ACC3005/304 | Tax Law Assignment

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Taxation Law Assignment (ACC3005 Taxation Law Assignment)

Added on 2020-03-16

ACC3005/304 | Tax Law Assignment

Taxation Law Assignment (ACC3005 Taxation Law Assignment)

Added on 2020-03-16

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ACC3005/304 Tax Law Assignment

TABLE OF CONTENTSQuestion 1..................................................................................................................................3Case description and legal provisions associated with it.......................................................3Case analysis and Assessability of trading stock...................................................................3Question 2..................................................................................................................................5Case description and legal provisions associated with it.......................................................5Case analysis and Assessability of trading stock...................................................................6References..................................................................................................................................7

QUESTION 1Case description and legal provisions associated with itTony carries on business that involves the sale of new gazebos and the repair and sale ofsecondhand gazebo chairs. Issues are (a)How to account these chairs for income tax purposes at 30 June 2017?(b)Whether the gazebos and gazebo chairs constitute trading stock?(c)Are there any alternatives available to him in accounting for the various transactions?(d)Accounting for obsolete units and the difference from above method of accounting?As per the Australian taxation provisions, accounting for income tax purpose is forproduction of the overall result to reflect the activities with trading stock in a year. Accordingto Section 70(10) of the Income Tax Assessment Act 1997, "Trading stock" means anythingthat is produced or acquired or manufactured, which is held for the purposes of sale orexchange or manufacture in the course of business (Valuing trading Stock, 2017).According to Section 70(10) of the Income Tax Assessment Act 1997, an item of tradingstockin hand at the end of an income year shall be valued at cost or its market selling valueor its replacement value (Blakelock and King, 2017).The term 'obsolescence' refers to stockwhich is going out of use; or going out of date, or becoming unfashionable or outmoded1.The accurate value of the obsolete stock will be scrap value if this stock can be sold as scrap(TR 93/23.Income tax: valuation of trading stock subject to obsolescence or other specialcircumstances, 2006). If it cannot be sold as scrap but remains on hand, it may be valued atnil. Case analysis and Assessability of trading stockIn the given case, Tony manufactures the gazebo and second-hand gazebo chairs which arehis trading stock at the end of the income year; which can be valued either at cost or sellingprice or replacement cost; also a different method can be chosen each year for different itemsof stock. The obsolete item shall be either valued at nil or its scrap value, whichever is thecase.Working noteValue of trading stock of New Gazebos based on the cost:1 Jam Co. Pty Ltd v FC of T (1953) 88 CLR 23 at 31

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