Income Classification:
Briefly discuss the income tax implications of the following, stating which sections of the ITAA 1997 or ITAA 1936, if any, are most relevant.
1. A $10,000 bonus paid by the Australian Cricket Control Board to the captain of the Australian cricket team for outstanding leadership during a successful tour of England.
2. A boat valued at $35,000 given to an amateur footballer to turn professional.
3. Profit of $25,000 made by a trucking company on the disposal of one of the 30 trucks it has leased to carry on its business.
4. An exchange gain of $500,000 made by a manufacturer in respect of money borrowed in 1997 and used to finance construction of a new building.
5. Gift and payments made by a football club and its supporters to a star professional player, largely in their delighted response to his being selected to play for Australia. The club gave him a car valued at $25,000; supporters, through a collection at one game, gave him $2,425.
Capital Gains Tax:
Because of his wife’s ill-health, Brain sold his gift shop and family home in Victoria and moved to WA on 20 June this year. Brain had acquired the vacant premises 10 years ago for $750,000 and established the business on that date. He sold the business on 20 May this year for a net consideration of $1,880,000. This was made up as follows:
Items AUD $
1 Goodwill 440,000
2 Trading Stock 60,000
3 Fittings 120,000
4 Shop and Land 1,360,000
5 Less debt taken over secured over stock and fittings (100,000)
In addition, Brain received a further $20,000 for signing a contract not to open another business within a 10 Km radius for the next five years.
The turnover of the shop for the previous financial year was $540,000.
Brain’s home is valued at $1.8m. He also has a 45% interest in a property development company which has assets of $5.4m. His wife also has a 5% interest in that company. The turnover of the property development company last year was $1.2m.
Advise Brain of the tax consequences arising from the sale.
Fringe benefit tax:
The taxable value of fringe benefits provided by XYZ Ltd to its employees for the current FBT year is:
• Cars – $32,000; input tax credits are available for GST purposes
• Loans – $6000; no GST has been paid
• External expense payments – $4,000 inclusive of GST. An input tax credit is available.
Calculate FBT payable for the year.
Capital Allowance:
Explain tax consequences for following term:
• Pooling of Assets
• Low – value pool assets
• Software development pool
• Small business concessions