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ACC311

Taxation Law and Practice

Semester 1 - 2019

Mid Semester Test

Question 1 (5 marks)

Jane has asked you to prepare her income tax return for the current income year. Jane is an Australian resident for tax purposes and all income is from Australian sources.

Income    $

Salary as a trainee nurse           26,000

Sale of shares in Brown Pty Ltd (net gain)                                                     5,000

(these were bought as a long-term investment)

Interest income   3,000
(from a term deposit)

Rental income 10,000

(from an investment property)

Deductions     $

 

Nil     0

Required:

Calculate Jane’s taxable income and net tax payable including Medicare levy for the current year. Remember to include a reference from the Income Tax Assessment Act(s) for each line of your calculation. Marks will be allocated as follows: 3 marks for calculations and 2 marks for references.

Mark allocations:

Calculations:

Taxable income total – 1 mark

Medicare levy – 1 mark

Net Tax payable – 1 mark

References:

Salary – ½ mark

Shares – ½ mark

Interest income - ½ mark

Rental income – ½ mark

Question 2 (15 marks)

Jack Frost is in the widget making business. Jack has two product lines:

Widget A

Widget B

Units in each product line are identical and indistinguishable and Jack uses the FIFO inventory system and usually elects to value his trading stock at cost.

Jack produces the relevant data from his business and asks that you provide him with the following information (including supporting calculations and relevant references from the ITAA 1997 as he is a very meticulous businessman):

2018/2019

Product line 1	Widget A	Opening Stock – 1,600 units Purchases – 100 units Closing Stock – 90 units	Cost price per unit - $90 Sales price per unit - $250
Product line 2	Widget B	Opening Stock – 50 units Purchases – 300 units Closing Stock – 10 units	Cost price per unit - $60 Sales price per unit - $140

Required:

Prepare the 2018/2019 taxable income calculations for each of the product lines (please include relevant references). Marks will be allocated as follows: 9 marks for calculations and 6 marks for references.

Mark allocations:

Calculations:

For each calculation (there are two)

Sales proceeds: 1 mark

Purchases: 1 mark

Year end adjustment: 1 mark

Taxable income: 1 ½ marks

References:

For each calculation (there are two)

Sales proceeds: 1 mark

Purchases: 1 mark

Year end adjustment: 1 mark

Question 3 (15 marks)

Cathy Cash has been investing in shares for several years. Transactions for the current year are:

		Bought	Sold
1	300 Company Pty Ltd shares	$2 each 1 January 1983 Brokerage $10	$20 each 1 December 2018 Brokerage $300
2	450 Alphabet Pty Ltd shares	$10 each 1 June 1986 Brokerage $100	$7 each 1 August 2018 Brokerage $200
3	1,000 Medical Pty Ltd shares	$15 each 1 August 2018 Brokerage $100	$25 each 30 June 2019 Brokerage $200
4	550 Business Pty Ltd shares	$15 each 5 February 2002 Brokerage $100	$20 each 1 January 2019 Brokerage $150

Required:

1. Calculate the impact of each transaction on Cathy’s assessable income (including referencing).

2. Calculate the overall impact of all the share transactions on Cathy’s assessable income (including referencing).

Marks will be allocated as follows: 8 marks for calculations and 7 marks for references.

Mark allocations:

Calculations:

Requirement 1 (4 share transactions to consider): 6 marks

Requirement 2: 2 marks

References:

Requirement 1 (4 share transactions to consider): 6 marks

Requirement 2: 1 mark

WORKING PAPER MAY BE WRITTEN ON DURING PERUSAL