ACC311 Taxation Law and Practice Semester 1, 2020
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ACC311 Taxation Law and Practice
Semester 1, 2020
Question 1: Companies and Shareholders
Total Marks: 25
a. Prepare the company’s franking account for this income year. Reference authorities as required – 15 Marks
A resident company (not a Small Business Entity), has an opening credit balance of $15,000 in its franking account in this income year. It has the following transactions in the year. Ignore the impacts of any over or under franking:
|
1. |
21 July |
Final PAYG instalment of $7,500 paid |
|
2. |
1 August |
Paid a $10,000 cash dividend (franked to 50%) |
|
3. |
15 September |
Received a dividend with franking credits of $2,500 |
|
4. |
21 October |
PAYG instalment of $5,000 paid |
|
5. |
29 November |
A Salary paid to a shareholders was deemed to be dividend under Div 7A of ITAA36. The amount of the deemed dividend was $22,000. |
|
6. |
31 December |
Fully franked dividend of $15,000 received |
|
7. |
21 January |
PAYG instalment of 5,000 paid |
|
8. |
1 March |
Received a $22,000 cash dividend fully franked |
|
9. |
21 April |
PAYG instalment of $5,000 paid |
|
10. |
28 April |
Payment of fringe benefits tax of $13,000 |
|
11. |
21 May |
Partially franked dividend of $15,000 paid (franked to 60%) |
|
12. |
15 July |
Payment of unfranked dividend of $15,000 |
b. Provide a brief discussion and examples of the deductions available under Division 43 of the ITAA 97 (capital expenditure on buildings used for income-producing purposes and other capital works)
Reference authorities as required – 10 Marks.
Question 2: Partnerships
Total marks: 25
Calculate the ITAA 1936 s90 net income of the partnership for the current year and determine the distribution to each partner. Reference authorities as required – 25 marks.
Jack and Jill carry on a partnership together. Jack and Jill share profits in the ratio 2:1.
The partnership gross receipts for the current income year amounts to $250,000. It includes (among other items):
|
Partially franked dividend (carrying imputation credits of $5,000) |
20,000 |
The following were paid from the partnership cheque account during the current income year:
|
Salary to Jack |
40,000 |
|
Advance to Jill |
5,000 |
|
Wages to employee |
10,000 |
|
Purchases of trading stock |
30,000 |
|
Lease payments on two cars - Both cars were used for business purposes. - Jack uses one car 10% for private purposes - Jill uses one car 50% for private purposes
|
$4,000 |
|
Accounting and administration fees |
$750 |
Question 3: Offsets
Total Marks: 25
From the below information, prepare a statement of the assessable income and deductions of Fred Barnes for the current income year. Calculate Fred’s net tax payable. Reference authorities as required – 25 marks.
Fred Barnes provides the following information in respect of receipts and expenditures for the year ended 30 June 2020:
Receipts
|
1 |
Salary |
45,000 |
|
2 |
Dividends franked to 70% (excluding gross up) |
1,500 |
|
3 |
Car expense reimbursement from employer (Calculate this on a cents per kilometre basis – Fred has travelled 6,000km for work this year) |
? |
|
4 |
Entertainment allowance from employer |
500 |
Expenditure
|
1 |
Car expenses incurred on work related travel (Calculate this on a cents per kilometre basis – Fred has travelled 6,000km for work this year) |
? |
|
2 |
Childcare fees (after school care) |
1,800 |
|
3 |
Interest paid on a loan from Fred’s brother used to buy shares in a listed company. The interest rate is at the benchmark interest rate. |
150 |
|
4 |
Dry cleaning of a distinctive work uniform |
140 |
|
5 |
Parking fine (parking on a yellow line outside a work site) |
250 |
Further information
|
1 |
Fred maintained the following dependants: (a) One school aged child who is in full time primary education. (b) One school aged child who is in full time secondary eduction. (c) One child aged 19 who is on a “gap” year and not working or enrolled in formal education. (d) A wife who is in receipt of interest income of $100. (e) An invalid father, aged 74, who receives a disability support pension of $2,900. |
|
2 |
Fred and his family live permanently in a town in a Zone A. |
|
3 |
Fred has private health insurance but has not claimed the private health insurance offset upfront. His total premium for the year was $2,500. |
|
4 |
Fred is aged 53. |
|
5 |
Ignore any family threshold reductions for Medicare levy. |
Question 4: FBT - Motor Vehicles
Total marks: 25
Fringe Benefits Tax (FBT): Calculate the FBT payable based on the car fringe benefit, using two different methods. The employer is entitled to claim input tax credits. Reference authorities as required – 25 Marks.
Assumptions:
A car is garaged at an employee’s home each night, apart from 7 nights when the car was in airport parking and 5 nights when the car was at the mechanic’s workshop for repairs.
Other information:
An employer purchased a new car at a cost of $48,000 on 1 November 2019. This car is provided to an employee to use. The use is mainly for business purposes – of the 45,000 km travelled to 31 March, only 15,000 km were for private purposes.
(Days from 1 November 2019 to 31 March 2020 totals 152 days)
Expenses incurred were:
|
Registration and insurance for 12 months |
1,200 |
|
Petrol and oil (per month) |
500 |
|
Repairs (cracked windscreen) |
550 |
|
Contribution by employee for petrol and oil (declaration provided to employer) |
200 |
|
Air conditioner installed 1 November 2019 and already included in the cost of the vehicle |
2,000 |
2022-06-01