Solved Questions on Tax Calculation and Capital Gains Tax

This article contains solved questions on tax calculation, taxable income, capital gains tax, and more. The questions cover topics such as Medicare Levy, income from personal exertion, taxable income from Australian and foreign sources, and disposal of assets. The output is in JSON format.

Units Covered: FNSACC502
The following questions are based on the material in Chapter 1:
Q1.1.5.
(Application of Medicare Levy using family thresholds)
Required: For each taxpayer, calculate their liability for Medicare Levy.
The following persons are resident taxpayers who are not liable for the Medicare Levy Surcharge. The
information given relates to the 2015/16 tax year:
a. Glenn derived taxable income of $22,000 and his wife Rowena derived taxable income of $6,000. They
do not have any children.
Glenn and Rowena does not have to pay the Medicare levy since their combined family taxable income stands
$28,000 which does not exceed the family Medicare levy threshold of $36,001.
b. Kath derived taxable income of $41,000 and her husband Fred derived taxable income of $18,000.
They have three dependent children.
Computation of Medicare Levy
In the Books of Kath and Fred
For the year ended 2015/16
Particulars
Amount
($)
Amount
($)
Assessable Income
Kath 41000
Fred 18000
Total Assessable Income 59000
Medicare Levy Payable (41,000*2%) 820
c. Beck derived taxable income of $29,000 and her de facto partner Roy derived taxable income $23,000.
They have four dependent children.
Computation of Medicare Levy
In the Books of Beck and Roy
For the year ended 2015/16
Particulars Amount ($) Amount ($)
Assessable Income
Beck 29000
Roy 23000
Total Assessable Income 52000
Medicare Levy Payable Nil
d. Will derived taxable income of $36,000 and his wife Tina derived taxable income of $22,000. They
have three dependent children.
Computation of Medicare Levy

Units Covered: FNSACC502
In the Books of Will and Tina
For the year ended 2015/16
Particulars
Amou
nt ($)
Amou
nt ($)
Assessable Income
Will 36000
Tina 22000
Total Assessable Income 58000
Medicare Levy Payable (36000*2%) 720
Q2.1.19.
(Tax calculation for family)
Fred, a resident taxpayer aged 47, has taxable income of $145,345 and reportable fringe benefits of $17,170.
During the year Fred has paid PAYG tax instalments totalling $13,480. His wife, Jani, has taxable income of
$27,000.
They have seven children and no private health insurance.
Required: Calculate Fred’s net tax payable for the 2016/17 tax year.
Tip: Check if Medicare Levy Surcharge will apply to Fred and, if applicable, include in your calculations.

Units Covered: FNSACC502
The following questions are based on the material in Chapter 2:
Q3.2.3
(Income from personal exertion)
Ned Markson is a resident taxpayer employed by Acme Holdings Ltd. The following transactions were all as a
consequence of Ned’s employment:
 Net weekly wages totalled $78,000 for the year.
 Total PAYG tax withheld from Ned’s weekly wages from Acme and forwarded to the ATO amounted to
$19,000.
 Additional wages paid to Ned as a Christmas bonus of $6,000 net (net of $4,200 PAYG tax withheld).
 Reimbursement of out-of-pocket travel costs of $1,200 that Ned incurred during his employment.
 A taxable travel allowance totalling $2,800. No PAYG was withheld from this amount.
 Acme paid health insurance premiums for Ned and his wife to the value of $2,750.
 Superannuation contributed $10,000 to Acme Holdings Superannuation Fund on behalf of Ned.
Computation of Taxable Income
In the books of Fred for the year 2016/17
Particulars
Amou
nt ($)
Amoun
t ($)
Assessable Income
Gross Salary
14534
5
Add: PayG 13480
Add: Fringe benefit 17170
Total Assessable Income 175995
Allowable Deductions 0
Total taxable Income 175995
Tax on taxable income
52750.
15
Add: Medicare levy 3519.9
Less: PayG 13480
Total Tax Payable
42790.
05

Units Covered: FNSACC502
Required:
For each of these transactions indicate which amounts are to be included in Ned’s assessable income and
provide Ned’s total assessable income.
Answer: Transactions that will be included in the taxable income of Ned are as follows;
a. The total amount of net weekly wages will be included in the assessable income of Ned
b. The receipt of Christmas bonus will be included in the Ned’s assessable income
c. Ned will be subjected to claiming an allowable deductions on the travelling cost since it is not covered under the
fringe benefit tax.
d. Ned will be able to claim an allowable deductions relating to the cost incurred on travelling allowance since
under section 8-1 of the ITAA 1997 the expenditure incurred by Ned is in the course of employment and the
same can be claimed as allowable deductions.
e. The superannuation contribution that is made by Ned will be subjected to allowable deductions under section
8-1 of the ITAA 1997.
f. The premium paid by Ned will be subjected to allowable deductions.
The total amount assessable income of Ned is stated below;
Computation of Assessable Income
In the books of Ned Markson
For the year 2016/17
Particulars
Amou
nt ($)
Amou
nt ($)
Assessable Income
Net Weekly Wages 78000
Christmas Bonus 6000
Total Assessable Income 84000
Travelling cost 1200
Travelling Allowances 2800
Superannuation Contribution 10000
Premium on health insurance 2750
Total Allowable Deductions 16750
Total Assessable Income 67250
Q4.2.13
(Calculation of tax payable from dividend income)
Jim Dough, a single resident taxpayer, received the following amounts from investments during the 2016/17
tax year:
Fully Franked Dividends – Dynamic Ltd (franking credit $9,000) $ 21,000
Partly Franked Dividends – Static Ltd (franking credit $2,400) 15,000
Unfranked Dividends – Lost Ground Ltd 20,000
Jim had no other income or deductions during the year.
Required:

Units Covered: FNSACC502
a. Calculate Dough’s taxable income for the 2016/17 tax year.
b. Calculate Dough’s net tax payable or refundable for the 2016/17 tax year.
a.
Computation of Assessable Income
In the books of Jim Dough
For the year 2016/17
Particulars Amount ($) Amount ($)
Assessable Income
Australian Sourced Dividend Income 78000
Fully Franked Dividends 21000
Gross up Franking Credits 9000 30000
Partly Franked Dividends 15000
Gross up Franking Credits 2400 17400
Un-franked Dividend 20000
Total Taxable Income 67400
b.
Computation of Assessable Income
In the books of Jim Dough
For the year 2016/17
Particulars Amount ($) Amount ($)
Assessable Income
Australian Sourced Dividend Income 78000
Fully Franked Dividends 21000
Gross up Franking Credits 9000 30000
Partly Franked Dividends 15000
Gross up Franking Credits 2400 17400
Un-franked Dividend 20000
Total Taxable Income 67400
Tax on taxable income 13452
Add: Medicare levy 1348
Less: Franking Credit 11400
Total tax payable 3400
The following questions are based on the material in Chapter 3:
Q5.3.5
(Taxable income from Australian and foreign sources)
Yvette Jankic, a resident single taxpayer aged 31, worked in New Zealand from 1 July 2016 until 15 November
2016 and has provided the following information for the 2016/17 tax year:
Receipts $
Interest (net of TFN tax withheld $490) 510
Interest from United Kingdom (net of withholding tax $300) 2,700

Units Covered: FNSACC502
Dividend from the U.S. state of Georgia (net of withholding tax $2,100) 3,900
Gross salary – Australian employment (PAYG tax $5,285 withheld) 21,000
Reportable fringe benefit as per PAYG Summary 6,252
Net salary – New Zealand employment (tax withheld $2,540) 12,650
Bonus from Australian Employer for exceptional performance 2,000
Payments $
Interest and Dividend deductions relating to United Kingdom and Georgia investments 250
Work-related deductions relating to Australian employment 300
Note – Yvette does not have private health insurance.
Required:
a. Calculate Yvette’s taxable income for the 2016/17 tax year.
b. Calculate Yvette’s net tax payable or refundable for the 2016/17 tax year.
a.
Computation of Assessable Income
In the books of Yvette Jankic
For the year 2016/17
Particulars
Amou
nt ($)
Amou
nt ($)
Assessable Income
Gross Salary 21000
Add: PayG 5285 26285
Add: Fringe benefit 6252
Salary from New Zealand Employment 12650
Add: Withholding 2540 15190
Bonus from Australian employer 2000
Interest 510
Interest from UK 2700
Dividend from US State of Georgia 3900
Total Assessable Income 50585
Allowable Deductions
Interest and dividend deductions 250
Work related deductions 300
Total allowable deductions 550
Total Taxable Income 50035
b.
Computation of Assessable Income

Units Covered: FNSACC502
In the books of Yvette Jankic
For the year 2016/17
Particulars Amount ($) Amount ($)
Assessable Income
Gross Salary 21000
Add: PayG 5285 26285
Add: Fringe benefit 6252
Salary from New Zealand Employment 12650
Add: Withholding 2540 15190
Bonus from Australian employer 2000
Interest 510
Interest from UK 2700
Dividend from US State of Georgia 3900
Total Assessable Income 50585
Allowable Deductions
Interest and dividend deductions 250
Work related deductions 300
Total allowable deductions 550
Total Taxable Income 50035
Tax on taxable income 7808.38
Add: Medicare levy 1000.7
Less: Foreign Income tax offset
Interest 20
Interest from UK 300
Dividend from US State of Georgia 1800
PayG withheld 5285
New Zealand Employment tax withheld 2540
Net tax refundable -1135.92
The following questions are based on the material in Chapter 4:
Q6.4.3
(Disposal of two assets)
On 10 April 1988, Penny Pleb, an Australian resident, purchased a block of land for $74,000 as an
investment. On 19 February 2017, she sold the land for $125,000.
Penny also sold shares in Prosperous Ltd for $32,000 on 1 August 2016. The shares had cost Penny $8,000 on
17 July 2008. Penny did not dispose of any other assets during the year, nor did she have any capital losses
from previous years.
Required:
Calculate the minimum net capital gain to be included in Penny's assessable income or capital loss to be
carried forward from the 2016/17 tax year.
Calculate using the indexed cost base method and also using only the discount method (without indexing) to
determine the most favourable outcome for Penny. Show your workings for each method.

Units Covered: FNSACC502
Computation of Capital Gains Tax of Sale of Land
Particulars Amount ($)
Sale Price 125000
Less: Cost of Selling 0
Adjusted Sale Price 125000
Purchase Price 74000
Add: Cost of Purchase 0
Adjusted purchase Price of asset 74000
Capital Gains/(loss) 51000
CGT Old Regime
Indexed capital gain/loss 29,080
Tax payable under old regime (marginal tax rate x indexation
factor x capital gain)
5,540
CGT New Regime
Tax payable under Discount regime (marginal tax rate x half
capital gain)
4,413
Computation of Capital Gains Tax of Sale of Shares
Particulars Amount ($)
Sale price $32,000
less Cost of selling $0
Adjusted sale price $32,000
Purchase price $8,000
add Cost of purchase and ownership $0
Adjusted purchase price of asset $8,000
Capital gain/loss $24,000
CGT Old Regime
Indexed capital gain/loss 24,000
Tax payable under old regime (marginal tax rate x indexation factor x
capital gain)
3,940
CGT New Regime
Tax payable under Discount regime (marginal tax rate x half capital gain)
1,020
Q7.4.15
(Losses with indexed gains)
Brad Emerson, a resident taxpayer, sold the following CGT assets during the 2016/17 tax year:
ASSET COST
BASE
ACQUISITION
DATE
DISPOSAL
DATE
SALE
PRICE

Units Covered: FNSACC502
Shares - AAA $48,000 19 Jan 87 20 Feb 17 $71,000
Shares - BBB $62,000 30 May 05 17 Apr 17 $77,000
Shares - CCC $49,000 8 Jun 09 24 Mar 17 $35,000
Required:
Determine the minimum amount of capital gains that Brad is able to include as assessable income in his
2016/17 income tax return.
Calculate using the indexed cost base method and also using only the discount method (without indexing) to
determine the most favourable outcome for Brad. Show your workings for each method.
Computation of Capital Gains Tax
In the books of Brad Emersion
For the Year ended 2016/17
Asset 1
Asset name Shares AA
Indexation option
Capital gain $
CGT payable $
Discount method
Capital gain $ 23,000
CGT payable $
Least capital gain $
Least CGT payable method Indexation
option
Q8.4.37
(Partial main residence exemption)
Benita Ford, a resident taxpayer purchased a house on 30 June 2007 which she used as her main residence
for 2 years until 30 June 2009. She then leased the property to tenants for 8 years until the property was sold
on 30 June 2017. Benita will apply the main residence exemption for 6 years of this period.
 The house was originally purchased for $420,000.
 The market value of the property on 30 June 2009 was $475,000.
 The house was sold for $705,000.

Units Covered: FNSACC502
Benita did not dispose of any other assets during the 2016/17 tax year.
Required:
Calculate Benita’s Net Capital Gain in respect of the 2016/17 tax year (after allowing for the partial main
residence exemption).
Computation of Capital Gains Tax
In the Books of Benita Ford
For the Year ended 2016-17
Sale price $705,000
less Cost of selling $0
Adjusted sale price $705,000
Purchase price $420,000
add Cost of purchase and ownership $0
Adjusted purchase price of asset $420,000
Capital gain/loss $ 2,85,000
Number of days where the ownership was not the main residence 2,190
Total number of days in ownership 730
Net Capital Gains $ 8,55,000
Total Capital Gain from CGT Event x
Number of days in your ownership period
when the dwelling was not your main
residence
Total number of days in ownership period
The following questions are based on the material in Chapter 5:
Q9.5.29
(Foreign Pension)
Leonard Expat, a 58 year-old resident taxpayer with private health insurance, received a government pension
from the United Kingdom that is taxable in Australia, but not in the United Kingdom. Leonard is exempt from
tax in the United Kingdom, but subject to tax as an Australian resident taxpayer.
During the 2016/17 tax year, Leonard received $15,000 of pension, and also derived interest and unfranked
dividends of $48,000.

Units Covered: FNSACC502
Required:
a. Calculate Leonard’s taxable income for the 2016/17 tax year.
b. Calculate Leonard’s tax payable or refundable for the 2016/17 tax year.
a.
Computation of Taxable Income
In the Books of Leonard Expat
For the year ended 2016-17
Particulars Amount ($) Amount ($)
Assessable Income
Income From Pension 15000
Interest and Un-franked Dividend 48000
Total Assessable Income 63000
Allowable Deduction 0
Total Taxable Income 63000
b.
Computation of Taxable Income
In the Books of Leonard Expat
For the year ended 2016-17
Particulars Amount ($) Amount ($)
Assessable Income
Income From Pension 15000
Interest and Un-franked Dividend 48000
Total Assessable Income 63000
Allowable Deduction 0
Total Taxable Income 63000
Tax on Taxable Income 12022
Add: Medicare Levy 1260
Total Tax Payable 13282
The following questions are based on the material in Chapter 5
Q10.5.3
(Superannuation lump sum, low cap amount)
Stan Eckhardt, aged 57, received a superannuation lump sum of $310,000 from his superannuation fund
upon retirement on 15 April 2017. PAYG tax of $28,170 was withheld from the lump sum. The lump sum
comprised entirely of an element taxed in the fund.
Stan also received gross wages of $85,000 up to the date of his retirement. PAYG tax of $22,110 was
withheld from Stan’s wages. Stan has adequate private health insurance.
Required:
a. Calculate Stan’s taxable income for the 2016/17 tax year.
b. Calculate Stan’s net tax payable or refundable for the 2016/17 tax year.
a.

Units Covered: FNSACC502
Computation of Taxable Income
In the Books of Stan Eckhardt
For the year ended 2016-17
Particulars Amount ($) Amount ($)
Assessable Income
Gross Wages 85000
Superannuation Lump sum 310000
Total Assessable Income 395000
Allowable Deduction 0
Total Taxable Income 395000
b.
Computation of Taxable Income
In the Books of Stan Eckhardt
For the year ended 2016-17
Particulars Amount ($) Amount ($)
Assessable Income
Gross Wages 85000
Superannuation Lump sum 310000
Total Assessable Income 395000
Allowable Deduction 0
Total Taxable Income 395000
Tax on Taxable Income 150982
Add: Medicare Levy 7900
Less: 15% Tax Offset 46500
Less: PayG Withholding on Superannuation 28170
Less: PayG Withholding on Wages 22110
Total Tax Payable 62102
Q11.5.5
(Superannuation lump sum and income stream)
On 14 August 2016, Tammy Gochi, aged 53, retired from her job as chief executive officer of Megacorp
Limited to commence service as a volunteer for Whalepeace International. She received a superannuation
lump sum of $160,000 which entirely comprised an element taxed in the fund. PAYG tax of $34,500 was
withheld from the lump sum.
During the remainder of the 2016/17 tax year, Tammy also received a superannuation income stream benefit
of $40,000 from the fund. PAYG tax of $9,780 was withheld from this amount. The entire amount was taxed
in the fund.
Tammy’s only other income during the 2016/17 tax year was gross salary of $36,290 for the period up to the
date of her retirement. PAYG tax of $9,035 was withheld by her employer. Tammy has private hospital
insurance.
Required:
a. Calculate Tammy’s taxable income for the 2016/17 tax year.
b. Calculate Tammy’s net tax payable or refundable for the 2016/17 tax year.
a.

Units Covered: FNSACC502
Computation of Taxable Income
In the Books of Tamay Gochi
For the year ended 2016-17
Particulars Amount ($) Amount ($)
Assessable Income
Gross Salary 36290
Superannuation Lump sum 160000
Income Stream Benefit 40000
Total Assessable Income 236290
Allowable Deduction 0
Total Taxable Income 236290
b.
Computation of Taxable Income
In the Books of Tamay Gochi
For the year ended 2016-17
Particulars Amount ($) Amount ($)
Assessable Income
Gross Salary 36290
Superannuation Lump sum 160000
Income Stream Benefit 40000
Total Assessable Income 236290
Allowable Deduction 0
Total Taxable Income 236290
Tax on Taxable Income 79562.5
Add: Medicare Levy 4725.8
Less: 15% Tax Offset 24000
Less: PayG Withholding on Superannuation 34500
Less: PayG Withholding on Salary 9035
Less: Withholding from Income Stream 9780
Total Tax Payable 6973.3
The following questions are based on the material in Chapter 6:
Q12.6.5
(Small business asset pool, additions)
Gwyneth is a resident, individual small business taxpayer. As at 30 June 2016, she had a General small
business pool balance of $ 41,800.
During the year Gwyneth purchased an asset for $34,800 with an effective life of 5 years and another asset
for $40,400 with an effective life of 30 years.
There were no disposals during the year.

Units Covered: FNSACC502
Required:
a. Calculate any amounts that are deductible for the 2016/17 tax year.
b. Calculate the closing balance of the asset pool.
a.
Calculation of Small Business Pool Balance
Calculation Item Pool Balance Depreciation Claim
Closing pool balance from previous year $ 41,800.00
Opening pool balance for current year $ 41,800.00
Add : New asset purchase $ 75,200.00
Subtotal $ 1,17,000.00
Less: Proceeds of asset sale or disposal $ -
Subtotal $ 1,17,000.00
Pool deduction claim (30% of $41,800) $ 12,540.00 $ 12,540.00
Subtotal $ 1,04,460.00
New asset deduction claim (15% of $75,200) $ 11,280.00 $ 11,280.00
b.
Calculation of Small Business Pool Balance
Calculation Item Pool Balance Depreciation Claim
Closing pool balance from previous year $ 41,800.00
Opening pool balance for current year $ 41,800.00
Add : New asset purchase $ 75,200.00
Subtotal $ 1,17,000.00
Less: Proceeds of asset sale or disposal $ -
Subtotal $ 1,17,000.00
Pool deduction claim (30% of $41,800) $ 12,540.00 $ 12,540.00
Subtotal $ 1,04,460.00
New asset deduction claim (15% of $75,200) $ 11,280.00 $ 11,280.00
Total depreciation for current year $ 23,820.00
Closing pool balance $ 93,180.00
The following questions are based on the material in Chapter 7:
Q13.7.1
(Identification of trading stock)
Required: Identify which of the following would be classed as trading stock under Section 70-10:
(a) Pairs of shoes held by a retailer for resale.
(b) Shares held by an investor.
(c) Blocks of land held by a property developer.
(d) Clothing held by a retail clothes shop, currently under lay by.
(e) Petrol held in underground tanks by a service station.

Units Covered: FNSACC502
(f) Raw materials held in store by a manufacturer.
(g) Stationery supplies held for office use by an insurance company.
(h) Videos held for hire by a video store.
(a) Trading Stock under Section 70-10
(b) Cannot be classified as trading stock
(c) Land held by property investor would be classified as the trading stock under division 70
of the ITAA 1997
(d) Clothing held by the retail clothes shop will be classified as trading stock since the clothes
are acquired or held for the purpose of selling in the ordinary course of business
(e) Petrol held by an underground tank by a service station will be classified as trading stock
petrol is acquired for selling them in ordinary course of business.
(f) Raw materials held by the store manufacturer will be regarded as trading stock under
section 70-10 of the ITAA 1997 since it is held for the purpose of manufacturing and will
be treated as trading stock.
(g) Will not be classified as trading stock since the stationary supplies it is not for the purpose
of resale or exchange. The stationary supplies are for office use only and therefore cannot
be treated as trading stock under section 70-10 of the ITAA 1997.
(h) Videos held by hire video store is for the purpose of sale or exchange in the ordinary
course of business. Therefore it will be treated as trading stock under section 70-10 of the
ITAA 1997.
The following questions are based on the material in Chapter 8:
Q14.8.13
(Business deductions for employing others)
Zac Harris operates a retail outlet selling kitchen utensils. During the 2016/17 tax year, Zac had the
following transactions relating to his employees:
(a) Zac paid net wages to his employees totalling $215,000.
(b) As at 30 June 2017, there was one week’s worth of wages that remained unpaid amounting to
$4,500. Zac made a journal entry accruing this amount as an expense.
(c) Zac deducted $74,000 of PAYG tax from his employee’s wages. Of this amount, $9,000 was
paid on 5 July 2017.

Units Covered: FNSACC502
(d) Zac paid a retiring employee $7,000 of annual leave entitlements on termination.
(e) Zac paid an employee a redundancy payment of $15,000. The employee had given 7 years’
service to Zac.
(f)Zac provided for an increase in annual and long service leave of $8,500.
(g) Zac paid travel allowances amounting to $3,400.
Required: Identify which amounts are allowed as deductions for Zac’s business for the 2016/17 tax year.
(a)
The net wages of $215000 paid to the employee is allowable deduction because it is necessary for generating
assessable income as per section 8-1 of the ITAA 1997
(b)
The accounting for the purpose of tax can be done using the accrual and cash basis. The Taxation Ruling TR 98/1
provides that the accrual method of accounting is the appropriate method for business. Therefore, the accrued
wages of $4500 should be allowed as deduction because accrual method of accounting is followed.
(c)
The PAYG is the tax amount deducted by the employer from the employees in order to deposit it with the ATO. It is a
liability of the business and it cannot be deducted as an expenses.
(d)
The termination payment are paid to the employee for the service provided during employment. The employment
termination payments are made in lump sum and are taxed in a different manner. The annual leave entitlement is
not part of the ETP but a concessional tax treatment can be received.
(e)
The redundancy payment are made to thee employee that are dismissed from employment as the job is abolished.
The redundancy payments are made in replacement of salary or wages for the outgoing employee. Therefore, the
redundancy payment will be allowed as deduction by the business.
(f)
The section 26-10 of the ITAA 97 provides that loss or outgoing for annual or long service leave is not allowed as
deduction except the mount paid in the income year or an accrued leave transfer payment made during the year.
In the current case Zack has provided for the increase but no amount related to annual leave is paid to the
employee. Therefore, the amount is not allowed as deduction.
(g)
The travel allowance of $3400 paid is included as a part of the salary or wages of the employee. It is an allowable
expenditure for the business.
The following questions are based on the material in Chapter 9:
Q15.9.1
(Tax related expenditure)

Units Covered: FNSACC502
Required: For each of the following resident individual taxpayers, calculate the amount that they would
be entitled to claim as a deduction for the 2016/17 tax year:
(a) On 10 August 2016, Dennis paid $100 to Australia Post to lodge his income tax return via Tax Pack
Express.
(b) Daniel paid three PAYG tax instalments of $6,000 each in October 2016, January 2017 and April 2017.
(c) On 24 August 2017, Wilson paid his tax agent a fee of $300 for preparing his 2016/17 income tax
return during July 2017.
(d) On 5 October 2016, Hope paid her cousin who is studying to be an accountant $200 to prepare her
2015/16 income tax return.
(e) During the year, Jacqueline paid a total of $42,000 in payroll tax.
(f) On 15 April 2017, Josh paid $13,600 in fringe benefits tax.
(g) During the year, Krystal travelled a total of 400 kilometres in her 2,800cc Ford Falcon driving to her tax
agent for meetings involving tax planning and attending to her income tax and fringe benefits tax
returns. She did not use her car for any other work or business related trips during the year.
(h) On 15 February 2017, Raelene paid $11,800 land tax on her business premises.
(i) On 27 January 2017, Dirk paid $18,900 in NSW land tax on his family’s holiday house. He did not use
this property for business or producing rental income.
(j) On 1 August 2016, Troy paid his solicitor $700 to prepare a submission to the Administrative Appeals
Tribunal relating to his 2013 income tax assessment which Troy was disputing.
(k) On 15 March 2017, Leonie paid $7,000 on her 2015 income tax assessment. This amount included
$6,000 of income tax, $800 of penalties and $200 from the shortfall interest charge.

Units Covered: FNSACC502
Your answers to Q15.9.1:
(a)
The section 69 of the ITAA 97 allows deduction in respect of tax related expenditure. The electronic
transmission of information related to expenditure is allowed as deduction. Therefore the amount of
$100 incurred for lodging the income tax return via post office is not allowed as deduction.
(b)
The PAYG instalment is the tax amount that is withhold by the employer and is deposited with the ATO.
Therefore, the amount of $6000 is not tax related expenditure so it is not allowed as deduction.
(c)
The section 25-5 ITAA97 allows deduction for the expenses incurred in the management of the tax related
affair. Therefore the amount of $300 paid as tax agent fees is allowed as deduction but as the amount is
paid in August so it is not allowed as deduction under section 8-1 in the year 2016-17.
(d)
The amount paid for preparing the tax related expenditure is allowed as deduction under section 8-1 ITAA
97. The amount of $200 paid for preparing the income tax return of 2015-16 is allowed as deduction.
(e)
The payroll tax of $42000 is a liability and it is not a tax related expenditure so it is not allowed as
deduction.
(f)
The FBT of $ 13600 is a tax liability that is required to be deposited with the ATO. The FBT amount is not
used for calculating the tax liability of the individual. This amount is not a tax related expenditure hence it
is not allowed as deduction.
(g)
The Division 28 allows the taxpayer to claim deduction for the car travel used for the purpose of visiting
the tax agent. It is because visiting the tax agent is regarded as the business kilometre for the purpose of
tax. Therefore the car expenses used for meeting the tax planner will be allowed as deduction.
(h)
The land tax is a liability that is required to be paid. The land tax of $11800 paid on business premises is
an allowable expenditure.
(i)
The section 8-1 of the ITAA 97 provides that the expenses that are necessary for producing the assessable
income is allowed as deduction. In this case the land tax of $18900 paid for family holiday house will be
not be allowed as deduction because it is not used for producing the assessable income.
(j)
The ATO 2002/367 provides that the cost incurred for objecting and appealing against the tax decision is
allowed as deduction under section 25-5(1)(a). Therefore the amount of $700 paid to solicitor will be
allowed as deduction.

Units Covered: FNSACC502
(k)
The section 26-5 of the ITAA 97 provides that the amount paid as penalty cannot be claimed as deduction.
The income tax paid is not an allowable deduction and the interest charged for the shortfall amount is
also not allowed as deduction. The amount of $7000 is not allowed as deduction as deductible expenses.
Q16.9.21
(Calculation of deductions – business taxpayer)
Ricky Falzano conducts business operating a waste removal service and has provided the following data in
respect of the 2016/17 tax year:
INCOME
Gross Income $ 1,638,940
EXPENDITURE
Net Wages paid to employees 743,900
PAYG tax withheld from employees' wages 296,720
PAYG tax instalments paid 87,845
Fringe Benefits Tax paid 5,155
Entertainment of employees (subject to FBT) 5,380
Entertainment of clients (not subject to FBT) 9,235
Annual leave paid 14,780
Annual leave provided 5,560
Rent paid to Ricky’s brother for the business premises 137,000
Payroll Tax paid 19,430
Employees superannuation contributions 98,020
Personal superannuation contributions for Ricky 50,000
Superannuation Guarantee Charge paid 11,315
Other overheads paid 69,330
Note 1 – The market value of rent for the business premises was $65,000.
Note 2 – The deduction available to Ricky for decline in value on his equipment and office fittings was $46,780.
Required: Calculate Ricky’s taxable income for the 2016/17 tax year.
Calculation of Ricky’s Taxable Income
Particulars Amount Amount
Gross Income 1638940
Assessable Income 1638940

Units Covered: FNSACC502
Allowable Deductions
Gross Wages 1040620
Entertainment Expenses (subject to FBT) 5380
Annual leave paid (s26-10 ITAA97) 14870
Rent paid 65000
Personal Superannuation contribution 50000
Other overhead paid 69330
Depreciation 46780
Total Allowable Deductions 1291980
Taxable Income 346960
The following questions are based on the material in Chapter 10:
Q17.10.3
(Application of decline in value methods)
On 1 July 2016, Di Lifter commenced business operating a retail nursery. Di chooses to apply her own
estimates of effective life to various assets purchased during her first year of trading.
Asset Cost ($) Date of
Purchase
Effective
Life
(years)
Depreciation Method
Chemical Sprayer 40,000 1 July 16 10 Prime Cost
Temperature Gauge 12,000 1 July 16 6 Diminishing Value
Soil Elevator 37,500 1 Nov 16 15 Prime Cost
Deleafer 10,500 1 Feb 17 7 Diminishing Value

Units Covered: FNSACC502
Required:
For each asset, calculate only the deduction for decline in value available to Di for the 2016/17 tax year.
Asset Cost
($)
Date
of
Purcha
se
D
ays
hel
d
Effe
ctive
Life
(yea
Depreciatio
n Method Formula
Depreciation
Amount ($)
Che
mical
Sprayer
40,000 01-07-
16 365 10 Prime Cost
Asset’s cost ×
(days held/365) ×
(100%/asset’s
effective life) 4000
Temp
erature
Gauge
12,000 01-07-
16 365 6 Diminishing
Value
Base value × (days
held/365) ×
(200%/asset’s
effective life) 4000
Soil
Elevato
r
37,500 01-11-
16 241 15 Prime Cost
Asset’s cost ×
(days held/365) ×
(100%/asset’s
effective life) 1651
Delea
fer 10,500 01-02-
17 149 7 Diminishing
Value
Base value × (days
held/365) ×
(200%/asset’s
effective life) 1225
Q18.10.15
(Disposal of depreciating assets)
Required: The following are all resident taxpayers. In each case, calculate the deduction available for
decline in value as well as any assessable income (if any) arising from the disposals during the 2016/17 tax
year.
(a) Trevor sold shop fittings from his retail store on 31 October 2016 for $3,700. The fittings had
originally cost $5,600 and were depreciated using the diminishing value method using an effective life
of 10 years. The opening adjustable value was $4,000 on 1 July 2016. The fittings were originally
purchased in 2008/09. Decline in value on Trevor’s other assets was $15,000.
Calculation of deduction available
Particulars Amount ($)
Opening Adjusted Value 4000
Days Held 123
Effective Life 10
Depreciation 270
Net Adjusted Value 3730
Termination Value 3700

Units Covered: FNSACC502
Assessable Income 30
(b) Hannah sold equipment from her factory on 31 May 2017 for $9,200. The equipment had originally
cost $11,000 and was depreciated using the prime cost method using an effective life of 5 years. The
opening adjustable value was $6,000 on 1 July 2016. Decline in value on Hannah’s other assets was
$1,700.
Calculation of deduction available
Particulars Amount ($)
Opening Adjusted Value 6000
Days Held 335
Effective Life 10
Depreciation 1101
Net Adjusted Value 4899
Termination Value 3700
Assessable Income 1199
(c) Joe sold office equipment from his law practice on 1 November 2016 for $600. The office equipment
had an original cost of $1,800 but was added to the low value pool in 2014 when it became a low
value asset. The low value pool had an opening balance of $3,500 and there were no additions to the
pool during the year.
The balancing adjustment is required to be made when an asset is disposed. However, this balancing adjustments is
not applicable in case of low value assets. In case of low value assets the amount received from disposing the low
value assets is used to reduce the value of pool. This in turn reduces the future depreciation charged in the low
value assets.
Calculation of deduction available
Particulars Amount ($)
Opening Adjusted Value 3500
Depreciation rate 37.50%
Depreciation 1313
Sales Value 600
Net Value of pool 713
(d) Tommy, an employee of Kwikee Couriers, sold a phone on 15 May 2017 for $50. He had purchased
the phone in 2015 for $250 and had claimed the full cost of the phone as a deduction in that year.
The amount of phone was claimed as deduction in the year it was purchased so there is no depreciation in the later
period. The entire amount of $50 received from the sales of phone should be allowed as deduction.
The following questions are based on the material in Chapter 11:
Q19.11.7

Units Covered: FNSACC502
(Calculation of zone tax offsets with notional offsets)
During the 2016/17 tax year, each of the following resident taxpayers resided in prescribed areas that are
subject to zone tax offsets:
(a) Emmett resided in the ordinary are of Zone A for the entire year. He lives with his daughter Beth, aged
9, who has no adjusted taxable income.
(b) Guillame resided in the special are of Zone B for the entire year. He lives with Deni, his 24 year old
daughter who is engaged in full-time studies. Deni has adjusted taxable income of $200.
(c) Yanni lived alone in the special are of Zone A up until his death on 31 December 2016.
(d) Karyn resided alone in the ordinary area of Zone A until 30 April 2017 when she returned to Perth to
live.
For each of these taxpayers, calculate the zone tax offset (if any) that they are entitled to claim for the
2016/17 tax year.
(a)
The Zone Tax offset is dependent on the usual place of residence of the taxpayer. In this case Emmett is ordinary
resident of Zone so he is allowed to claim zone tax offset. He has a daughter of age 9 so he is further allowed to
claim base amount in addition to the fixed amount.
Calculation of Zone Tax offset
Particulars Amount
Fixed Amount 338
Base Amount 282
Total Zone Tax offset 620
(b)
In this case Guillame is an ordinary resident of Zone B so he is allowed to claim tax offset. He has a student daughter
who is dependent so allowed to claim base amount.
Calculation of Zone Tax offset
Particulars Amount
Fixed Amount 57
Base Amount 376
Total Zone Tax offset 433
(c)
Calculation of Zone Tax offset
Particulars Amount
Fixed Amount 338
Base Amount
Total Zone Tax offset 338

Units Covered: FNSACC502
(d)
Karyn is not an ordinary resident of Zone A so she is not allowed to claim Zone tax offset.
The following questions are based on the material in Chapter 12:
Q20.12.7
(Tax losses, partner in partnership)
The following data relates to Stephanie Garner, a resident taxpayer. Stephanie derives income from a public
relations business and is also a partner in a marketing business.
2014/15 2015/16 2016/17
Assessable business income $ 93,400 $ 126,000 $ 133,400
General business deductions 80,000 129,000 119,200
Share of Partnership Net Income (Loss) (21,800) 14,900 (5,600)
Superannuation and Gifts 4,000 11,000 8,000
Net exempt income 1,500 3,000 2,000
General business deductions are separate from personal superannuation, gifts, partnership losses and losses of
previous years.
Please assume that the necessary tests have been satisfied such that any partnership losses from Stephanie's
share in the marketing business may be deducted from other income as appropriate.
Required: For each year, determine Stephanie’s Taxable Income and any losses that may be carried forward.
2014/15:
Calculation of Taxable Income and losses that can be carried forward for 2014/15
Particulars Amount Amount
Assessable business income $93,400.00
Less:
Business deduction $80,000.00
Assessable Income from business $13,400.00
Personal superannuation and gifts -$4,000.00
Share of partnership business -$21,800.00
Net Taxable Income -$12,400.00
Net Exempt income $1,500.00
Carry forward of losses -$10,900.00

Units Covered: FNSACC502
2015/16:
Calculation of Taxable Income and losses that can be carried forward for 2015/16
Particulars Amount Amount
Assessable business income $126,000.00
Less:
Business deduction $129,000.00
Assessable Income from business -$3,000.00
Personal superannuation and gifts -$11,000.00
Share of partnership business $14,900.00
Net Taxable Income $900.00
Loss carried Forward -$10,900.00
Net loss carried forward -$10,000.00
2016/17:
Calculation of Taxable Income and losses that can be carried forward for 2016/17
Particulars Amount Amount
Assessable business income $133,400.00
Less:
Business deduction $119,200.00
Assessable Income from business $14,200.00
Personal superannuation and gifts -$8,000.00
Share of partnership business -$5,600.00
Net Taxable Income $600.00
Loss carried Forward -$10,000.00
Net loss carried forward -$9,400.00

Units Covered: FNSACC502
The following questions are based on the material in Chapter 13:
Q21.13.3
(Investor, capital gains)
Karl Kruger is a 38 year-old single Australian resident taxpayer. During the 2016/17 tax year, Karl received and
retained the following records:
Account Summary received from XYZ Bank
Interest from Term Deposits $ 17,200
Interest from Savings Account 350
Bank Charges relating to Term Deposits 40
Interest charged on line of credit (used for personal expenses) 715
4 February 2017 Dividend Statement from Eccy Ltd
Franked Dividend 2,100
Franking Credits 900
Rental Summary from Hawkeye Real Estate
Gross Rent Received 15,200
Rental expenses:
Agent’s Commission 920
Council Rates 1,490
Landlord Insurance 290
Other Information:
 Karl’s rental property was built in 1999 when total construction costs of $200,000 were incurred. Karl
has owned and leased the property since 2008.
 Karl made mortgage repayments on his rental property of $20,000, of which $12,100 was principal.
 Karl also sold the following assets during the year:
ASSET PURCHASE
COST
ACQUISITION
DATE
DISPOSAL
DATE
SALE
PRICE
Quality shares $12,000 12 Apr 11 10 May 17 $18,600
Oil Painting 6,000 03 Mar 98 26 Feb 17 5,200
Crummy shares 4,000 21 Aug 06 03 May 17 2,500
Required:
a. Calculate Karl’s net capital gain/loss for the 2016/17 tax year.
Calculation of Capital gain
Particulars Amount ($) Amount ($) Amount ($)
Quality Shares
Discount method

Units Covered: FNSACC502
Sales price 18600
Less:
Purchase price 12000
Gain 6600
Less:
50% Discount 3300
Net capital gain 3300
Oil Painting
Discount method (1)
Sales price 5200
Less:
Purchase price 6000
Gain -800
Less:
50% Discount
Net capital loss -800
Indexation Method (2)
Sales price 5200
Less:
Indexed Cost 6152
Net capital loss -952
Lower of 1 or 2 -952
Crummy Shares
Discount Method
Sales price 2500
Less:
Purchase price 12000
Net capital loss -9500
Total net Capital loss -6200
Capital loss for collectables -952
b. Calculate Karl’s taxable income for the 2016/17 tax year.
Statement showing Calculation of Taxable Income
Particulars Amount Amount
Assessable Income
Interest from Term Deposits
$17,200.
00
Interest from Term Deposits $350.00
Frank dividend
$2,100.0
0
Franking Credits $900.00
Rent Received
$15,200.
00
Total Assessable Income
$35,750.
00
Allowable Deductions

Units Covered: FNSACC502
Bank Charges relating to Term Deposits 40
Rent related expenses 2700
Interest expenses 7900
Capital Losses 6200
Total Allowable deduction
$16,840.
00
Taxable Income
$18,910.
00
c. Prepare a statement calculating Karl’s tax payable/refundable.
Calculation of Tax payable or Refundable
Particulars Amount
Taxable Income $18,910.00
Tax Payable (18910-18200)*19% $134.90
Medicare Levy (2%*18910) $378.20
Total Tax Payable $513.10
The following questions are based on the material in Chapter 14:
Q22.14.1
(Regulatory framework)
Required:
Explain the function of the Tax Agent Services Act 2009 (TASA) and the Tax Agent Services Regulations
2009 (TASR)?

Units Covered: FNSACC502
The main function of TASA is that it is tasked with ensuring that tax agent services which are
being provided to the public is offered to them in compliance with professional and ethical
conduct. There are certain functions which the act performs in order to ensure that the users of tax
agent services receive an ethical and professional service. The functions performed are as follows:
a) In order to provide tax services the tax agents must be registered. Hence, it performs the
function of establishing national board to register tax agents and BAS agents.
b) It also performs the function of establishing professional conduct for the tax agents and the
BAS agents.
c) It also performs the function of levying of sanctions that ensures discipline among the tax
agents and the BAS agents.

Units Covered: FNSACC502
Q23.14.9
(Tax Avoidance)
Required:
What are the three necessary criteria for the anti-avoidance provisions of part IVA ITAA36 to apply?
In order to ensure that the provisions specified in part IVA applies the following conditions should
be affirmed.
1) That a tax benefit had been received from a scheme. This implies that the specific benefit
would not have been available if the scheme had not been entered into.
2) There have been eight matters specified in the part IVA that objectively specifies that
either the person himself or other person entered into the scheme and the sole purpose of it
was to enjoy the tax benefit.
3) The overall practical financial consequences of the scheme were such that in its absence it
would have not been possible to make available the tax benefit.

Units Covered: FNSACC502
Bibliography
Braithwaite, V. ed., 2017. Taxing democracy: Understanding tax avoidance and evasion. Routledge.
Davis, A.K., Guenther, D.A., Krull, L.K. and Williams, B.M., 2015. Do socially responsible firms pay more
taxes?. The accounting review, 91(1), pp.47-68.
Duong, L. and Evans, J., 2016. Gender differences in compensation and earnings management: Evidence from
Australian CFOs. Pacific-Basin Finance Journal, 40, pp.17-35.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education
AU.
Okello, A., 2014. Managing Income Tax Compliance through Self-Assessment (No. 14-41). International
Monetary Fund.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-Social and
Behavioral Sciences, 109, pp.1069-1075.