Please be sure that you do it according to the australian legislation and tax rulings, providing sections and references.
PART A:
Note: All amounts are in Australian dollars. Ignore any double tax agreements.
You are an Australian-resident individual. During the income year ended 30 June 2015 you earned the following amounts:
• $90,000 (gross) salary from working in Australia. Australian tax withheld was $40,000.
• $10,000 (gross) salary from working in France for two months, on which $4,000 French income tax was paid.
• $30,000 capital gain net of any applicable discount from the sale of shares in a United States company. United States tax of $12,000 was paid on this.
• $35,000 as a fully franked dividend from an Australian resident company. This amount received is net of $15,000 franking credit.
• For foreign income tax paid, you wanted to know how much you can claim as foreign income tax paid in accordance with the Foreign Income Tax Offset (FITO) limit. You would do a further research on this matter.
• You have a private health insurance cover for the whole year under Medibank Private.
In addition to the above:
You and Maxine are equal partners in a partnership. The partnership operates a car dealership selling brand new and second-hand cars. The partnership is registered for GST purposes.
Note: All amounts are GST-exclusive unless otherwise stated.
During the year ended 30 June 2015, the partnership had the following transactions:
1. Cash received from sales of $2,500,000. Accounts receivable balances as at year end were as follows:
• 30 June 2014: $260,000.
• 30 June 2015: $180,000.
2. Trading stock purchases of $1,200,000. All purchases satisfy the requirement of being on hand. Opening stock value for tax purposes is $1,300,000. Closing stock value for tax purposes are as follows:
• Market selling price: $1,600,000.
• Replacement price: $1,400,000.
• Cost: $1,100,000.
3. Interest expense of $400,000 in relation to a $2 million bank loan. The money was used as follows:
• Working capital: $1,200,000.
• Return of capital to partners: $800,000.
• The partners used the money returned to them to carry out extensive renovations to their private home.
4. Parking fines incurred by employees of $2,100.
5. Salary costs of $500,000. Of this amount, $80,000 was paid to Maxine as salary.
6. Restaurant meal expenses of $5,000. Records indicate that these expenses were incurred taking highly valued corporate clients to dinner in order to maintain good business relationships. You and Maxine were the only persons from the business to attend. The partnership has not made a meal entertainment election for FBT purposes. You wanted to know how much you can include in your allowable deductions and might do additional research on this matter.
7. Clothing allowance of $3,000 was paid to sales employees on 30 June 2015 to purchase more professional attire as required.
8. Professional fees of $6,000 paid to Raul David Chartered Accountants on 28 February 2015. The fees relate to investment advice to assist the partnership to set up a small share portfolio of $1,400 and the preparation of the BAS and compliance with GST obligations of $4,600.
REQUIRED:
(a) Calculate the minimum net income of the partnership for the income year ended 30 June 2015. For all items (excluding items 1 and 3) provide a relevant section reference or case law to support your answer. For items 1 and 3 provide relevant case law to support your answer. Explain all exclusions.
| Item |
Description/calculation |
References (Legislative references are to ITAA 1997 unless otherwise stated) and/or Case law |
Amount ($) |
| 1 |
Sales: |
|
(+) for assessable income, (-) for allowable deductions |
| 2.. etc. |
|
|
|
|
|
|
|
| NET INCOME |
|
$XXX,XXX |
(b) Calculate your minimum tax payable by, or maximum refundable, for the income year ended 30 June 2015. Show all workings, references are not required.
(c) After completing your calculations in (b), download the electronic copy of the Individual tax return 2015 (NAT 1371-6.2015) from the ATO website and fill out the required information to complete your income tax return accordingly.
PART B
Manny is an Australian resident who presents the following information relating to the 2015 income year:
1. Sold BHP shares for $20,000. The contract for sale was signed on 29 June 2015 and settlement occurred on 2 July 2015. The shares were acquired in 2007 for $25,000.
2. Sold his stamp collection (which was not held for a profit making intention) for $5,000. He bought it for $2,000 on February 2015.
3. Sold a house in Manly for $1 million. Manny's grandmother bought the house for investment in 2000 for $300,000 and Manny inherited it in 2010. Manny continued to rent it out until it was sold. At the time of his grandmother's death, the house was worth $800,000. The total deduction claimed under Division 43 of the Income Tax Assessment Act 1997 was $60,000.
4. Received a trust distribution of $5,000. He was advised this was all the discount capital gains derived by the trust. Manny wanted to do a further research on this matter as he is not sure on its capital gain tax implications.
5. Received compensation of $50,000 for pain and suffering from a work-related accident.
6. Carried forward capital losses $2,000.
REQUIRED:
Calculate Manny's net capital gain for the year ended 30 June 2015. Show your calculations in good form. If a capital gain is exempt, provide the relevant section reference.