Tax Planning - Anti Avoidance Provisions - Tax Administration - Taxation Law Assignment Help

Assignment Task

Question 1

Thomas is in the business of selling computers and software. Most customers pay at the time of delivery. However, Thomas provides credit to his largest customers. During the year ended 30 June 2019 Thomas received $2,800,000 in cash for sales of computers and software. Sales which had been made during the year ended 30 June 2018, but which were paid for in the year ended 30 June 2019 were $260,000 and are included in the $2,800,000 above. At 30 June 2019 sales of computers and software not yet paid for amounted to $430,000. During the year ended 30 June 2019 purchases of computers and software were $1,800,000 and at the end of 30 June 2019 stock on hand was $150,000. Thomas’s closing stock for the year ended 30 June 2018 was $630,000. During the year ended 30 June 2019 Thomas took 2 computers from his stock for private use. The computers cost him $1,240 each and had a market value of $1,630 each. He also gave away another 4 similar computers to friends during the year.
Required:
What is Thomas’s taxable income, assuming there are no other relevant transactions.

Question 2

Gareth had an overall loss for the year ended 30 June 2018 from all his activities of $180,000 (there were no capital losses). Included in this loss of $180,000 was a donation to a charity of $25,000. During the year ended 30 June 2018 Gareth earned exempt income of $11,000. Gareth had business income of $500,000 for the year ended 30 June 2019. During the year ended 30 June 2019 Gareth also received an inheritance of $80,000 (lump sum) and real estate of $1,630,000 from a distant relative who died on 14 August 2017.

Required:
What is Gareth’s taxable income for the 2019 tax year, assuming there are no other relevant transactions?

Question 3

On 1 July 2018 Maxwell bought a rental property for $820,000. He borrowed $530,000 on the same day from the bank to buy the property. The term of the loan was 4 years. The property was leased on 1 July 2018. He received rent in cash from his tenants during the year ended 30 June 2019 in the amount of $85,000. Included in this amount was a payment of $11,000 on 28 June 2019 as rent for the month of July 2019.
Required:
What is Maxwell’s assessable income for the year ended 30 June 2019?

Question 4

Maxwell (from Question 3) also incurred the following expenses during the year ended 30 June 2019 in relation to the property:

• Repairs to the front fence damaged by his tenant $1,750
• Agent’s Commission for collecting rent $3,780
• Loan Repayments ($6,250 principal and $40,250 interest) $46,500
• Loan application fee (paid on 1 July 2018) $1,200
• Stamp duty on the mortgage for the loan (paid on 1 July 2018) $1,800
• Stamp duty on the purchase of the property (paid on 1 July 2018) $33,000
• Building a garage at the side of the property on 1 January 2019 $103,500
• New microwave (purchased 1 July 2018 with an effective life of 5 years) $1,650
• Repairs on 2 July 2018 to the Stove damaged in June 2018 $470

Thomas wants to minimise his taxable income for this year.

Required:
Calculate Maxwell’s allowable deductions for the year ended 30 June 2019.

Question 5

Timmy and Tammy are in partnership in equal shares and carry on a business of selling comic books. They agree that Timmy will receive a wage of $50,000 because he works in the shop. Tammy received interest of $20,000 on her partnership capital account. Timmy has wages from his lecturing job of $70,000 and Tammy has unfranked dividends of $60,000. Both have individual gift deductions in the amount of $4,500 for Timmy and $3,500 for Tammy. They do not employ any staff. The accounts for the 2019 tax year showed the following:
Sales of comic books $440,000
Purchase of comic books $225,000
Value of comic books on hand 30 June 2018 $85,000
Value of comic books on hand 30 June 2019 $46,000
Wages to Timmy $50,000
Interest to Tammy on her capital account $20,000
Shop Rent paid $30,000
Electricity and Telephone for the shop $7,000

Required:
(a)What is the net income or net loss of the partnership for the 2019 tax year?

(b)What is the distribution of the net income or net loss of the partnership
between the partners for the 2019 tax year?

(c)What is the taxable income of each of the partners for the 2019 tax year?

Question 6

Michaels Pty Limited had a Benchmark Franking Percentage of 80% for the year ended 30 June 2019. On 1 July 2018 it paid a dividend of $90,000 franked to 65% to its shareholders. Then on 1 February 2019 it paid a dividend of $250,000 franked to 90% to its shareholders.

Required:

What are the consequences of these two events for Michaels Pty Limited for the year ended 30 June 2019? Only advise on the consequences for Michaels Pty Limited NOT its shareholders.

Question 7

Eric is a mechanic who is employed by Mechano Pty Ltd. He earns an annual salary of $45,000 plus overtime. During the 2019 tax year in addition to his salary he also worked 50 hours overtime at $70 per hour. Ten of these hours were performed in the last week of June 2019 and were not paid to him until 14 July 2019. In addition to his salary he also received a Tool Purchase and Maintenance Allowance of $1,500. Eric received franked dividends of $2,200 which had franking credits of $300 attached. In
addition, Eric received a lump sum legacy of $80,000 from his grandmother who died during the year. Eric owned a rental property from which he received rent of $11,000 ($1,000 per month) for rent from 1 July 2018 to 31 May 2019 inclusive. On 1 June 2019 the tenant prepaid rent for 12 months.

Required:
Calculate Eric’s Assessable income for the year ended 30 June 2019.

Question 8

On 15 December 2018 Eric (from Question 1) bought himself a new set of tools worth $950. During the 2019 tax year he also bought miscellaneous spanners, screwdriver etc. for a total of $800. None of the miscellaneous spanners etc. cost more than $300 and were generally to replace items he had lost or that were no longer working properly. Eric also bought overalls for work which cost $340 to purchase (these were only expected to last a year) and a further $100 in laundry expenses during the year. Eric was required during the year to travel to the homes of some clients and carry out services on their cars. He had to take with him his full toolkit to enable him to properly carry out the work. This travel fell into the following categories:

• Travel from Eric’s home to clients’ homes $200
• Travel from clients’ homes to work $180
• Travel from work to clients’ homes $300
• Return to work from client’s homes $300

Expenses in relation to the rental property were rates and taxes of $560 and interest of $15,000. A commission of 10% of all rent collected was paid to the real estate company which managed the rental property. On 1 June 2019 Eric took out a small loan to assist with some repairs he intended to carry out on the property. There was
stamp duty of $200 paid on the loan and loan application fee of $50. These were all paid on 1 June 2019. The loan was to be repaid in 3 years. No interest was paid in the current year. Assume all depreciating assets, if any, have an effective life of 5 years and Eric wants to minimise his taxable income.

Required:
Calculate Eric’s allowable deductions related to his employment for the year ended 30 June 2019.

Question 9

Phil Estein purchased a house as a rental property on 1 July 2018. Phil rented out the house out from 1 July 2018 to 30 June 2019. He received $55,000 rent in cash up to 30 June 2019 and he received another $5,000 rent in cash on 5 July 2019 for the month of June 2019.

Required:

What is Phil’s assessable income for the year ended 30 June 2019?

Question 10

Phil Estein (from Question 1) paid the following amounts during the year ended 30 June 2019:

• The property was constructed at a cost of $800,000 in 2001 and first rented out soon after.
• $10,000 on 1 August 2018 to buy a new air conditioning system with a useful life of 10 years after the old one was destroyed by the tenants. The new air conditioning system was exactly the same model as the old one. He wishes to maximise his deduction this year. However, as the air conditioning system was too noisy he sold it on 1 June 2019 for $8,000.
• $5,000 interest during the year ended 30 June 2019 on a loan borrowed for renovations to the rental property after Phil mortgaged his own home to secure the loan.
• $2,000 on 3 July 2018 for retiling the roof of the house after it had been damaged in a storm which happened on 3 June 2018.
• $500 on 10 July 2018 for fixing a light fitting that blew up after being used by his tenants for 10 days without a break.
• $1,000 fine paid on 2 February 2019 to the local council because his tenants cut down a tree on the property illegally.
  Required:
  Calculate Phil’s allowable deductions for the year ended 30 June 2019 giving reasons for your answer.

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