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Hi6028 taxation theory, practice and law Final Assessment t1 2021

HI6028
TAXATION THEORY, PRACTICE AND LAW
FINAL ASSESSMENT
TRIMESTER 1, 2021
Holmes Institute

Assessment Question 1

For tax purpose, in what circumstances are individuals and companies treated as residents of Australia? Explain based on the the Income Tax Assessment Act 1936 (Cth) and relevant case law.

Assessment Question 2

Referring to relevant statutory provisions and common law, discuss whether the following amounts would be as an allowable deduction against assessable income.

  1. Provision of doubtful debts of $4,200 for a detective agency.
  2. Speeding fines of $ 700 paid by an owner to a driver.
  3. An amount of $1,000 paid to a solicitor for preparing a partnership deed.
  4. Travel cost of a business executive to attend a trade fair in Munich paid by the employer.
  5. Newspapers purchased by an accountant who advises clients on financial and investment matters.

Assessment Question 3

  1. RK Co purchased a machine on 1st November 2020 at the cost of $110,000 (inclusive of GST) and exclusively used it to manufacture for the Co’s production. The machine’s effective life is ten years.
  1. Andy purchased a Toyota car and use it 100% for business purpose on 1st October 2020 at the cost of $74,000 (inclusive GST), estimated to have a useful life of twelve years.

Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the car discussed above, using both prime cost and diminishing value methods.

Assessment Question 4

Andrew and Piter are paterners, carrying on a business as a partnership. The partnership agreement provides that Andrew is to be paid an annual salary of $40,000. The balance is to be distributed equally between Andrew and Piter. The partnership agreement also provides that the partners are to share the losses equally in the case of losses. The partnership’s assessable income for the income year is $100,000. Deductible expenses are $120,000.

Required:

What are the tax consequences for the partnership and each partner?

Assessment Question 5

Benjamin is an artist. He sold some assets last week. He requests you to calculate the Capital Gain Tax (CGT) consequences of the following transactions: 

He purchased the following items last eight months ago.

  • an antique ceramic bowl (for $4,000),
  • An antique vase (for $5,000),
  • A colourful painting (for $15,000),
  • A TV sound system for his personal use (for $10,000) and
  • Shares of a reputed Company (for $6,000)

Last week he sold these assets as follows:

  • an antique ceramic bowl (for $6,000),
  • An antique vase (for $1,000),
  • A colourful painting (for $ 5,000),
  • A TV sound system for his personal use (for $9,000) and
  • Shares of a reputed Company (for $26,000)

Based on the legal provisions, discuss capital gain tax assets and calculate his net capital gain or net capital loss for the current tax year

Assessment Question 6

What is meant by two terms, ‘tax evasion’ and ‘tax avoidance’? Give your answer with examples of each.

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