Taxation Theory, Practice and Law - Final Assessment

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HI6028
TAXATION THEORY, PRACTICE AND LAW
FIANAL ASSESSMENT
TRIMESTER 1, 2021
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Submission instructions are at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of knowledge of
the key topics covered in this unit
HI6028 Tutorial T1 2021

Question 1 ( 11 marks)
For tax purpose, in what circumstances are individuals and companies treated as residents of
Australia? Explain based on the the Income Tax Assessment Act 1936 (Cth) and relevant case law.
ANSWER: ** Answer box will enlarge as you type
An individual can be considered Australian resident for the tax purpose without being a
permanent resident. There are certain test for determining residency like resides test, domicile
test, 183 day test, the commonwealth superanuation test.
A company is considered to be resident for the incoem tax purpoe if:
1. It is incorporated in Australia, and if not, carries business in Australia,
2. either its core management and control is in Australia or it voting power is controlled by
shareholders who are basically the residents in Australia.
Question 2 (7 marks)
Referring to relevant statutory provisions and common law, discuss whether the following
amounts would be as an allowable deduction against assessable income.
a) Provision of doubtful debts of $4,200 for a detective agency.
b) Speeding fines of $ 700 paid by an owner to a driver.
c) An amount of $1,000 paid to a solicitor for preparing a partnership deed.
d) Travel cost of a business executive to attend a trade fair in Munich paid by the employer.
e) Newspapers purchased by an accountant who advises clients on financial and investment
matters.
ANSWER:
a) Bad debt deduction can be claimed as deduction if it included in the assessable income.
b) There is no tax deduction pertaining to the fines in regard to breach of an Australian law on-
deductible.
c) The amount paid to solicitor can be claimed as deduction.
d) Travel cost of a business executive cannot be claimed as deduction as it is paid by employer.
e) Newspapers purchased by an accountant is generally the eprsonal expenses and thus cannot
be claimed.
Question 3 (11 marks)
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A. RK Co purchased a machine on 1st November 2020 at the cost of $110,000 (inclusive of
GST) and exclusively used it to manufacture for the Co’s production. The machine’s
effective life is ten years.
B. Andy purchased a Toyota car and use it 100% for business purpose on 1st October 2020
at the cost of $74,000 (inclusive GST), estimated to have a useful life of twelve years.
Required: With reference to relevant legislation and case law, discuss and calculate what
amount is allowed as a deduction for the decline in value of the machinery and the car
discussed above, using both prime cost and diminishing value methods.
ANSWER:
A.
Under diminishing methods
RK Co. will be get 100% deduction of the depreciation amount every year which is $62293.11 in
the first year.
Under Prime method
RK Co. will be get 100% deduction of the depreciation amount every year which is $58646.59 in
the first year.
B.
Under diminshing method
Deduction for depreciation, amounting to $32,379.43 for the first year is allowedd as deduction
and the same will happen with the remaining years as well.
Under prime method
Deduction for depreciation, amounting to $30584.96 for the first year is allowed as deduction
and which will be followed in the remaining years as well.
Question 4 (7 marks)
Andrew and Piter are paterners, carrying on a business as a partnership. The partnership
agreement provides that Andrew is to be paid an annual salary of $40,000. The balance is to be
distributed equally between Andrew and Piter. The partnership agreement also provides that
the partners are to share the losses equally in the case of losses. The partnership’s assessable
HI6028 Tutorial T1 2021