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Question 1 ? Assessable Income (10 marks) Explain...

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Question 1 ? Assessable Income (10 marks) Explain what is meant by the term ?ordinary income? and provide some examples of receipts which may be included in a taxpayer?s ordinary income. You should discuss relevant cases. Discuss, with reference to legislation or case law, whether the following are ordinary income in the hands of the recipient: ? Qantas frequent flyer points received by a solicitor in relation to work-related travel paid for by his employer ? a gift received under a will of a deceased estate ? proceeds from the sale of trading stock (e.g. electrical appliance sold by a retailer) ? a cash prize received by a competitor on a quiz show ? payment made by an employer to a former employee in consideration of the employee agreeing not to sue the employer for unfair dismissal ? a payment made by a television station to a netballer for being named best and fairest in the national netball competition. Question 2 ? Fringe Benefits Tax (6 marks) Discuss how to determine whether a fringe benefit has been provided. Outline, with reference to legislation, whether the following are fringe benefits, and if so, how to calculate the value of the benefit: ? a trainee accountant is able to park for free on his employer?s business premises each working day ? a secretary of a law firm is provided legal services by her firm, in relation to her divorce, at a 40% discount to normal rates ? an entertainment allowance paid to a sales representative employed by a publishing company ? an oil rig worker is provided a flight to return home to see his family for a 2 week holiday. Question 3 ? Deductions (10 marks) Discuss the various tests developed by the courts for deciding whether a loss or outgoing is ?on revenue account? or ?capital in nature?. Discuss the deductibility, with reference to legislation or case law, of the following outgoings of Felix?s Florist: ? Felix borrowed $100,000 to use as working capital in the business. He also incurred $4,500 in borrowing costs in relation to this loan. ? He incurred $40,000 interest for the year on additional borrowings of $220,000 used to purchase the goodwill and stock of a rival business ? Felix had to pay $150,000 in damages after being sued by a competitor for using the same business name. He also incurred legal costs of $25,000 in relation to the lawsuit ? Felix incurred $12,000 for advertising his business for sale. ACC00132 ? Unit Information 15 Question 4 ? Capital Gains (8 marks) Sarah is considering selling her hairdressing business that she has owned for 13 years, and has come t you for advice to minimise her tax in relation to the sale. She estimates she will make a gain on sale of $84,000. She also has a parcel of shares (owned for 5 years) that she is considering selling, that would realise a capital loss of $14,000. Discuss what options are available to minimise the amount of capital gains tax she might have to pay, including any conditions that must be met to access these concessions. Question 5 ? Tax Offsets and Obligations (6 marks) Georgia has a taxable income of $75,000 for the current 2012 tax year. She is 58 years old and is a sole parent to a dependent child. Her child has had substantial surgery and rehabilitation in the current tax year after a serious sporting injury at school. Georgia has no private health insurance.Outline the tax offsets Georgia might be entitled to claim for the year, and explain any special conditions that must be met to obtain these offsets. Explain any additional levies or tax Georgia may be required to pay, based on the information provided above. It is essential that reference to the legislation and other authorities (not the Master Tax Guide) be made in relation to the issues arising in all four questions.

 

Paper#4516 | Written in 18-Jul-2015

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