Reference no: EM132579713

HI6028 Taxation Theory, Practice and Law Assignment - Tutorial Questions, Holmes Institute, Australia

Purpose - This assignment is designed to assess your level of knowledge of the key topics covered in this unit.

Unit Learning Outcomes Assessed:

1. Demonstrate an understanding of the Australian income tax syste m, the concepts of income and deductions, CGT, FBT, GST general anti-avoidance provisions and income tax administration;

2. Identify and critically analyse taxation issues;

3. Interpret the relevant taxation legislations and case law;

4. Apply taxation principles to real life problems.

The questions to be answered are:

Question 1 - Mason is a car painter with Melbourne Collision Repair Centre. Mason studying BPA and his employer pays for his course fees at Holmes Institute costing Mason $12,000. Also, Mason lives in a unit apartment in Brisbane, which is provided to him by Melbourne Collision Repair Centre as his employer as fringe benefit. The market value rent for the apartment is $500 per week, and Mason pays $100 of rent per week for the apartment.

Required - Advise the FBT consequences of Mason's remuneration package (maximum 200 words).

Question 2 - Alex is a carpenter who purchased a vacant block of land in Sydney on 1 October 1980. On 1 September 1986, Alex built a house on the land. At the time, the land was valued at $110,000 and the cost of construction was $100,000. Immediately, after the construction finished, the property has been rented out. On 1 March 2019, Alex sold the property at auction for $1,400,000.

Required - With reference to relevant legis lation/case law, determine:

a) Alex's net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method.

b) How would your answer to a) differ if the owner of the property was a company instead of Alex? (maximum 100 words)

Question 3 - Bowens Pty Ltd is a building materials supplier in Victoria. Bowens Pty Ltd has an annual turnover of $24 million, and works under the accrual method of accounting. Bowens Pty Ltd purchases concrete mixer for $660 each from Builder's Choice Pty Ltd, a company in Geelong with an annual turnover of around $21 million, and works under the accrual method of accou nting. Bowens Pty Ltd plans to sell the concrete mixers at a 200% mark-up to its customers. In October last year it purchased 110 concrete mixers but in December they discovered that 12 of the concrete mixers were faulty and subsequently returned these faul ty concrete mixers to the manuf acturer, obtaining a full refund. Assume both apply the accrual method of accounting.

Required - With reference to relevant laws, discuss the GST consequences of this arrangement for both Bowens Pty Ltd and Builder's Choice Pty Ltd. (maximum 400 words).

Question 4 - Due to COVID-19 impact, HI Co becomes insolvent and placed into voluntary liquidation by its directors. Dissolve liquidators have been appointed as the comp any liquidators. On the winding up of the HI Co, Dissolve liquidators have started distributions and Paul as ex-shareholder of HI Co received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant to the provision of Income Tax Assessment Act 1963, section 47(1). This distribution to Paul was from his $4,000 investment in the shares of HI Co on 2nd February 2019.

Required - With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the tax consequences of the above scenario for Paul. (maximum 300 words).

Question 5 - Stephen and his cousin Alex started an equal partnership business, Euca Sanitizers, motivated by the increase in the recent demand for hand sanitizers during the COVID-19 pandemic. Stephen lives in Sydney and is an Australian resident for tax purposes. Alex however, is resident of New Zealand and is a foreign resident for tax purposes in Australia. On 30 June 2020, Euca Sanitizers partnership net income is $300,000, 60% of this income is generated from selling hand sanitizers to Australian retailers and 40% comes outside Australia from sale of hand sanitizers to New Zealand retailers.

Required - With reference to relevant provisions of ITAA 97/ITAA 36, discuss how the partnership income is taxed. (maximum 200 words).