VIC 1111, Rental Income from Newport (VIC) Townhouse
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VIC (VIC 1111)
Added on 2020-02-18
VIC 1111, Rental Income from Newport (VIC) Townhouse
VIC (VIC 1111)
Added on 2020-02-18
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TAXATIONJANET BROWN: PART – A: INCOMESISSUE – 01: Salary from BMA Investments Ltd.Janet Brown received a Gross Salary amount of $99,9201 from BMA Investments Ltdfor the period 1 July 2017 to 30 June 2018. She also received an amount of $3,0002towards allowances during the same period of her employment. Amount withheld byBMA Investments Ltd from her salary on account of PAYG for this period was$26,734.ISSUE – 02: Rental Income from Newport (VIC) TownhouseJanet entered into a contract for purchase of her Newport VIC townhouse on 10 August2017 for $300,000. It was rented with effect from 1 September 2017 at $2,500 permonth. Janet earned a total of $25,0003 as Rental Income from this investment propertyduring the year ending 30 June 2018.ISSUE – 03: Capital Gain / (Loss) on Telstra / Orica Shares1,000 Telstra shares were purchased in 2014 for $5,000 and sold for $10,000 on 15March 2018, giving a Gross Capital Gain of $5,000. Since the shares were held for morethan 12 months, the capital gain is eligible for 50% Discount4. Thus the Net Capital gainshall be $2,5005.The Orica shares were purchased in December 2017 for $10,000 and sold in March2018 for $6,000, thus creating a Gross Capital Loss of $4,000.As both the above transactions were carried out in the year 2017-18 and both belong toCGT Assets, the NET effect reflected in the Income Statement of Janet for the yearended 30 June 2018 shall be Capital Loss of $1,500. 1Ordinary Income – s.6-5(1)2Ordinary Income – s.6-5(1)3Statutory Income – s.6-10(1)4 Under Discount Method – s.115-55Statutory Income – s.6-10(1)
ISSUE – 04: Capital Gain / (Loss) on Babushka DollsThe Babushka dolls are item of personal collection described as “Collectables”6. If thepurchase price of a collectible is less than $500, all capital gains / losses from its saleare ignored for taxation purposes. Since Janet had purchased a set of 5 dolls for $1,000and owned them for more than 2 years, the Gross Capita Gain will be subjected to 50%Discount.Purchase Cost of 3 Dolls @$200 each$600 Sale Proceeds received for 3 dolls$5,900Gross Capital Gain$5,30050% Discount$2,650NET CAPITAL GAIN$2,6507JANET BROWN: PART – A: EXPENSESISSUE – 01: Interest Payment on Loan used for Investment propertyJanet took a loan of $400,000 from BMA Investments Ltd at annual interest rate of 3%.Of this amount, she invested $300,000 towards purchase of an investment property inNewport VIC and used $100,000 for renovating her residential house at Sesame Street,Elmo VIC. Hence, for investment property use, Janet will be deducting the followingamount as expense from the rental income derived – Amount – $300,000 Interest Rate – 3% paPeriod of usage – From 1 July 2017 to 30 June 2018 (12 months)Interest Payable – $300,000 x 3% = $9,0008ISSUE – 02: Interest Payment on Loan used for Residential HomeJanet used $100,000 for renovating her residential house at Sesame Street, Elmo VIC.Hence, for investment property use, Janet will be deducting the following amount asexpense from her salary income – Amount – $100,000; Interest Rate – 3% pa; Period of usage – From 1 July 2017 to 30June 2018 (12 months); Interest Payable – $100,000 x 3% = $3,00096 s.108-10(2)7Statutory Income – s.6-10(1)8Deductible Expense – s.8-19Deductible Expense – s.8-1
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