Taxation Law
Maximum 2,000 words (acceptable to be 10% above or below this word limit)
HA3042 Assignments Instructions and Requirements
QUESTION 1 (5 MARKS)
Furnaces Pty Ltdwas advised by a local building inspector that one of the chimneys on its premises was unsafe and, unless it was repaired, the factory would have to be closed. Furnaces decided that it was not feasible to stop operations to repair the chimney, so they gained permission to build an alternative chimney adjacent to the old chimney, thereby allowing production to continue. They found that although the new chimney was substantially the same size and make as the old one, it was cheaper to build than it would have been to repair the old one. Also, the new chimney can better ventilate the weather, which was not available in the previous one. After the new chimney was erected, the old chimney was demolished.
Is any amount allowable as a deduction for the cost of the new chimney?
QUESTION 2 (10 MARKS)
Anushka (an Australian Tax resident) works as an employee for a child care centre, Brilliant Kids Pty Ltd, on a permanent part-time basis while she runs her business as a day carer for her own customers. Meanwhile, she invested some of her extra cash in some shares on the ASX and in an Australian private company. Listed below is the summary of her earnings for the year ended 30 June 2020.
| Particulars |
$ |
| Net Salary Received from Brilliant Kids for the year (Tax paid by company to ATO during the year is $29,000) |
81,000 |
| Net Business Profit as a sole trader (Day Carer) |
30,000 |
| Allowable Deductions on Employment (Uniforms, Laundry, Shoes) |
5,000 |
| Fully Franked Dividend |
7,000 |
| Unfranked Dividend from a private company |
1,200 |
Required: Calculate Anushka’s taxable income and net tax payable (Ignore Medicare Levy and Medicare Levy Surcharge if any). (Please use the following table to complete your response to this question in the spaces provided)
| Particulars |
Answers |
Marks |
| Net Salary Received |
|
0.5 mark |
| Add Back Tax Paid |
|
0.5 mark |
| Net Business Profit |
|
0.5 mark |
| Fully Franked Dividend |
|
0.5 mark |
| Add Back Franking Credit |
|
1 mark |
| Unfranked Dividend |
|
0.5 mark |
| Assessable Income |
|
1 mark |
| (Allowable Deductions) |
|
0.5 mark |
| Taxable Income |
|
1 mark |
| Tax Payable |
|
2 mark |
| Less Refundable Tax Offsets |
|
|
| PAYG Withholding |
|
0.5 mark |
| Franking Credits |
|
0.5 mark |
| Net Tax Payable |
|
1 mark |
QUESTION 3 (10 MARKS)
Discuss the Fringe Benefits Tax (FBT) implications of the following cases (a) – (e): (Note - No calculations are needed. Only answer whether the employer is liable for FBT or not and why or why not)
- An employer provides a Christmas lunch at a local restaurant, costing $1,000, for 10 of its key employees. (2 marks)
- A sporting club, which pays its honorary treasurer an honorarium of $5,000 per year, providing a car to him. The car is used 90% for club business. The treasurer has a full-time job at the local hospital. (2 marks)
- An employer gives each of its 15 staff a leg ham each valued at $60 for Christmas. (2 marks)
- An employer allows its staff to take home their laptop computers. It is estimated that only half the work done at home is business related. (2 marks)
- A company director, not in receipt of any remuneration from the company, uses the company’s two-tonne truck while undertaking renovations to his own home. (2 marks)
