Assessment 1 Method of Submission: Electronic – Moodle Weighting: 30% Length: See below- Word Limit.

Assessment 1

Method of Submission: Electronic –
Moodle

Weighting: 30%

Length: See below-
Word Limit in PART A only.

Course Objectives

On successful
completion of this course you should have acquired:

A basic understanding of the Australian
Taxation System

1. A sound
knowledge of the main concepts and principles of Australian taxation law.

2. A reasonable
degree of competence in applying the taxation laws and in preparing income tax
returns of moderate complexity for individual taxpayers, companies,
partnerships and trusts.

3. An
understanding of the principles of Fringe Benefits tax and Goods and Services
tax.

4. An
acquaintance with the compliance requirements under the Australian taxation
system.

5. An
understanding of the concept of tax avoidance including a familiarity with some
specific anti-avoidance provisions in the Australian tax legislation.

Details

This
assessment relates to the above listed Course objectives.

This
assessment item may be submitted as an individual
or as a group assignment and MUST
be submitted electronically through the educational interface – Moodle.

If you are
opting to submit an individual assignment, the work must be the result of your personal
effort. If material in the assignment
was found to be similar to material in another assignment this will be treated
as a case of plagiarism.

If you are
opting to complete this assignment as a group assignment, you may work in a
group of up to but no more than three
students. Only one assignment will
be submitted by a group, with the names and student numbers of all group
members shown and all members of the group will receive the same mark.

As it is up
to students to choose if they wish to work in a group and if so who the other
members of the group will be, there will be no opportunity for the case to be
made later than one or some members of the group did not contribute as much as
others. If you choose to work in a group
then choose the members of your group
carefully.

Place your
‘WORD COUNT’ at the end of PART A

The
assignment is assessed on the basis of the content presented and not the
teamwork skills that may or may not be demonstrated.

While the
assignment is based on material covered, you may find it necessary to access
additional information to address some of the issues raised in the Assignment.

FAILURE
TO FOLLOW ANY OF THE ABOVE INSTRUCTIONS WILL RESULT IN A LOSS OF MARKS

PART A (1,500 WORDS) 10
MARKS

The following section 8-1 as listed below is described as the
cornerstone if the Income Tax Assessment Act (1997).

“S8-1(1) you can deduct from your assessable income any loss
or outgoing to

The extent that:

(a) it is incurred in gaining or producing your assessable
income; or

(b) it is necessarily incurred in carrying on a business
for the purpose of

gaining or producing your assessable income.

S8-1(2) However, you cannot deduct a loss or outgoing under this
section to

the extent that:

(a) it is a loss or outgoing of capital or of a capital nature;
or

(b) it is a loss or outgoing of a private or domestic nature;
or

(c) it is incurred in relation to gaining or producing your
exempt income; or

(d) a provision of this Act prevents you from deducting it.

S8-1(3) A loss or outgoing that you can deduct under this
section is called a

general deduction.”

REQUIRED:

EXPLAIN and VALIDATESection 8-1 of ITAA97 by
reference to Case Law, Taxation Office Rulingsand other sections
of the ITAA97 and ITAA36. You are required to address under separate
headings the underlined words in the course of your explanation.

PART B 10
MARKS

SALE
OF ASSETS INFORMATION

Carole Mc
Donald sold the following assets during the year ended 30th June 2014.

Details Date Purchased Cost Date
Sold Consideration

$ $

NBA Ltd 1 May 2014 35,000 1
June 2014 20,000

XYZLtd
shares* 1 Sept 1965 65,000 30
May 2014 160,000

XRO Ltd 1 May 1998 15,000 1
March 2014 35,000

CBD Ltd 1 Jun 2014 $25000 28 June 2014 $50,000

FBU Ltd 15 Nov 1998 30,000 1
July 2013 33,000

Diamond Ring 18 July 1993 501 1 Feb
2014 200

Houseboat 21 Sep 1985 20,000 1
March 2014 25,000

Private
Residence** 16 June 1986 300,000 12
March 2014 600,000

Gold Charms 31 March 1986 300*** 13
March 2014 2,500

Caravan 1 January 2010 12,000 15
June 2014 5,000

Motor Cycle 1 July 2012 5,500 15 June 2014 6,300

Sports Car 1 July 2011 6,500 30 June 2014 22,000

*These shares
were purchased by the taxpayer’s father on 1st September 1965. They were
bequeathed to the taxpayer on 1 January 2009 (date of death of James’
father). The market value of the shares
at date of the father’s death was $150,000.

**The private residence was rented for the period from 1
February1988 to 1 July 2008 while he lived overseas.

***Purchased as a set which cost $600

REQUIRED:

CALCULATEthe minimum amount of net capital gainwhich
is to be included in his assessable income for the year ended 30 June 2014. You
must indicate how every item mentionedabove is treated for tax
purposes. You must refer to the relevant sections of the Income Tax Assessment
Act 1997.

PART C 10
MARKS

John Smith is a resident of Australia and a full-time employee for
Paladin Ltd. He provides you with the
following information for the year ended 30 June 2014.

RECEIPTS

$

Net salary
received (PAYGW $18,000) 80,000

Fringe benefits – low interest loan 15,000

Fully franked dividend paid by Exmouth Ltd – reinvested 7,000

Share of income – The Estate of Harry
Smith 2,500

Loss on sale of shares 3,600

Gross Profit on sale of Jet ski – purchased 01/01/2001 5,000

PAYMENTS

Motor Vehicle
expenses – see Note 1

Superannuation
contribution for John Smith – made by
Paladin Ltd 6,000

Superannuation contribution – made by John Smith 3,000

Donation – Royal Children’s Hospital 150

Net rental loss on investment property- No 1 3,500

Loss on capital investment- investment property – No 2 35,000

Education
Expenses- see Note 2 3,500

Membership fees – Master Chefs Association 250

Note
1

MOTOR
VEHICLE INFORMATION

John uses his
car for work purposes for 9 months
of the financial year. He maintained a log book for the whole of the financial
year. His private kilometres were 20,000 and his total kilometres were 40,000
for the year. The Motor Vehicle (4200ccs) cost $125,000 on 1/03/2014. It has an effective life of 8 years. Expenses
for the year ended 30 June 2014 are as follows:

$

Fuel 3,104

Cost of repairs –accident 9,500

Insurance 855

Repairs 427

Parking fees 22

Registration and 3rd Party 438

Road Tolls 54

Car washes 45

New Motor –purchased 1 March 2014 – not separate asset 10,500

Note
2

John is
employed as an IT manager and is a member of the IT Association of Australia, a
professional accrediting body providing among other services continuing
professional education (CPE) to members.

Members must complete
a minimum 20 hours per year of CPE. John attended a four day conference in
Hawaii in October 2013 of the International IT Association. John arranged a
package that included:

Conference
fees 800

Air fares 1,600

Accommodation and meals – 8 days 1,100

John spent an extra 4 days holidaying.

REQUIRED:

CALCULATE
the TAXABLE INCOME and TAX PAYABLE of John for the year ended 30 June 2014.