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HA3042 Taxation Law Tutorial Questions Assignment 1 Answer

Assessment Task  Tutorial Questions Assignment 1

Unit Code: HA3042

Unit Name: Taxation Law

Assignment: Tutorial Questions Assignment 1

Weighting: 25%

Total Assignment Marks: 50 Marks

Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit

Assignment word limit: 1000 words (acceptable to be 10% above or below this word limit).

Unit Learning Outcomes Assessed:

  1. Gain a broad understanding of tax law
  2. Demonstrate ability to analyse and synthesise complex tax law issues
  3. Demonstrate ability to apply principles of tax law to complex legal problems

Description: Each week students were provided with three tutorial questions of varying degrees of difficulty. These tutorial questions are available in the Tutorial Folder for each week on Blackboard. The Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer the provided tutorial questions. Your task is to answer a selection of tutorial questions from weeks 1 to 5 inclusive and submit these answers in a single document.

The questions to be answered are:

Week 1 Question (10 marks)

Alex is resident of the UK for tax purposes. He lives in Australia and had $90,000 assessable income from Australian sources in 2019/2020. He does not have any allowable deductions.


  1. What is Alex’s taxable income?
  2. Calculate Alex’s tax payable.

Anna is a fitness consultant operating as a sole trader. Anna recently completed two fitness contracts for two of her clients.

In her first contract, Anna provided a 10-hour fitness training course to her client, Sam. Anna charged

$1,000 for her fitness training course. This included fitness training materials that cost Anna $100.

In her second contract, Anna provided fitness video tutorials for a client, Lilly. Anna charged $1,000 in total. This included $200 to cover the cost of the video recording materials.

With reference to the relevant legislation and/or case law, discuss whether or not these receipts are Anna’s income from personal services.

Week 3 Question (10 marks)

Alex is a musician who is also interested in collecting old golden gramophones. He is not collecting these old golden gramophones for business purposes. On 20 February 2020, Alex sold one of these old golden gramophones for $3,000. The gramophone cost him $500 when he acquired it on 1 June 2000. With reference to the relevant legislation, discuss Alex’s net capital gain or net capital loss for the year ended 30 June.

Week 4 Question (10 marks)

Sam is a property investor. He purchased a small commercial building in Sydney for $2,000,000. Sam had to take out a loan from the ANZ Bank to purchase this property and Sam is charged interest on that loan. In order to rent the property, he met William, who is an experienced real estate agent. Sam and William agreed that an upfront lump-sum payment of $8,100 as a management fee is to be paid to William. With reference to the relevant legislation and case law, discuss the issue as to the deductibility of the management fee to William and the bank interest charges.

John purchased new machinery for his small business factory on 1st June 2018 for $8,000. The effective life of the machinery is determined to be five years. John sold his old business machinery for

$4,000 on 31 August 2019. John used this machinery 90% for business purposes. With reference to the relevant legislation and case law, discuss the tax consequences arising from the disposal of the old machinery under the prime cost method.


Question 1) 

Alex’s income-

Alex is the resident of UK. He has accessible income of $90,000from Australian sources. He doesn’t have any allowable deductions.

Based on the above information we have to answer two questions-

Taxable income of Alex:

It is clearly stated in the case that is no allowable deductions. Therefore to calculate taxable income of Alex we have to convert Australian dollar into Pounds .The current rate of exchange rate of Australian dollars to pound is -  1 A$ = 0.53 pounds. Therefore, A$90,000* 0.53 = £47700. Hence the taxable income of Alex is £47700

Tax payable:

In UK the amount of tax payable depends on the residing status of an individual of an individual. In UK, if a person holds foreign domicile he/she is not liable to pay any tax but if a person holds UK domicile he is liable to pay taxes as per the current tax rates.  The person can be granted tax reduction if there is tax treaty between two countries (Sovereign, 2020). In this case we have to assume that the person holds a UK domicile and there is no tax treaty between UK and Australia. The income slab and tax rates in UK are as follows (, 2020)-

S.noIncome slabTax rate
10 to £ 12,500No tax
2£ 12,501 to £ 50,00020%
3£ 50,001 to £ 1,50,00040%
4Above £ 1,50,00045%

Alex’s income falls in the second slab. Therefore tax will be calculated at the rate of 20%. Tax payable by Alex in UK- £47,700*20%= £9,540.

Alex is also liable to pay some taxes in Australia. In Australia, he has pay taxes at the rate of 32.5% for each for each 1$. Therefore Alex’s tax in Australia will be A$ 2769.

Question 2) Anna’s gain:

 Anna has two clients Sam and Lily. She provided a fitness course to Sam for which she charged $1,000 and the training materials amounted $100.  She provided video recording materials to Lily for which she charged $1,000 and the materials amounted $200. We are required to calculate Anna’s taxable income. In this given context the proper consideration made that in Australia business operations expenditure is deductible from the income (, 2020).

Taxable income from Sam- $1000- $100= $900

Taxable income from Lily- $1000- $200= $800

Total taxable income of Anna - $900 + $800= $1700

Question 3) Capital gain or capital loss for Alex

Alex has a hobby of collecting gramophones. He sold is old gramophone for r $3,000 on 20th February 2020. He purchased that gramophone for $500 on 1st June 2020. According to Australian legislation, f items are included in Australian capital gains tax are real estate, lease, licenses, goodwill, shares, investments, crypto currency , collectables (coins, stamps, painting, jewelry and antiques) exceeding a certain amount (Austrade, 2020). There are few exceptions regarding capital gains tax on collectables-if the collectable was purchased for $500 or less, if the collectable was purchased for $500 or less before 16th December 1995.

Gramophone is a collectable which comes under the category of collectables. Although Alex had a gain of $3000- $ 500= $2500 but as per the tax law this will not be counted as capital gain or loss because it was originally purchased at a price of $500. Therefore no tax should be charged on the capital gain of Alex.

Question 4) Deductibility of the management fee to William and the bank interest charges:

Sam is a property dealer. He purchased a building in Sydney at a price of $2,000,000 for commercial purposes. To purchase this property he took a loan from ANZ bank and is liable to pay interest. He hired a real estate agent William for renting out that property. William charged $8,100 as management fees from Sam. According to the Income tax assessment tax act Australia, the interest is deductible if it is purchased for a commercial purpose. The property should be available for rent. No deductions are applied if it is taken for personal use.  According to ITAA Australia, management fess is only deductible if it fulfills the following criteria-

  1. The expenses have been repaid for the exhortation regarding the purchasing selling of speculation.
  2. The costs spread the expense of overseeing or administrating the speculation which is claimed by financial specialist who makes the case.
  3. It should not be in the form of commission.
  4. It is comparable to the counsel on interest in the non-enrolled account (McCluskey, 2018).

In the given case it does not qualifies the given criteria because the amount paid to William a management fess is in the form of commission to the broker. Thus, $8100 cannot be deducted.

Question 4) Disposal of the old machinery:

John has a small business. He purchased machinery for $8000 on 1st June 2018 and sold the same for $4000 on 31st August 2019. The effective life of machinery was 5 years and e used the same machinery n 90% of the business operations. According to ITAA 1997, the value of asset will be deducted to the extent it is used for personal purposes (ICAA, 2012). Here, 10% value will be deducted from the total amount of machinery. 

  • 10% of $8000= $800
  • Value of machinery = 9000-800= $7200

Financial area in the Australia is from 1st July to 30th June. Depreciation from prime cost method-

Asset cost*(number of days/ 365 days) * (100 percent/ effective life of asset)

Number of days held- 1st June 2018 to 31st August 2019 – 457

Depreciation= $7200*(457/365) *(100%/5) =$1803

Value of machinery after charging depreciation= $7200-$1803=$5397

Hence, John had a loss $5397-$4000= $1397.

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