QUESTION 1
( a ) Clarissa is a single resident taxpayer aged 42 who lives with her 14 year-old daughter Jessica and her 10 year-old son Damon.
During the 2016/17 tax year, Clarissa derived a taxable income of $98,350 from her salary as an office administrator and her Payment Summary showed PAYG tax of $17,810 with withheld. She also received Family Tax Benefit Part A.
During the 2016/17 tax year, Clarissa spent the following amounts on behalf of herself and her dependants:
|
Expenditure
|
Self
|
Jessica
|
Damon
|
|
Doctor's fees in respect of illness
|
$ 1,300
|
|
$ 300
|
|
Optical expenses
|
500
|
$ 500
|
|
|
Day surgery fees for elective cosmetic surgery
|
3,100
|
|
|
Neither Clarissa nor her dependants are covered by private health insurance.
Clarissa claimed the medical expenses tax offset in 2013/14 and 2014/15.
REQUIRED:
(i) Calculate Clarissa's net tax payable or refundable for the 2016/17 tax year.
(ii) Calculate any tax offsets to which she is entitled, clearly showing all workings.
( b ) Destiny is a 57 year-old resident taxpayer. Destiny is single and derived taxable income of $63,000 for the 2016/17 tax year consisting of:
|
Net Business Income
|
$ 42,000
|
|
Gross Wages (no PAYG tax withheld)
|
10,000
|
|
Net Capital Gain
|
33,000
|
|
Net Loss from Rental Property
|
- 22,000
|
|
TAXABLE INCOME
|
63,000
|
Destiny was also in receipt of reportable fringe benefits amounting to $7,000.
Destiny does not have any dependants and was NOT covered by private hospital health insurance.
REQUIRED:
Calculate Destiny's net tax payable or refundable for the 2016/17 tax year.
Clearly show all workings for each component of your calculation.
QUESTION 2
Sunil Agarwal, a resident taxpayer, purchased a townhouse in Sydney as an investment property on 1 July 2016 which he made available for lease by tenants. Details of the purchase were as follows: Purchase Price $ 478,000
Stamp Duty $ 17,000
The vendor provided Sunil with a certified schedule indicating that the eligible construction costs of the property (in 2012/13) amounted to $140,000. The schedule also specifies that the adjustable value of depreciable fittings was $14,500 and has a remaining useful life of 5 years. Sunil recorded the following transactions for the 2016/17 tax year in respect of the property:
|
Receipts
|
|
|
Rent received (net of agents commission of $2,100)
|
$ 31,900
|
|
Recovery from the Rental Bond Board for damage left by tenants during March 2017
|
820
|
|
Reimbursement of water rates (usage portion only)
|
740
|
|
Rebate from State government in respect of washing machine purchased on 1 Oct 2016
|
150
|
|
Payments
|
|
|
Mortgage repayments to ANZ Bank - principal
|
2,100
|
|
Mortgage repayments to ANZ Bank - interest
|
27,100
|
|
Loan establishment fees to ANZ Bank for a 15 year mortgage to buy the property
|
|
|
- paid upon commencement of loan 1 July 2016
|
925
|
|
Council and Water Rates
|
3,560
|
|
Building Insurance premiums
|
610
|
|
Repair of carpet - carried out on 19 July 2016 in respect of damage by previous owner
|
1,845
|
|
Repair of guttering - carried out on 27 March 2017 in respect of damage by tenants
|
830
|
|
Renovation of bathroom - completed on 1 January 2017 (partial removal of a wall and replacement of tiling and porcelain fixtures)
|
8,500
|
|
Travel costs (see note 1)
|
3,200
|
|
Purchase of washing machine - 1 October 2016; 5 year effective life
|
1,250
|
|
Purchase of ceiling fans - 19 April 2017; 10 year effective life
|
240
|
Other Information Relating to Property - Note 1:
Sunil lives in Ballina. During the 2016/17 tax year Sunil made 4 trips to Sydney.
Each trip cost a total of $800 comprising: Return airfares $350; Meals and taxis $180; Accommodation $270. One of the trips was taken in July 2016 finalise the purchase of the property; another trip taken during May 2017 was to view another property that Sunil was considering purchasing; the remaining 2 trips were taken during the year in order to inspect the rental property;
Sunil received gross salary of $96,480 from his employer.
Sunil has diarised $470 of work-related expenditure including a briefcase costing $280 and $190 of stationery and work related journals (each costing less than $10). He has not retained any receipts.
Required:
Calculate Sunil's taxable income for the 2016/17 tax year.
QUESTION 3
Anna Rexic operates a weight loss clinic located in North Sydney. During the 2016/17 tax year, Anna entered into the following transactions:
|
Receipts
|
$
|
|
Gross fees from weight loss customers (see note 1)
|
534,790
|
|
Sales of weight loss products
|
1,736,400
|
|
Proceeds from sale of electronic weighing platform on 1 July 2016 (see note 2)
|
37,450
|
|
Proceeds from sale of point of sale register (currently in low value pool)
|
475
|
|
Proceeds from settlement of lawsuit (Fergus received damages for loss of
|
|
|
reputation following a newspaper article)
|
200,000
|
|
|
|
|
Payments
|
|
|
Salaries and employee costs
|
375,000
|
|
Purchase of trading stock ( see to note 3)
|
192,800
|
|
Rent of clinic premises ( see to note 4)
|
133,000
|
|
Purchase of new electronic weighing platform on 1 July 2016 ( see to note 2)
|
90,000
|
|
Purchase of new drinks refrigerator on 1 October 2016 (5 year life)
|
7,500
|
|
Purchase of new storage cupboards on 1 April 2017 (10 year life)
|
15,000
|
|
Other overheads all tax deductible
|
97,300
|
Other Information
Note 1:
Clinic fees are paid for in advance and are refundable if the consultation is not provided.
As at 30 June 2016, clinic fees received in advance totaled $23,900.
As at 30 June 2017, clinic fees received in advance totaled $17,800.
Note 2:
The original electronic weighing platform had an adjustable value of $27,450. The platform was replaced by a newer, more efficient version at a cost of $90,000 with an effective life of 4 years.
Note 3: Trading stock balances were:
- 30 June 2016 $31,220 (at cost)
- 30 June 2017 $39,670 (at cost)
Note 4:
Rent amounted to $7,000 per month and has been prepaid up to 31 January 2018.
Note 5: Other depreciable assets held by Anna included:
|
Asset
|
Cost
|
Date of Purchase
|
Effective Life
|
Adjustable Value as at 30/6/16
|
Method
|
|
Clinic Fittings
|
$ 56,000
|
1/1/2009
|
10
|
$ 23,490
|
Diminishing Value
|
|
Meeting room Furniture
|
9,000
|
1/7/2014
|
5
|
5,400
|
Prime Cost
|
|
Security System
|
1,500
|
1/7/2015
|
5
|
900
|
Diminishing Value
|
|
Blinds
|
1,200
|
1/7/2015
|
10
|
980
|
Diminishing Value
|
Note: Anna uses a low value pool which had a balance on 30 June 2016 of $2,000.
Required:
Calculate the taxable income of Anna for the 2016/17 income year.
QUESTION 4
Cameron Renly conducts an online business called New Age Fashions selling clothing and accessories by mail order. Cameron commenced business in 2014/15 but has found the business to not be profitable to date. Cameron has lodged income tax returns disclosing tax losses of $62,000 in 2014/15 and $28,000 in 2015/16.
During the 2016/17 tax year Cameron had the following transactions:
|
Amounts banked into business account
|
$
|
|
Cash received from accounts receivable for sales
|
294,500
|
|
Government enterprise subsidy (exempt income)
|
2,000
|
|
Compensation from internet provider for loss of income
|
25,000
|
|
(Cameron was unable to conduct business while his internet service
was inoperable for 2 weeks)
|
|
|
Additional funds contributed by Cameron to meet business needs
|
75,000
|
|
|
|
|
Amounts paid from business account
|
|
|
Cash paid to accounts payable for purchases of trading stock
|
208,000
|
|
Payments for internet and website services
|
42,800
|
|
Personal superannuation contributions paid
|
10,000
|
|
Car expenses (refer to note below)
|
6,440
|
|
|
|
|
Stock take data
|
|
|
Trading Stock as at 30 June 2016
|
16,500
|
|
Trading Stock 30 June 2017 - at cost
|
14,100
|
|
Trading Stock 30 June 2017 - at market selling value
|
25,800
|
|
Trading Stock 30 June 2017 - at replacement
|
12,900
|
|
Cameron has removed trading stock for his personal use to the value of
|
1,750
|
|
|
|
Ledger balances (GST exclusive)
|
|
|
Accounts receivable 1 July 2016
|
9,500
|
|
Accounts receivable 30 June 2017
|
11,400
|
|
|
|
Accounts payable 1 July 2016
|
24,700
|
|
Accounts payable 30 June 2017
|
22,100
|
|
|
|
Car Expenses:
Cameron has maintained records including a valid logbook which indicate that he has used his private car for a total of 5,500 business kilometers during the tax year which amounts 35% of business usage. The car is a 2,800cc Chrysler which was purchased by Cameron on 1 July 2016 for $64,000. Costs incurred by Cameron and listed in the payments summary included:
- Petrol, registration and insurance
|
$ 5,800
|
|
|
380
|
|
|
140
|
- Parking fees (during meetings with suppliers)
|
120
|
|
|
$ 6,440
|
Required:
Calculate Cameron's taxable income for the 2016/17 tax year and any unrecouped tax losses.
Show all available methods of determining Cameron's deduction for car expenses.
QUESTION 5
Gaylord Zoker holds part-time employment as both a flight attendant and a bus driver. Gaylord has received a letter from the ATO asking him to explain his income and deductions on his 2016/17 tax return. The return lodged by Gaylord included the following:
|
Assessable Income
|
$
|
|
Gross Salary - Seduction Airlines
|
36,500
|
|
Gross Salary - East Coast Buses
|
19,500
|
|
Travel Allowance (within reasonable limits)
|
4,800
|
|
Fully franked dividend (cash amount received)
|
350
|
|
Total
|
61,150
|
|
|
|
|
Deductions
|
|
|
Laundry of airline uniform (estimate)
|
175
|
|
Laundry of bus uniform
|
110
|
|
Skincare products used during flights (grooming expenses) (receipts kept)
|
215
|
|
Hairdresser and grooming costs (receipts kept)
|
450
|
|
Travel luggage used during flights (receipt has been lost)
|
250
|
|
Car expenses for travel between jobs
|
1,450
|
|
(total of 800km in his 1,800cc Toyota based on logbook maintained for 4 weeks)
|
|
|
Travel costs within Australia relating to allowance ($700 of receipts held)
|
5,500
|
|
|
8,150
|
|
Taxable Income
|
53,000
|
NOTE: Gaylord has received an evening shift allowance of $3,000 that he has not included as he does not believe that it is assessable.
Required:
Briefly list each error that Gaylord has made in his 2016/17 income tax return that he should disclose in his reply to the ATO.
Your list must include an explanation of each error identified and the amount to be adjusted.
QUESTION 6
Alberto Cortes is a resident Australian taxpayer employed as a lecturer by Universal Training Group. During the 2016/17 tax year, Alberto also sold two properties and some shares.
His Payment Summary from Universal Training Group showed the following for the year ended 30 June 2017:
|
Payment Summary
|
|
|
Gross Wages
|
$ 85,000
|
|
Performance Bonus
|
5,000
|
|
PAYG tax withheld
|
21,120
|
|
Union fees deducted and forwarded to Academics Federation
|
700
|
|
|
|
|
Alberto has also disclosed other amounts received during the 2016/17 tax return:
|
|
|
Winnings from casino (Alberto won a jackpot at one of the card tables)
|
15,480
|
|
Proceeds from sale of rental property on Gold Coast
|
432,000
|
|
Proceeds from sale of shares in Golden Mining NL
|
9,340
|
|
Proceeds from sale of shares on Blackpitt Ltd
|
415
|
|
Proceeds from sale of holiday house in Nelson Bay
|
397,000
|
|
Proceeds from sale of artwork (partially destroyed during cleaning)
|
750
|
|
|
|
Details Relating to Assets Sold:
- The rental property was originally purchased for $276,800 during 2006/07.
- The purchase price included eligible capital works from which Alberto has claimed a deduction of $19,400 during the period held.
- The Golden Mining shares were purchased for $2,770 during 2007/08.
- The Blackpitt shares were purchased for $4,075 during 2011/12.
- The holiday house was originally purchased for $428,000 in 2012/13. Alberto has incurred a further $20,000 in building extensions and $6,800 in rates and insurance during the period held. The property has only ever been used by Alberto for weekends away from Sydney.
- The artwork was originally purchased in 2014/15 for $5,000.
Other Expenses:
- Alberto has kept an estimate that he has used his 1,500cc car for 3,200 work related kilometers. He has also estimated that the petrol used for this amounted to $480.
- Alberto's net rental loss prior to selling his rental property was $2,090 for the 2016/17 tax year.
- Alberto uses a room in his home exclusively for work preparation. The room accounts for 25% of the floor space of his home. Alberto's mortgage interest, rates and insurance for the tax year amounted to $27,590 while electricity used for the room was estimated at 10% of $1,800.
Required:
Calculate Alberto's taxable income for the 2016/17 tax year.
Clearly show all workings in determining his net capital gain or capital losses available to carry forward.
QUESTION 7
Dave Banks, a resident taxpayer aged 58, was employed by Cool Brick Ice Creamery until 17 June 2017 when his position became redundant. Dave had total employment with the company of 20 years and 11 months.
Upon receiving the redundancy, Dave notified his superannuation fund that he intended to retire and drew his entire superannuation entitlement as a lump sum.
Amounts received by Dave from Cool Brick Ice Creamery for the year included
|
|
|
|
Gross wages 1/7/2016 to 17/6/2017 (PAYG tax withheld $27,000)
|
$ 76,000
|
|
Redundancy payment
|
117,840
|
|
Unused annual leave (all post 18/8/1993)
|
3,500
|
|
Unused long service leave
|
|
|
- Service pre 18/8/1993
|
7,500
|
|
- Service post 18/8/1993
|
16,400
|
|
Amounts received from his superannuation fund included:
Superannuation Lump Sum
|
|
Tax free component (Dave's own contributions)
|
95,000
|
|
Taxable component (element taxed in the fund) (PAYG tax withheld $17,325)
|
260,000
|
|
|
|
|
Dave is covered by private patient hospital insurance.
Required:
( a ) Calculate Dave's taxable income for the 2016/17 tax year.
( b ) Calculate Dave's net tax payable or refundable for the 2016/17 tax year.
QUESTION 8
Paul Rufus is employed as a salesman. He also operates a small business selling beer coasters. During the 2016/17 year Paul found it necessary to sell some assets to pay for his business expenses.
Transactions during the 2016/17 tax year included:
- Gross salary from employment of $84,000.
Information Relating to Assets Sold:
- In August 2014 Paul sold some jewellery for $600 that he had bought in March 2013 for $350.
- In May 2015 Paul sold his 'Cardio Twister' (personal exercise equipment) for $800 that he had purchased in August 2015 for $600.
- In July 2016 Paul sold some shares in Sure Thing Ltd for $24,800 that he purchased in August 2015 for $11,300.
- Paul has capital losses of $5,200 carried forward from 2015/16 relating to the sale of land.
Information Relating to Beer Coaster Business for 2016/17 tax year:
- Paul has derived $17,400 in sales.
- Paul has paid $11,275 for purchases of trading stock.
- Payments of $4,800 were made by Paul as bribes to potential customers. There is no record of these transactions as cash was paid.
- In 2015/16, Paul had incurred set-up costs for the business of $10,000 consisting of market research.
- Paul has carried forward $16,340 of non-commercial business losses from this business.
- Stock on hand at 30 June 2017 was Nil and there was no opening stock.
Required:
Calculate the taxable income of Paul for the 2016/17 tax year.
Clearly showing workings, calculate any remaining non-commercial business losses that may be carried forward.
Show all workings used to determine Paul's net capital gain. Where assets are exempt or disregarded, provide a reason.