Reference no: EM133140064

Question 1

Required: Discuss briefly, citing sections, whether the following amounts are deductible for the taxpayer.

i. The taxpayer purchased an investment property. On 1 July 2021 they took out a 10 year mortgage for this property and paid $2000 in loan application fees.
ii. A business pays a $200 restaurant bill for an important client and the client's husband to celebrate their 10 year wedding anniversary.
iii. The taxpayer (an employee accountant) buys a $250 phone to use purely for work purposes.
iv. An individual taxpayer paid their lawyer (who is a legal practitioner but not a registered tax agent) for advice regarding the tax consequences of selling their investment property.

Question 2

Required: For the transactions below, discuss what deductions are available for the 2020-21 tax year.
Jill is a sole trader who runs a clothing retail business that has an aggregated turnover of approximately $3 million a year. This business has 2 stores, the first of which is owned by Jill as a business asset, the second of which is rented by her. She incurs the following expenses on 1 June 2021:
• $4800 for an insurance policy (for the first store premises, which she owns) that commences on 1 June 2021 and runs till 30 September 2022.
• $3000 in prepaid rent (for the second store premises) covering the period 1 June 2021 till 30 April 2022.

Question 3
Required: Discuss what amounts are deductible as specific deductions for Opt Pty Ltd. Assume that the $100,000 and $3,000 amounts are capital.
Opt Pty Ltd sells prescription glasses through a variety of retail stores. In the current tax year it spent the following amounts:
• $100,000 on an independent consultant for expert advice regarding how Opt should modify their marketing strategy and products on offer so that they could target a younger client base.
• $3,000 in bank fees due to paying off the mortgage for one of its store premises earlier than expected.

Opt Pty Ltd also had $60,000 in debts from customer sales made on credit that were written off. These had been previously included in income. On top of these, it had a provision for doubtful debts in its accounts for an additional $40,000.

Required: Showing workings and citations, calculate Greg's Net Capital Gain or Loss. If the 50% discount applies, please state that this is the case and apply it without going into details about the requirements for the discount applying.

Question 4

Greg made the following acquisitions on 20 June 2019:

• An antique desk for use in his home dining room $1100
• Shares in Bus Ltd for $40,000
• Shares in Nok Ltd for $80,000.

During the current tax year on 10 January 2022, Greg sold these items as follows:

• The antique desk for $300
• Shares in Bus Ltd for $60,000
• Shares in Nok Ltd for $70,000

Question 5

Required: Showing workings and citations, calculate Bianca's deductions regarding the two items for the 2021-22 tax year. Where Bianca has a choice of methods in calculating her deductions, use the method that will give her the highest deductions for the tax year (4 marks).

Bianca runs a small manufacturing business as a sole trader (it has an aggregated annual turnover of approximately $5 million). Separate from this, she also owns a residential investment property (which is not considered as being part of her business). She makes the following acquisitions:
-On 10 January 2022 she acquires a leather lounge for her investment property (effective life of 10 years). This cost her $6,000.
-On 15 February 2022 she acquires a new piece of machinery for her business (effective life of 15 years). This cost her $40,000.

Required: Discuss the CGT consequences regarding Katie selling the 2 houses. Where applicable, discuss if the 50% discount is available

Question 6

Katie's brother died in March 2020, and as a result, at that time, she inherited the following assets from her brother:

• A house (House A) purchased by her brother in June 2010, which had been used by her brother as his main residence. In her brother's hands, the cost base was
$400,000. Market value in March 2020 was $1,000,000.
• A house (House B) purchased by her brother in July 2012 and used by him as an investment property. In her brother's hands, the cost base was $700,000. Market value during March 2020 was $800,000.

Katie initially rents out both houses, and then makes the following sales during January 2021:

• House A: sold for $1,100,000
• House B: sold for $950,000

Question 7

Required: Advise Darren regarding what amounts are deductible as repairs .

Darren acquired a rental property on 1 July 2021. During the tax year he incurred the following expenses

• The kitchen cupboards were all replaced in December 2021 as a leaking roof during November 2021 had damaged the previous ones. The new cupboards were of a very similar type and colour to the previous ones. This cost $8000.
• On 1 October 2021 Darren replaced the garage door (the house had a stand alone garage) for $1500. The new garage door was of a similar type and colour to the previous one. Darren had discovered right after purchasing the house that the original garage door had already been defective for a number of years, but waited till October 2021 to replace it.

Question 8

Required: Describe and calculate, citing sections, the CGT consequences of Camilla selling her house. You are not required to discuss the application of the 50% CGT discount, or of any potential impact of Division 43 ITAA 1997.

Camilla buys her first property (a house) on 1 January 2018 for $500,000 and she moves into it immediately. She paid stamp duty of $20,000. On 1 January 2019, when her house was worth $600,000, she purchased an apartment and immediately moved into
it, and from that point treated her apartment as her main residence for tax purposes. From that time (1 January 2019) she also rented out her original house. She sold the original house to her sister on 1 January 2021 for $800,000, even though it had a market value of $900,000 at that point.

Question 9

Discuss the CGT consequences of these events for Nathan and Chemical Pty Ltd (4 marks). Include in your discussion the availability of the 50% discount.

Nathan had a car that he acquired for $45,000 5 years ago. It was stolen in the current tax year, and insurance as a result gave Nathan $65,000 in compensation.

Nathan, whose job was an industrial chemist, also entered into a restraint of trade with his ex-employer, Chemical Pty Ltd, to not work with any of their competitors for 3 years. Nathan was paid $300,000 for this (assume this did not constitute ordinary income and was also not assessable under s. 15-2). When the agreement lapsed it was not renewed.

Question 10

Required: Briefly describe which of the following deductions would be deductible under
s. 8-1 if the relevant specific deductions mentioned did not exist in the legislation.

i. Donations to a charity (which is a deducible gift recipient) by an individual employee taxpayer (deductible under Division 30 ITAA 97).
ii. Depreciation deductions under Div 40 by a landlord that purchased a dishwasher for their investment property.
iii. Business expenses that are deductible over 5 years under s. 40-880.
iv. Bad debt deduction incurred by a business due to their customers not paying their invoices (s. 25-35).