Unit Name/Code Tax Law/BACC3004
Assessment Type Assignment
Assessment Number 2
Assessment Name Assignment
Unit Learning Outcomes Assessed Learning outcomes Graduate attributes
1. Describe the taxation framework in Australia and identify the concepts and principles that underpin Australian Tax Law. Communication: The ability to communicate effectively, both orally and in writing, with a diverse range of audiences
Research: The ability to conduct thorough, accurate and targeted research
2. Explain how the main tax laws and regulations in Australia have been applied and identify the body of case law that informs current interpretations of the taxation regime. Research: The ability to conduct thorough, accurate and targeted research
Critical thinking and problem solving: The ability to address and solve problems creatively and in a structured and methodical way
Flexibility: The ability to critically assess and evaluate different approaches to issues and problems
3. Recognise, describe and analyse taxation issues and concepts with regard to problems encountered in commercial settings. Research: The ability to conduct thorough, accurate and targeted research
Critical thinking and problem solving: The ability to address and solve problems creatively and in a structured and methodical way
Flexibility: The ability to critically assess and evaluate different approaches to issues and problems
4. Demonstrate an understanding of substantive areas of taxation law including income tax, goods and services tax and fringe benefits taxes. Flexibility: The ability to critically assess and evaluate different approaches to issues and problems
5. Discuss the role and responsibilities of accountants with regard to taxation law and the preparation of taxation documents. Communication: The ability to communicate effectively, both orally and in writing, with a diverse range of audiences
Ethical behavior: The ability to identify and understand ethical problems and demonstrate ethical behaviour
Due Date and Time
Week 8
Friday 5pm
Weighting 30%
Assessment Description
This assignment explores practical issues in taxation law. It is important for you to have time to think through how to structure and present arguments.
Detailed Submission Requirements
Individual
Question 1 (10 marks)
During the income year ended 30 June 2019/20 Nicholas, a resident, received salary and wages income of $35,000, interest income of $3,000, an exempt compensation payment of $23,000, commission income of $4,000, a Living Away from Home Allowance (LAFHA) of $20,000, an Overtime Allowance $2,000 and a rental loss of $9,000. Assuming that he has PAYG (W) of $6,000. Ignore tax offsets.
Required: what is Nicholas tax payable / refund (Please show all workings)?
Question 2 (10 marks)
The Disco Biscuit Company is a resident company that owns and operates a car dealership. During the year, the company has provided the use of a car to a number of people. The details are shown below. For each of the below transactions, explain by referencing to legislation and case laws applicable whether the provision of the vehicle represents a fringe benefit.
a. Mary, the wife of Damon who is a salesperson of the company, received a car to use.
b. Gabby operates the business of providing an advertising consulting services to clients. The Disco Biscuit Company gives Gabby the use of a Mercedes for her services provided to it instead of paying a fee for her service upon their mutual agreement.
c. Nigel, a salesperson, receives the use of a Lexus, a luxury car.
d. Tristan, the managing director, is given the use of a Jaguar (car) instead of receiving a director’s fee.
Question 3 (10 marks)
During the 2019/20 income year, Maxwell Johnson, sold various assets that realized capital gains and losses as follows:
Items Amount ($)
Loss on sale of motor vehicle 5,600
Gain on sale of yacht (cost base not indexed) 21,900
Gain on sale of antique crockery (indexed cost base) 13,900
Loss on sale of jewelry 1,300
Gain on sale of land held as an investment (cost base not indexed) 24,000
Gain on sale of family home (cost base not indexed) 38,000
Loss on sale of shares 19,300
Gain on sale of rental property (indexed cost base) 21,000
Gain on sale of rare comic book collection (cost base not indexed) 7,500
Capital loss from a previous year from the sale of shares 6,400
In each case above, the asset has been held by Maxwell for more than 12 months and the relevant minimum cost thresholds have been exceeded.
Required: calculate the minimum net capital gain that Maxwell is required to include as assessable income for the 2019/20 income year.
Assessment
Section Requirements Weight 10% HIGH DISTINCTION
100-85% DISTINCTION
84-75% CREDIT
74-65% PASS
64-50% FAIL
49-0%
Structure
N/A Mark
Content
N/A Mark
Format, Grammar, Presentation and Referencing
N/A
TOTAL MARK 30 Overall comments:
Question 2
2a.
The use of the company by Mary amounts to a fringe benefit. In this case, since Mary is the wife to Damon, who is an employee of Disco Biscuits Company, means that Damon has received the company car hence he is subject to fringe benefit tax. The subject matter in this case is the company car and Damon being an employee he was allowed by the company to let his wife use the car. Therefore, in this case, this amounts to a fringe benefit as per the provision of section 7 (1) (a) (i) Division 2 of the Fringe Benefits Tax Assessment Act 1986. The section states that car benefits apply when an employee or an associate of the employee uses an employer’s car for personal use.
2b.
In this case, Gabby is a consultant to Disco Biscuit Company and has an agreement with the company to be offered a Mercedes Benz for the services provided. Gabby, in his capacity as a consultant does not make him an employee of Disco Biscuit Company which also exempts him from fringe benefit which is mainly accorded to employees of a particular company.
2c.
Nigel is an employee of Disco Biscuit Company, hence receiving a luxury car amounts to a fringe benefit. The company is allowing Nigel to use the car for personal use as well as the car is a luxury car and not a commercial vehicle. If it were a commercial vehicle to use in his capacity as a sales person this would not have amounted to a fringe benefit to him. The decision in this section is based on the provisions of Section 8 (2) (a) of the Fringe Benefit Assessment Act 1986, where a car may be exempted from fringe benefits is it is a van, or utility truck designed to deliver or carry a load of less than one tonne.
2d.
Tristan, the managing director receiving the use a Jaguar instead of a director fees means his employment benefits are enjoyed in the form of using a company’s car. Therefore, this means he will be using the company’s car for personal use which results into a fringe benefit and this may be assessable as a car benefit and not employment income under the Income Tax Assessment Act 1936 (Fringe Benefit Tax Assessment Bill 1986).
Question 3
Maxwell Johnson
Net Capital Gains for 2019/2020
Amount ($)
Gains subject to Capital Gains Tax
Gain on sale of antique crockery (indexed cost base) 13,900.00
Gain on sale of land held as an investment (cost base not indexed) 24,000.00
Gain on sale of rental property (indexed cost base) 21,000.00
Gain on sale of rare comic book collection (cost base not indexed) 7,500.00
Total capital gains 66,400.00
Less Capital Losses
Loss on sale of jewellery 1300
Loss on sale of shares 19300
Capital loss from a previous year from the sale of shares 6400
Total capital losses 27,000.00
Minimum net capital gain 39,400.00
Notes
All assets are not subjected to capital gains tax. Capital gains tax is applicable on shares, units and similar investments, cryptocurrency, leases, goodwill, licenses, foreign currency, contractual rights, and major capital improvements made to land or pre-CGT assets collectables and personal use assets above a $10,000 Chung 35). Capital gains tax is exempt on depreciating assets, main residence, personal use items less $10,000, and collectables less $500.
Loss on motor vehicle has not been considered in the computation of net capital gains since the motor vehicle is a depreciating asset and depreciating assets are exempt from capital gains taxes. Also, gain on the sale of a yacht not been used to compute the net capital gain since it is a personal use item which is exempt from capital gains tax. Moreover, the family home is exempted from capital gains since it represents the main residence of Maxwell Johnson. All other assets have been used in the computation of the Capital gains tax since they are subject to capital gains taxes.
Works Cited
Chung, Eddie. “The absolute beginner’s guide to capital gains tax.” REIQ Journal May 2017 (2017): 35.
Fringe Benefit Tax Assessment Bill 1986.
Fringe Benefits Assessment Tax Act 1986.
Income Tax Assessment Tax Act 1997.
