Question 1
Rosemary Tran works as the eLearning advisor for the Department of Education. Her
employment package includes a salary of $75,000 p.a. and reimbursement of her car
expenses. In 2022-23 her car expenses were $8,000. She also gets a parking space at
work, which saves her $3,000 pa in parking.
Recently, Rosemary’s team at Victoria Police was restructured. As part of this
restructure, Rosemary was given $6,000 from Victoria Police because she agreed to
change her job title from ‘Manager’ to ‘Senior eLearning Designer’. Her salary and other
employment benefits remained unchanged.
Rosemary’s best friend Kevin is a lecturer at Monash University. Owing to Rosemary’s
expertise with eLearning platforms (eg Moodle), he regularly seeks her assistance with
designing the lecturer-student interface for his subject materials. Rosemary always
assists Kevin on a no-obligation basis, however due to Kevin’s reliance on Rosemary’s
expertise, he decides to give her a present of a non-transferable holiday to New York,
valued at $3,500. When Kevin presented the holiday tickets to Rosemary after she fixed
his Moodle site, Rosemary initially refused to accept the tickets. At that time, Kevin said
“let’s just call it your birthday present”. Rosemary then accepted the present.
In Rosemary’s spare time, she loves to play Poker and has considerable success at
Crown Casino, playing Poker. 2022-23 has been a particularly good year for Rosemary
as her winnings have totalled $60,000 and her losses have totalled only $5,000. She
can substantiate her wins and losses at Poker.
Rosemary also enjoys investing in the share market. In 2022-23 she sold shares in
Commonwealth Bank for $30,000. She had purchased the shares in 2018 for $6,000.
Required: Support your answers with legislation and relevant cases
I. Analyse each of the amounts discussed in the above facts and advise Rosemary
on the income tax consequences. (10 marks)
II. Calculate Rosemary’s taxable income for 2022-23. (4 marks)
III. Calculate Rosemary’s income tax payable for 2022-23. (2 marks)
IV. Can Rosemary register for the GST? (2 marks)
QUESTION 2
Michael is a Chief Financial Officer, earning a salary of $200,000 per annum. His
brother George is a successful cattle farmer. Seeking to follow in his brother’s footsteps,
Michael purchased a property near his brother’s farm on 1 July 2022 for $1,000,000 and
paid stamp duty of $55,000 and legal fees of $2,000. The property was partially funded
by a loan of $800,000 from the Commonwealth Bank at an interest rate of 6.5% per
annum. The interest charges amounted to $52,000 for the 2022-23 income year.
During July 2022, Michael had the farmhouse repainted and carried out minor repairs at
a cost of $3,300 (incl GST) then the property was tenanted (from 1 August 2021), with
monthly rent being $1,800.
Michael purchased the following assets during the 2022-23 income year:
Asset Date Cost (incl Effective
Purchased GST) Life
Tractor 10 Mar 2023 $66,000 15 years
Tools 15 Mar 2023 $35,000 5 years
In April 2023, Michael spent $10,000 on seeds and fertilizer and commenced planting.
Michael realised that buying the property was a mistake because he didn’t have
sufficient time to commit to it. After lengthy discussions with his brother (George),
Michael decided to sell the property to George for $800,000. At the time of the sale, the
property was valued at $1,000,000.
The contract for the sale was entered into on 30 May and settlement occurred on 1
August 2023. The tenant continued to rent the farmhouse until 30 June 2022. The
tractor and tools were also sold to George on 30 May 2023 for $60,000 and $30,000
respectively (market rates).
Required:
Assume where relevant, the diminishing value method is used for depreciation. Also
assume that Michael is not registered for GST.
Using relevant legislation and case law to support your answer, calculate:
a) Michael’s taxable income for the relevant financial years based on the above
information. Michael can substantiate his costs. (13 marks); and
b) Michael’s income tax payable. (2 marks)
Question 3
Digby Jones owns a bookstore. He undertakes the following activities:
(a) replastering and repainting a wall which had been damaged due to a leak;
(b) recarpeting the whole shop as the old carpet had worn out due to normal wear
and tear;
(c) installing a new payment counter with new display signs; and
(d) repainting the front of the store with a new type of glossy paint to make it more
attractive to walk-in customers.
Advise Digby of his tax consequences arising from the above information.
Question 4
Lucas and Tait, who were the initial shareholders and directors, founded Axis Holdings
Ltd eight years ago. Lucas and Tait had for many years been involved in property
development. Seven years ago, Axis purchased two properties in an area where there
was extensive real estate development. For six years, the properties were used for
cattle breeding and the properties were improved for that purpose.
Owing to unforeseen circumstances, the cattle breeding proved to be unprofitable and
there was an imminent zoning change whereby the properties could only be disposed of
in 100-hectare lots instead of 25-hectare lots. Axis therefore arranged to subdivide the
land up into 25-hectare blocks and sold the whole property to one purchaser. The
Commissioner assessed Axis on the gross receipts in s 6-5 of ITAA 1997.
What are the tax implications?
Question 5
Sandra Bullock is an accountant who works in a charted accounting firm in the city.
Sandra is a member of a professional accounting society for which she pays an annual
fee of $550 and she is undertaking a professional accounting qualification for which she
pays fees of $1100. Sandra is also undertaking a post graduate degree in media studies
at university for which she pays course fees of $2,000. Sandra is undertaking this
course as she hopes to eventually become a financial journalist once she has gained
enough practical experience at her accounting firm.
Sandra’s employer requires her to dress appropriately at work and last year she spent
$1100 on make-up and $2200 on a designer work suit. Sandra prefers to dress casually
and on leaving the office, she usually changes into casual clothes.
Sandra also has a one day per week part-time job at a night club which starts soon after
her accounting job finishes on Friday nights. The night club is located far away from the
city and therefore she has to drive her car to work on Fridays so that she can get to her
part-time job on time. On all the other days of the week, Sandra takes a train between
home and work and spends $44 per week on tickets.
Advise Sandra as to whether she is entitled to deductions for any of the above
expenses.
Question 6
Luke is employed as a financial controller for a large carwash business, named Tony’s
Car Wash (“TCW”). During the fringe benefits tax (FBT) year ending 31 March 2023,
TCW provided Luke with a total remuneration package in the amount of $116,490, plus
the mandatory employer superannuation contribution. Luke’s package consisted of the
following:
Salary: $75,000 per annum
Professional membership: TCW paid Luke Chartered Accountants annual
membership fee of $550
Exclusive use of an employer-provided car. TCW leased a Nissan vehicle from 1
April 2022 at which
time its purchase price was $45,000. During the FBT year, the car travelled 17,000
km of which 3,000 km was work related. The licence, insurance and service costs
totalled $1,500. Luke paid for petrol in the amount of $1,500
Study expenses for a graduate accounting degree: $20,000 in course fees and
$2,000 for textbooks
Laptop computer costing $2,800: provided to Luke to work from home
Mobile phone: in the amount of $2,000
TCW held a Christmas party at a restaurant that was run by a celebrity chef. Employees
and their spouse were invited. 10 employees and 5 clients attended the party. The total
cost of the party was $6,500 (including GST).
Required: Consider each item of Luke’s package and advise both Luke and his
employer (Tony’s Car Wash) of the tax consequences of each item. Support your
answer with appropriate legislation.
