TAX305-Taxation
Question 1
Part A
Ronny is your client and has come to you to prepare his tax return. During the 2018-19 financial year, Ronny has disposed of the following assets:
(a)Ronny purchased a motor vehicle for personal use in May 2017 from an auction warehouse for $25,000. Ronny has spent $5,000 on improvements to the vehicle. In June 2019 Ronny sells the vehicle for $45,000.
(b)Ronny purchased a vacant block of land in May 1991 for $300,000. In April 1998 Ronny subdivides the vacant block of land into two equal portions, both portions are valued at $200,000 each. In May 2019 Ronny sells one of the vacant blocks of land for $400,000
(c)Ronny acquired ANZ shares on 15 December 2018 for $25,000. He sold those shares on 2 May 2019 for $40,000.
Calculate Ronny’s Capital Gain, subject to Tax for the year ending 30 June 2019. Provide justification for your calculations using legislation and case law.
Part B
Your client City Wreckers Pty Ltd has 25 employees and has approached you for advice on the following transactions:
(a) Payment to employee for an estimated cost of electricity used in his home workshop.
(b) Loan to an employee at no interest. The employee used the loan as a deposit to buy a holiday home with intention to rent it out.
(c) Payment of an employee’s childcare fees.
(d) Providing alcohol for Friday BBQ which is held each week after work.
(e) $150 gift card to all employees as a Christmas present.
(f) Payment of employees’ registration for the wrecker’s workers union.
(g) Payment of superannuation contributions.
Advise City Wreckers Pty Ltd which of the above items will be subject to Fringe Benefits Tax. Provide justification for your calculations using legislation and case law.
Question 2
No.1 Supermarkets Pty Ltd operates a corner store and provides you with the following detail to prepare their December 2020 Business Activity Statement. No.1 Supermarkets is registered for GST on a quarterly accrual basis. All amounts below are stated as GST inclusive where GST is applicable and No.1 Supermarkets Pty Ltd holds tax invoices where applicable. All invoices are dated during the period 1 October 2020 to 31 December 2020.
Receipts
$
440,000 Receipts from general grocery sales
300,000 Receipts from sales of fruit and vegetables
25,000 Receipt from rental of the residential apartment above the shop
5,000 Interest on Bank Deposits
110,000 Receipts from Sale of alcohol
6,000 Credit card fees for customers who used credit card
Payments
$
180,000 Purchase general groceries
5,500 Maintenance cost for the residential apartments
50,000 Salary paid to employees
66,000 Purchase of fridges
3,500 Rates on the shop building paid to the Council
1,400 Water expenses paid to Landlord as part of Rent
22,000 Rent paid on the shop
175,500 Purchase of fruit and vegetables from the growers
Discuss the GST implications of each of the above transactions. Advise No1. Supermarkets Pty Ltd of the Net GST payable/refundable for the December 2020 Business Activity Statement. Provide justification for your calculations using legislation, case law and rulings.
