to a new laptop computer and sold the old one to a reputable second-hand dealer for $3,000 on 31 May 2016. Harry estimates that he used the laptop computer for business purposes 90% of the time. Advise Harry of his income tax consequences arising on the disposal of the laptop computer under both the diminishing value method and the prime cost method. Assume that Harry does not qualify as a small business entity.

BLO5539 AUSTRALIAN INCOME TAX LAW & PRACTICE

Semester 2, 2017

Page 6 of 7

QUESTION 5 (10 Marks)

Are the following CGT assets, collectables or personal use assets: (a) (b) (c) (d) (e)

An engagement ring which cost $5,000? (2 marks) A second-hand car purchased for $2,000? (2 marks) Shares in BHP? (2 marks) Your home? (2 marks) A painting hung in the foyer of your accounting firm? (2 marks)

BLO5539 AUSTRALIAN INCOME TAX LAW & PRACTICE

Semester 2, 2017

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