HA3042 Assignments Instructions and Requirements
QUESTION 1 (5 MARKS)
Furnaces Pty Ltd was 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
HA3042 Taxation Law Individual Assignment T2.2020
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 Answer 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 marks
Less Refundable Tax Offsets
PAYG Withholding 0.5 mark
Franking Credits 0.5 mark
Net Tax Payable 1 mark
Total Marks 10 marks
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)
(a) An employer provides a Christmas lunch at a local restaurant, costing $1,000, for 10 of its key employees. (2 marks)
(b) 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)
(c) An employer gives each of its 15 staff a leg ham each valued at $60 for Christmas. (2 marks)
(d) 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)
(e) 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)
HA3042 Taxation Law Individual Assignment T2.2020
HA3042 - Individual Assignment - Marking Rubric
Criteria Excellent Very Good Good Satisfactory Unsatisfactory
For Question 1, students need to answer the following elements correctly
General Deductibility Rules for Repairs Student knows how to use the ITAA 1997, know howto apply the law to the Furnaces' deductibility of the commercial kitchen expenditure. Very good identification of the Furnaces' deductibility of the commercial kitchen expenditures and discussion of the issues. Majority of relevant issues identified and discussed in relation to the given scenario. The area of deduction law is correctly identified but the statement does not clearly describe the legal problem/s and conclusions that need to be addressed in relation to the given scenario. The relevant area of law in relation to the given scenario is not identified.
Identification of the case assisting in decision making in this question. The relevant legal case in relation to the Furnaces' deductibility of the chimney expenditures is clearly explained and their correct source of authority is given. Similar yet relevant legal case in relation to the Furnaces' deductibility of the chimney expenditures is clearly explained and their correct source of authority is given. Close enough yet relevant legal case in relation to the Furnaces’ deductibility of the chimney expenditures is clearly explained and their correct source of authority is given. Some identification of legal case in relation to the Furnaces’ deductibility of the chimney expenditures is explained but their correct source of authority is not given. No relevant legal cases in relation to the deductibility of the given scenario have been identified and no correct source of authority is given.
Thorough yet succinct discussion on considerations required for repairs The discussion is a clear and comprehensive analysis of the relevant legal principles in relation to the Furnaces’ deductibility of the furnace expenditures. Very good discussion and analysis of the relevant legal principles in relation to the Furnaces' deductibility of the furnace expenditures. Good discussion and analysis of the relevant legal principles in relation to the Furnaces' deductibility of the furnace expenditures. The discussion considers some of the relevant legal principles but does not apply those principles to the key facts to support logical arguments in relation to the given scenario. The discussion of the facts does not refer to any relevant capital gain legal principles in relation to the given scenario.
Thorough yet succinct discussion on occasions where expenses are not considered as repairs and therefore, no deduction is available. All relevant legal principles in relation to the Furnaces' non-deductibility of the chimney expenses is clearly explained and their correct source of authority is given. Most of the relevant legal principles in relation to the Furnaces' non-deductibility of the chimney expenses is clearly explained and their correct source of authority is given. Some of the legal principles in relation to the Furnaces' non-deductibility of the chimney expenses is clearly explained and their correct source of authority is given. Few identifications of the legal principles in relation to the Furnaces' non-deductibility of the chimney expenses is clearly explained but the correct source of authority (section of Act or relevant case) has not been cited. No relevant legal principles in relation to the given scenario have been identified.
Apply the rules and cases above and provide conclusion on deductibility of expenses. Student knows how to use the ITAA 1997 in relation to the Furnaces' deductibility of the chimney expenditures, and know how to apply the law in a real scenario. Very good identification of the consequences in relation to the Furnaces' deductibility of the chimney expenditures and discussion of the issues. Majority of relevant issues identified and discussed in relation to the given scenario. The area of law in relation to the Furnaces’ deductibility of the chimney expenditures is correctly identified but the statement does not clearly describe the legal problem/s and conclusions that need to be addressed. The relevant area of law in relation to the given scenario is not identified.