Assessment Task - Tutorial Questions
Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit.
Unit Learning Outcomes Assessed:
1. Demonstrate an understanding of the Australian income tax system, the concepts of income and deductions, CGT, FBT, GST general anti-avoidance provisions and income tax administration;
2. Identify and critically analyze taxation issues;
3. Interpret the relevant taxation legislations and case law;
4. Apply taxation principles to real life problems.
Description: Your task is to answer a selection of tutorial questions for weeks 1 to 5 inclusive and submit these answers in a single document. The questions to be answered are:
Problem 1: With reference to relevant legislation, case law and secondary sources, briefly explain different functions of taxation. (maximum 300 words)
Problem 2: Amandeep born in India and migrated to Australia. He lives in Australia permanently. He still holds Indian passport. Amandeep works with the New Zealand Princess Cruises tours and most of the income year is in New Zealand. He signed an employment contract for this position in the company's Australian office in Sydney. Amandeep has two kids that are living with his wife Sandeep in Sydney.
Three years ago, Amandeep purchased a unit apartment in Sydney. Amandeep and his wife holding dividend yielding shares in an Indian public company called Hindustan Unilever. Amandeep and Sandeep have an Australian bank account as well. Amandeep's employer pays his salary to this bank account every fortnight.
Biannually Amandeep receives a holiday package from his employer, New Zealand Princess Cruises tours and he is using this package with his family traveling in Australia interstates or moves to India to visit his in laws.
Required: With reference to the relevant laws, discuss whether Amandeep is an Australian resident for tax purposes and also critically discuss whether Amandeep needs to pay income tax on his salary and investment income explained above. (maximum 400 words)
Problem 3: Gary owns a commercial building and leased his premises to John to conduct a bakery business. Under the lease contract, John is obliged to repair any modified or damaged parts of the building after the lease term. However, John fails to repair Gary's building, which was damaged due to machinery and fixtures' instalments. John agreed to pay Gary $3,100 to cover the repair expenses.
Required: With reference to relevant legislation and case law discuss the tax treatment of this payment for Gary. (maximum 300 words)
Problem 4: John owns a convenience shop called City Conv. The following events occurred for John during 2019-2020 financial year.
(i) John incurred legal expenses as he was sued for false advertising.
(ii) John purchased new fridge to the shop - $800. In addition, his builder added more space to the shop front. This cost him $22,000.
(iii) John ordered 1000 new T-shirts with printed City Conv's logos for marketing purposes. These costs him $1,500.
(iv) John received a City of Sydney fine for putting his sales item for display outside his shop without a permit. He required to apply for a permit to use the footpath.
Required: With reference to relevant legislation and case law advise John on the assessability and/or deductibility of above events. (maximum 300 words)
Problem 5:
A. Alex purchased a CNC machine on 1st October 2019 at a cost of $110,000 (including GST). This machinery is estimated to have a useful life of seven years.
B. Alex purchased a Holden car on 1 May, 2019 at a cost of $63,000, estimated to have a useful life of five years.
Required: With reference to relevant legislation and case law, discuss and calculate what amount is allowed as a deduction for the decline in value of the machinery and the Holden car discussed above, using both prime cost and diminishing value methods. (Maximum 200 words).