LAWS20060: Income Tax Assessment Act 1997 – Taxation Law Assessment Answer

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Subject Code: LAWS20060
1AGABA
Taxation Law Assessment Answer
TASK:
This assignment is to be submitted in one (1) Word document only. This assignment is to be submitted online via Moodle by the due date stated. It is suggested that where necessary you put your calculations into columns or tables to improve readability in the assignment document The method of referencing to be used in this assignment is the Australian Guide to Legal Citation (AGLC) 3rd Edition referencing method. Additional information regarding this method is available through the library and the Academic Learning Centre. When making a reference, cite the original source or authority in preference to a secondary source such as the textbook, especially when you are discussing various sections of the legislation. This means you should make reference to legislation, cases and Tax Rulings as a priority to back up any arguments that you make in your assignment.

QUESTION 1

a) What topic does Taxation Ruling TR 2018/4 cover? 
b) Which Division of the
Income Tax Assessment Act 1997
details available tax 
offsets?

c) What is the top tax rate applicable to a resident taxpayer in the 2018/19 tax 
year?

d) Give one example of an asset that is exempt from the capital gains tax, including its
 legislative reference? 
e) What does the CGT event B1 s104-15 tax? 
f) Explain the formula contained in s4-10(3) ITAA 1997? 
g) Explain the significance of the High Court case,
FC of T v Day
2008 ATC 20-064 
in the topic of deductions?

h) Explain in your own words the difference between the marginal rate of tax and the 
average rate of tax?

i) Explain what a consumption tax is?

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.
(b) Julie incurred $500 in mobile phone charges for the year. She determined that
 her work-related calls represented 60% of her total calls.
 

(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.
(d) One of Jerry’s long term employees stole $20,000 worth of goods from the business during the tax year.

 
(e) Expenditure incurred in contesting a local government election of $5,000  
with $2,000 of that, spent on a big election party.

QUESTION 3

a) Andy owns some land and grants a lease to Brian for five years, at a premium of 
$5,000.

b) On the 11
th
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.
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? 
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 2018. Calculate the net capital gain that Chris would record in his 2018/19 tax return.
Outline the CGT consequences for the 2018/19 tax year and state if the 50% discount is applicable to the above transactions?

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.
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.
c) An iPhone worth $1,000 from a client. 
d) $10,000 awarded as damages for personal injuries incurred by an individual in a car accident. 
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.

QUESTION 5

Nisu arrives in Australia on 30
th
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 the university with no prospect of returning.
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