Recent Question/Assignment
Taxation Law Group Discussion
Week 2 Residence and source
Nick Stannos arrives in Australia from a European country on 26 January. He rents a small apartment and accepts two jobs. By 30 June he has saved $10,000 and decided to return to Europe permanently.
1. For the relevant income year, will Stannos be regarded as a resident or non-resident? In any event, what difference does it make?
2. If Stannos had remained in Australia indefinitely and was regarded as a resident of Australia from 26 January, how would his European salary income of A$20,000 (derived in the period 1 July to 24 January) be taxed? Assume ex-Australia tax of A$3,000 has been paid in respect of this income.
Week 3 Income from Property
1. George owns a large cattle firm, parts of which are heavily timbered. He agrees to allow Mr. Smith to enter his land for the purpose of felling timber in return for a payment of $20 per tree removed. During the first tax year of his agreement, George receives $10,000 from Smith. What are the tax consequences of this transaction? Would your answer differ if Smith had promised to remove the timber?
2. The following year, George contracts to sell Smith 9,000 trees for $90,000. Smith is to enter George’s land for the purpose of felling and removing the trees, and is to pay the money by monthly installments regardless of whether the timber is removed or not. The agreement provides that if 9,000 suitable trees are not found upon the land, then there shall be a pro rata decrease in contract price.
3. In the following year, George decides to sell his farm to Brown for the sum of $200,000 plus “royalty†of $10 for every tree removed from the land for the next 10 years.
Advise George in each of the above situations as to his tax liabilities. Also advise him as to whether his receipts are income or capital on general principles. (Note that these cases are governed by CGT event DI)
Week 4 Income Classification
Briefly discuss the income tax implications of the following, stating which sections of the ITAA 1997 or ITAA 1936, if any, are most relevant.
1. A $10,000 bonus paid by the Australian Cricket Control Board to the captain of the Australian cricket team for outstanding leadership during a successful tour of England.
2. A boat valued at $35,000 given to an amateur footballer to turn professional.
3. Profit of $25,000 made by a trucking company on the disposal of one of the 30 trucks it has leased to carry on its business.
4. An exchange gain of $500,000 made by a manufacturer in respect of money borrowed in 1997 and used to finance construction of a new building.
5. Gift and payments made by a football club and its supporters to a star professional player, largely in their delighted response to his being selected to play for Australia. The club gave him a car valued at $25,000; supporters, through a collection at one game, gave him $2,425.
Week 5 Capital Gains Tax
Because of his wife’s ill-health, Brain sold his gift shop and family home in Victoria and moved to WA on 20 June this year. Brain had acquired the vacant premises 10 years ago for $750,000 and established the business on that date. He sold the business on 20 May this year for a net consideration of $1,880,000. This was made up as follows:
Items AUD $
1 Goodwill 440,000
2 Trading Stock 60,000
3 Fittings 120,000
4 Shop and Land 1,360,000
5 Less debt taken over secured over stock and fittings (100,000)
In addition, Brain received a further $20,000 for signing a contract not to open another business within a 10 Km radius for the next five years.
The turnover of the shop for the previous financial year was $540,000.
Brain’s home is valued at $1.8m. He also has a 45% interest in a property development company which has assets of $5.4m. His wife also has a 5% interest in that company. The turnover of the property development company last year was $1.2m.
Advise Brain of the tax consequences arising from the sale.
Week 6 Fringe benefit tax
The taxable value of fringe benefits provided by XYZ Ltd to its employees for the current FBT year is:
•Cars - $32,000; input tax credits are available for GST purposes
•Loans - $6000; no GST has been paid
•External expense payments - $4,000 inclusive of GST. An input tax credit is available.
Calculate FBT payable for the year.
Week 7 Capital Allowance
Explain tax consequences for following term:
•Pooling of Assets
•Low – value pool assets
•Software development pool
•Small business concessions
Week 2 Residence and source
Nick Stannos arrives in Australia from a European country on 26 January. He rents a small apartment and accepts two jobs. By 30 June he has saved $10,000 and decided to return to Europe permanently.
1. For the relevant income year, will Stannos be regarded as a resident or non-resident? In any event, what difference does it make?
2. If Stannos had remained in Australia indefinitely and was regarded as a resident of Australia from 26 January, how would his European salary income of A$20,000 (derived in the period 1 July to 24 January) be taxed? Assume ex-Australia tax of A$3,000 has been paid in respect of this income.
Week 3 Income from Property
1. George owns a large cattle firm, parts of which are heavily timbered. He agrees to allow Mr. Smith to enter his land for the purpose of felling timber in return for a payment of $20 per tree removed. During the first tax year of his agreement, George receives $10,000 from Smith. What are the tax consequences of this transaction? Would your answer differ if Smith had promised to remove the timber?
2. The following year, George contracts to sell Smith 9,000 trees for $90,000. Smith is to enter George’s land for the purpose of felling and removing the trees, and is to pay the money by monthly installments regardless of whether the timber is removed or not. The agreement provides that if 9,000 suitable trees are not found upon the land, then there shall be a pro rata decrease in contract price.
3. In the following year, George decides to sell his farm to Brown for the sum of $200,000 plus “royalty†of $10 for every tree removed from the land for the next 10 years.
Advise George in each of the above situations as to his tax liabilities. Also advise him as to whether his receipts are income or capital on general principles. (Note that these cases are governed by CGT event DI)
Week 4 Income Classification
Briefly discuss the income tax implications of the following, stating which sections of the ITAA 1997 or ITAA 1936, if any, are most relevant.
1. A $10,000 bonus paid by the Australian Cricket Control Board to the captain of the Australian cricket team for outstanding leadership during a successful tour of England.
2. A boat valued at $35,000 given to an amateur footballer to turn professional.
3. Profit of $25,000 made by a trucking company on the disposal of one of the 30 trucks it has leased to carry on its business.
4. An exchange gain of $500,000 made by a manufacturer in respect of money borrowed in 1997 and used to finance construction of a new building.
5. Gift and payments made by a football club and its supporters to a star professional player, largely in their delighted response to his being selected to play for Australia. The club gave him a car valued at $25,000; supporters, through a collection at one game, gave him $2,425.
Week 5 Capital Gains Tax
Because of his wife’s ill-health, Brain sold his gift shop and family home in Victoria and moved to WA on 20 June this year. Brain had acquired the vacant premises 10 years ago for $750,000 and established the business on that date. He sold the business on 20 May this year for a net consideration of $1,880,000. This was made up as follows:
Items AUD $
1 Goodwill 440,000
2 Trading Stock 60,000
3 Fittings 120,000
4 Shop and Land 1,360,000
5 Less debt taken over secured over stock and fittings (100,000)
In addition, Brain received a further $20,000 for signing a contract not to open another business within a 10 Km radius for the next five years.
The turnover of the shop for the previous financial year was $540,000.
Brain’s home is valued at $1.8m. He also has a 45% interest in a property development company which has assets of $5.4m. His wife also has a 5% interest in that company. The turnover of the property development company last year was $1.2m.
Advise Brain of the tax consequences arising from the sale.
Week 6 Fringe benefit tax
The taxable value of fringe benefits provided by XYZ Ltd to its employees for the current FBT year is:
•Cars - $32,000; input tax credits are available for GST purposes
•Loans - $6000; no GST has been paid
•External expense payments - $4,000 inclusive of GST. An input tax credit is available.
Calculate FBT payable for the year.
Week 7 Capital Allowance
Explain tax consequences for following term:
•Pooling of Assets
•Low – value pool assets
•Software development pool
•Small business concessions
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