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LAWS20060 – TAXATION LAW OF AUSTRALIA

Students must complete all questions in the assignment.
With reference to all questions – support the analysis in your answers where
appropriate to the ITAA97, ITAA36, Tax Rulings and/or case law.
QUESTION 1
a) What topic does Taxation Ruling TR 2018/4 cover? 1 mark
b) Which Division of the Income Tax Assessment Act 1997 details available tax
offsets? 1 mark
c) What is the top tax rate applicable to a resident taxpayer in the 2018/19 tax
year? 1 mark
d) Give one example of an asset that is exempt from capital gains tax, including
its legislative reference? 1 mark
e) What does the CGT event B1 s104-15 tax? 1 mark
f) Explain the formula contained in s4-10(3) ITAA 1997? 1 mark
g) Explain the significance of the High Court case, FC of T v Day 2008 ATC 20-064
in the topic of deductions? 4 marks
h) Explain in your own words the difference between marginal rate of tax and
average rate of tax? 5 marks
i) Explain what a consumption tax is? 5 marks
Total 20 marks
QUESTION 2
Briefly explain the extent, if any, to which each of the following payments made by
an Australian resident taxpayer during the current tax year would be an allowable
deduction:
(a) Brett incurred interest expense on a loan he took out to pay employee
wages. The loan was secured against his personal home. 2 marks
(b) Julie incurred $500 in mobile phone charges for the year. She determined
that her work related calls represented 60% of her total calls. 2 marks
(c) Sally paid $1,200 during the tax year to a babysitter to look after her children
that she required in order to go work. 2 marks
(d) One of Jerry’s long term employees stole $20,000 worth of goods from the
business during the tax year. 2 marks
(e) Expenditure incurred in contesting a local government election of $5,000
with $2,000 of that, spent on a big election party. 2 marks
Total 10 marks
QUESTION 3
a) Andy owns some land and grants a lease to Brian for five years, at a premium of
$5,000. 3 marks
b) On the 11th January 2018, in exchange for the sum of $40,000 John granted to
Farm Ltd, an option to purchase his 100-acre farm just outside Adelaide for the
sum of $800,000. John had purchased the farm 10 years ago. 4 marks
c) Jamie and Olivia purchase a house in January 2006. Immediately they rent it out
for 2 years while they travel overseas. In January 2008 they occupy the house and
make it their main residence until they sell it in January 2018. They make a capital
gain of $300,000. What are the CGT implications for Jamie and Olivia? 5 marks
d) Chris bought 12,000 shares in BHP for 45 cents on the 1 August 2018 and they are
now trading at $1.56. The same day he also purchased 5,000 shares in
Westfarmers for $5.20 and they are now trading at only $2.10. Chris sells both his
BHP and Westfarmers shares on the 30 June 2019. Calculate the net capital gain
that Chris would record in his 2018/19 tax return. 8 marks
Outline the CGT consequences for the 2018/19 tax year and state if the 50% discount
is applicable to the above transactions?
Total 20 marks
QUESTION 4
Various taxpayers receive the following during the 2018/19 income tax year:
a) A prize of $2,000 for the best TV advertisement of the year. 3 marks
b) $500 received by an employee from an employer for costs incurred to travel
to Sydney for work. The employee bought a return ticket on sale for only $120
and stayed with a friend while in Sydney. One of the conditions of the work
related trip was that the employee could keep whatever remained of the $500
as long as the work required to be performed in Sydney was completed.
3 marks
c) An iphone worth $1,000 from a client. 3 marks
d) $10,000 awarded as damages for personal injuries incurred by an individual in
a car accident. 3 marks
e) A taxpayer buys a share during the year for $5. On the 30 June, the taxpayer
still owns the share but it is now trading at $7.50 3 marks
REQUIRED:
Discuss the assessability or not of the above amounts. Total 15 marks
QUESTION 5
Nisu arrives in Australia on 30th December 2018 from Nepal. He is enrolled in the
Masters of Accounting Program at CQU Sydney campus. He comes to Australia from
Nepal with the intention of studying for three years in Australia. Nisu manages to get
a part-time job working in a bookshop with one of his roommates. There are four
students that share the rental of a house not far from the university. Nisu makes lots
of friends, joins the local soccer team and is doing well with his studies and job.
However, on the 30 June 2019 he has to return to Nepal due to a family
commitment. He unfortunately has to withdraw from university with no prospect of
returning.
REQUIRED:
Discuss the factors that will be taken into account in determining if Nisu would be
considered a resident of Australia for income tax purposes for the 2018/19 income
year. Total 15 marks

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