My Assignment Help

HI6028 Taxation Theory, Practice and Law Assignment Tutorial Questions 2 Answer

Assessment Task  Tutorial Questions

Unit Code: HI6028

Unit Name: Taxation Theory, Practice and Law Assignment: Tutorial Questions 2

Weighting: 25%

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 analyse taxation issues;
3. Interpret the relevant taxation legislations and case law;
4. Apply taxation principles to real life 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 for weeks 6 to 10 inclusive and submit these answers in a single document.

The questions to be answered are:

Week 6

Mason is a car painter with Melbourne Collision Repair Centre. Mason studying BPA and his employer pays for his course fees at Holmes Institute costing Mason $12,000. Also, Mason lives in a unit apartment in Brisbane, which is provided to him by Melbourne Collision Repair Centre as his employer as fringe benefit. The market value rent for the apartment is $500 per week, and Mason pays $100 of rent per week for the apartment.


Advise the FBT consequences of Mason’s remuneration package (10 marks, maximum 200 words).

Week 7

Alex is a carpenter who purchased a vacant block of land in Sydney on 1 October 1980. On 1 September 1986, Alex built a house on the land. At the time, the land was valued at $110,000 and the cost of construction was $100,000. Immediately, after the construction finished, the property has been rented out. On 1 March 2019, Alex sold the property at auction for $1,400,000.


With reference to relevant legislation/case law, determine:

  1. Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method. (8 marks)
  2. How would your answer to a) differ if the owner of the property was a company instead of Alex? (2 marks, maximum 100 words)
  3. Week 8

Bowens Pty Ltd is a building materials supplier in Victoria. Bowens Pty Ltd has an annual turnover of

$24 million, and works under the accrual method of accounting. Bowens Pty Ltd purchases concrete mixer for $660 each from Builder’s Choice Pty Ltd, a company in Geelong with an annual turnover of around $21 million, and works under the accrual method of accounting. Bowens Pty Ltd plans to sell the concrete mixers at a 200% mark-up to its customers. In October last year it purchased 110 concrete mixers but in December they discovered that 12 of the concrete mixers were faulty and subsequently returned these faulty concrete mixers to the manufacturer, obtaining a full refund. Assume both apply the accrual method of accounting.


With reference to relevant laws, discuss the GST consequences of this arrangement for both Bowens Pty Ltd and Builder’s Choice Pty Ltd. (10 marks, maximum 400 words).

Week 9

Due to COVID-19 impact, Watson Co becomes insolvent and placed into voluntary liquidation by its directors. Dissolve liquidators have been appointed as the company liquidators. On the winding up of the Watson Co, Dissolve liquidators have started distributions and Paul as ex-shareholder of Watson Co received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant to the provision of Income Tax Assessment Act 1963, section 47(1). This distribution to Paul was from his $4,000 investment in the shares of Watson Co on 2nd February 2019.


With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the tax consequences of the above scenario for Paul. (10 marks, maximum 300 words).

Week 10

Steve and his cousin Alex started an equal partnership business, Euca Sanitizers, motivated by the increase in the recent demand for hand sanitizers during the COVID-19 pandemic. Steve lives in Sydney and is an Australian resident for tax purposes. Alex however, is resident of New Zealand and is a foreign resident for tax purposes in Australia. On 30 June 2020, Euca Sanitizers partnership net income is $300,000, 60% of this income is generated from selling hand sanitizers to Australian retailers and 40% comes outside Australia from sale of hand sanitizers to New Zealand retailers.


With reference to relevant provisions of ITAA 97/ITAA 36, discuss how the partnership income is taxed. (10 marks, maximum 200 words).



Week 6

Provision of the ITAA 1997  on Fringe benefit says that if the employee has taken the part of income other than salary, then such income will be consider as  fringe benefits and will be liable to taxed a per the income tax rules as provided for fringe benefit provided by employer to employee. This rule was effective from 1986 to solve the various complexity and confusion about the income tax liability. The fringe benefit will be taxable for the employee who has to gain the benefit of facility or income provided by the employer (Australian taxation compliance and law, 2020).

As per the above rules it can be observed that Melbourne Collision Repair center has paid the fees of his employee for furthers study. This will be considered as an education facility provided by the employer to employees. As per the income tax provision education allowance is available in hand s of employee only up to $ 5250 and the excess amount will be taxable. Hence Out of the $ 12000 excess amount of $6750 will be taxable for Mason (Australian taxation compliance and law, 2020).

In the second case, the market value of rent facility provided to Mason is $ 500 but Mason has paid $ 100 and the excess amount will be considered as the fringe benefit provided by the company. The amount to be taxed here will be, 75% of the fair value of the fringe benefit reduces by the amount paid by the employee. Hence fringe benefit will be considered as taxable in hands of Manson as under (Woellner, et al 2010).

Rent facility  (500*4)
 $  2,000.00 
75% of rent facility
 $  1,500.00 
Less: Amount paid by employee
 $   (400.00)
Fringe Benefit
 $  1,100.00 
Tax Rate on fringe benefit
Tax amount
 $     825.00 

Source: - (Australian taxation compliance and law, 2020).

Week 7

According to the provision of the income tax act, the capital gain will be taxed for the individual with two methods, first is indexation and the second is reducing percentage method. This method is also known as a discounted method for implication of capital gain tax of individuals. The discounted method says that capital gain will be taxed after reducing the 50% of such benefit earned after deducting the cost of the property from such sale consideration (Australian taxation compliance and law, 2020).

If the discount method is not implemented by the individual then the indexation method should be used to calculate tax liability as it will lead to calculate the appropriate cost of the assets after consider the inflation factors of the market (Australian taxation compliance and law, 2020).

Companies are not allowed to implement the discount method hence they have to use the indexation method (Australian taxation compliance and law, 2020).

Calculation of capital gain as per both method for Alex:-

Discount method
Sale consideration
 $       1,400,000.00 
Cost of assets
 $          100,000.00 
Land Value
 $          110,000.00 
Benefit of assets
 $       1,190,000.00 
Discount rate 50%
 $          595,000.00 
Capital gain to be taxable
 $          595,000.00 

Indexation method
Sale consideration
 $                        1,400,000.00 
Cost of indexation
 $                            687,866.00 
Capital gain to be taxable
 $                            712,134.00 

Company tax liability in respect of capital gain will be the $ 712134 as it cannot implement the discount method. CPI for the quarter ending as on 30 September 1999 will be 68.70 while CPI for the year in which expenditure incurred was 114.80 (Australian taxation compliance and law, 2020).

Week 8

Goods and service tax has been  imposed as the indirect tax to be levied from the last consumer of goods and service and providing the tax credit to the intermediate supplier so that goods and services are not be expensive due to tax burden (Dyl, 2018).

If the supplier of the goods and service received the goods back from the recipient then he has to issue the credit note to the recipient in respect of such goods and services provided earlier.

If the recipient will return the goods to the supplier within the 6 months from the date of original invoice of supplier of such goods received then it will be required to pay tax which was taken as the input tax credit earlier in respect of such goods and service and if recipient return such goods after the 6 months from the invoice date then prevailing tax rate will be considered for tax implication (McKerchar, et al. 2015).

 Bowens Pty Ltd 
 Builder’s Choice Pty Ltd 
$                             129,360.00
$                 72,600.00
 Return of good 
$                                           -
$                   7,920.00
 Net sales 
$                             129,360.00
$                 64,680.00
 GST taxation 
$                                 6,468.00
$                   3,234.00
 Input credit 
$                                 3,234.00
$                              -
 Net liability 
$                                 3,234.00
$                   3,234.00

Source :( Australian taxation compliance and law, 2020).

It can be seen that goods which have been returned by the Bowens in October, the input tax credit in this respect has been taken by the company which requires to be pay in October as 12 concrete has been returning within the 6 months of the original invoice date of the supplier (Australian taxation compliance and law, 2020)..

Week 9

The company distributes the dividend to the shareholders for the investment made by them in the company in form of preference share or equity share capital. This dividend paid as an unfranked dividend to the company means the company has not made tax and shareholders will include the unfranked income in its tax return but he is also not required to pay tax on such dividends (Australian taxation compliance and law, 2020).

In the given case study, Watson Company has gone under voluntary winding up and paid consideration to Paul who is the farmer shareholder of the company. The total consideration paid by the company is $ 7200 in which $ 3000 was provided as an unfranked dividend and $ 4000 was paid as part of his invested amount (Australian taxation compliance and law, 2020). Now $ 200 has been left as profit share of the Paul from the company which has been generated during the financial year before liquidation (Australian taxation compliance and law, 2020).

As per the provision of ITAA 1997 unfranked dividend will not be part of tax computation and the invested amount will also not be taxable. Therefore only $ 200 will be liable to tax in the income tax return of Paul (Australian taxation compliance and law, 2020).

Unfranked dividend received
Not Taxable
 $           -   
Amount of investment received
Not Taxable
 $           -   
Sharing in profit of the company
 $  200.00 
Total Taxable income

 $  200.00 

Source :( Australian taxation compliance and law, 2020).

Week 10

As per the Australian tax law ITAA 1997, it can be observed that partnership firms are not required to pay tax on the income it has earned during the financial year but they require to disclose their income in the income tax return with the relevant authority (Australian taxation compliance and law, 2020).

Partners of the partnership firm have to file their return and consider their proportion of income in the individual tax return so that tax implication can be conducted on partners of the firm (Australian taxation compliance and law, 2020).

As per the income tax provision, in case of a non-resident, only those income will be taxable which has earned in Australia, and income earned outside the tax territory of Australia will not be subject to taxation. While the resident individual will always be taxable in respect of all kinds of income earned from any place in the world (Halperin, 2019).

In the given study Steve is the resident of Australia and entered with the partnership firm with an individual who is a resident of New Zealand to share the profit and loss equally. The business earing of their partnership firm by selling the hand sanitizer was $ 300000 which has 60 % earned from Australian and 40 % from New Zealand (Australian taxation compliance and law, 2020).

Following will be tax implication of both the partners:-

Total Sale of sanitizer 
 $                               300,000.00 
 Australian sale 
 $                               180,000.00 
 New Zealand sale 
 $                               120,000.00 
 Steve ( Resident) 
 Alex ( Non Resident) 
 Australian Income 
 $                                 90,000.00 
 $                      90,000.00 
 New Zealand income 
 $                                 60,000.00 
  $                                 -    
 Net income taxable in Australia 
 $                               150,000.00 
 $                      90,000.00 

Source: - (Australian taxation compliance and law, 2020).

Customer Testimonials